For years, Harry Glasbeek was a professor of law at York University’s Osgoode Hall Law School, where he taught a popular course titled – The Corporation As Criminal.
How long did you teach that course?
“For at least ten years,” Glasbeek told Corporate Crime Reporter in an interview last week. “The course became a bit notorious because of the title of the course. It attracted quite a bit of attention. I did get some rather bad remarks from time to time. At one stage, the dean of the law school, under the influence of the local law society, asked me to change the name of my course. I didn’t do that.”
He wanted you to change the title of the course to what?
“Anything that wouldn’t attract the attention of the senior and more elite people at the local bar. I told him I wasn’t going to change the title of the course. There was apparently at one stage someone who took the matter to the board of governors of our university and suggested I wasn’t fit to teach at the university. But that never got very serious. That was around the mid-1980s.”
Now Glasbeek is out with a new book titled Class Privilege: How Law Shelters Shareholders and Coddles Capitalism.
Your book focuses on limited liability for shareholders. Are you advocating for getting rid of limited liability for shareholders?
“It’s a necessary first step. I’m a lawyer. Law has lost its integrity when it comes to corporations. In the corporate sphere, we make responsibility disappear. And the primary tool is through limited liability for shareholders. We should tackle it head on. There is no good reason to grant shareholders limited liability.”
“We should say to shareholders – you should be responsible, just like anybody on the street is responsible for their actions. That would be a vast improvement.”
You also make a distinction between controlling shareholders and regular shareholders. You want to expose not just controlling shareholders to the risk, but all shareholders?
“In theory yes, but in practice no,” Glasbeek said. “I’m a passive shareholder. I have a pension. I’m quite sure that my pension fund is invested in all sorts of companies that I would not care to be invested in if I had a choice. And there are millions like me. In fact, most shareholders are probably like me. They hold stock through intermediaries.”
“The United States is a bit different. It is true in the United States, corporations are more widely held than in Canada or any other advanced country – except the UK. In the US and UK, shares are held widely. In all the other countries, shares are concentrated in the hands of a very small number of people.”
“Let’s say you are allowed to dispense liquor in Canada and you serve someone who is too inebriated to be served any more. The patron goes out and hurts someone. The person with the liquor license will be held responsible in law because he had control over the situation and benefitted from the situation.”
“People in control and who seek to benefit from that control should be held responsible, morally and legally.”
“It’s only in the corporate sphere do we say – that would create too much trouble.”
You say revoking shareholder limited liability should be the first step. But why that instead of controlling the excesses through criminal prosecution, regulation, fining, shaming?
“In Wealth by Stealth, I looked at those mechanisms and by and large they are unsuccessful. We have recidivism. The corporate social responsibility movement is vast, well intentioned, works very hard, but to little effect. Ethical investment has limited success.”
“All of these efforts have had limited success. That’s why I go to the other end.”
Corporate crime and corruption is being discussed in the public sphere. But limited liability for shareholders is not. Why not?
“You have to start somewhere. And I like this option because the others are not working. And let’s remember, shareholder limited liability was slow in coming. In the beginning, there was only limited limited liability. Shareholders remained on the hook for wages. Wage earners were considered too vulnerable to be exposed to risk avoiders like shareholders. We know this is not a crazy idea.”
And as you point out, throughout history, the reality was individual responsibility.
“And it still is for many people. And that is key to my argument. It still is for most of us. If I go out and drink before I drive, there is no question I will be held responsible. I put at risk people’s lives, just to satisfy my own pleasures. The idea put forth by profiteers is that profit is good for all of us. And that of course is a highly debatable political point of view. That is in the news. One third of US citizens live on or below the poverty line. They would find it hard to understand how profit chasing is good for them.”
“We can still have corporate social responsibility. We can still criminally prosecute corporations. We can still have settlements. All I’m saying is – if we can find people who actually control the corporation as shareholders, they should be named in all of these shaming and punitive exercises that we try to initiate. They should be responsible as individuals.”
“Two things will happen. They might have to pay for insurance. Another thing that might happen – they might say – we had nothing to do with any of this. But they are perfectly happy to take all of the dividends and all of the profits from the activity.”
The New Yorker magazine just ran an article titled – “The Family that Built an Empire of Pain.” And it’s about the manufacturer of oxycontin – Purdue Pharma. It’s a private company that is controlled by the Sackler family. Now that’s a clear case of what you are talking about. The family is controlling. Yet, they escape liability.
“Yes, and while Canada and Australia are familiar with controlling shareholders, the United States has them too. I quote a paper in my book titled – “The Myth of Diffuse Ownership in the United States.” And the authors identify 650 publicly traded corporations with majority shareholders that you can identify. And there are other papers that make similar claims.”
“It’s not impossible even in the United States to find many corporations of reasonable size where you can identify major controlling shareholders. As I said, the US and UK are exceptions to the general argument. But even there, it is plausible to make the argument. If you did it a few times with these companies, that would draw attention that controlling shareholders should be held responsible for their actions – like the family that controls Purdue Pharma.”
The New Yorker article focuses on the former Attorney General of Mississippi, Mike Moore. Here’s a quote from the article that makes your point.
“Mike Moore, the former Mississippi attorney general, believes that the Sacklers will feel no pressure to emulate this gesture until more of the public becomes aware that their fortune is derived from the opioid crisis. Moore recalled his initial settlement conference with tobacco-company C.E.O.s: ‘We asked them, ‘What do you want?’ And they said, ‘We want to be able to go to cocktail parties and not have people come up and ask us why we’re killing people.’ That’s an exact quote.’ Moore is puzzled that museums and universities are able to continue accepting money from the Sacklers without questions or controversy. He wondered, ‘What would happen if some of these foundations, medical schools, and hospitals started to say, ‘How many babies have become addicted to opioids?’’
“That makes my point exactly,” Glasbeek said. “If your enemy has a face in any kind of a dispute, it makes it easier to confront and understand the problem. The corporation makes people disappear. I used to say to my students – executives and major shareholders are just like you and I. They go home after work and kiss the wife and pat the dog. It’s only at work that they kill. They are ordinary people given a whole set of institutional surroundings that drive them in a way that they would not behave in another setting. It’s the setting that counts.”
“Even the tobacco settlements, as large as they were, haven’t discouraged tobacco sales, production and killing. While public education in our part of the world has diminished smoking considerably, in other parts of the world, it is skyrocketing. Nothing is being done to alleviate the problem. All that has been done is that we have got some money out of it. That is because we have never faced the people who actually benefit from all of this. It’s a signal lesson. Tobacco companies are a good example. The banks are a good example. They do not learn by having to pay out money. It’s usually our money anyhow. There was no personal accountability. Only by getting rid of limited liability and therefore legal immunity can we bring some personal accountability.”
[For the complete q/a format Interview with Harry Glasbeek, see 31 Corporate Crime Reporter 44(13), Monday November 13, 2017, print edition only.]