Letting Conrad Black off the hook would be a great blow to shareholder rights
Cap’n Black and the corporate buccaneers have a peculiar legal resonance with Somali piracy. International conventions and domestic law have long made pirates a common enemy of humanity, and many cases have mandated the death penalty. Currently the US courts are wrestling with the problem in the case of six Somali pirates who quixotically fired upon a US ship, which promptly sank them but then rescued them.
At issue is whether attempted and failed piracy is still legally piracy, and the case has brought to light a British Privy Council judgment on a similar failed piracy attempt in Hong Kong. In 1934, the council demurred, ‘Actual robbery is not an essential element in the crime of piracy. A frustrated attempt to commit piratical robbery is equally piracy,’ and added plaintively that ‘their Lordships are almost tempted to say that a little common sense is a valuable quality in the interpretation of international law.
Common sense would be useful in considering the ‘honest services’ law that has recently been cast into doubt by a Supreme Court whose majority so often seems to double up as attorneys of record for the Business Roundtable, which in turn is the most powerful labor union in the US, representing the CEOs of most major companies. The Business Roundtable has assiduously campaigned to disenfranchise shareholders and restrict their vestigial rights to rein in executives and boards.
Assume that an auto worker in Detroit is found diverting a car or so a week towards his family. When he is brought to court, the defense is that he was immensely productive and suggested innovations that made the company a lot of money.
Now consider a CEO who charged his wife’s $60,000 birthday to the company, took the corporate jet for a vacation at a cost of half a million plus, and doctored contracts putting millions in his pockets for spurious non-compete contracts, and what you have is Conrad Black, now out pending consideration of the Supreme Court judgment on ‘honest services’.
If the Black conviction is overturned in the lower courts, it will reinforce the implicit assumption made by compensation consultants and committees, and the boards, all effectively appointed by the CEOs and their colleagues, that corporations are like the old unlisted banks: limited liability partnerships of their senior managements, the property of a cabal whose occasional munificence to other shareholders should in no way be taken to imply any real ownership rights for the latter.
The consequences are dire. The manipulation of short-term results in order to loot the corporate treasury and share float to enrich the executives, and the consequent damage to the financial markets and the global economy, are all, at least in part, derivatives of the imperial and imperious executives whose ownership of corporations and the economy has been rising exponentially. But sadly, as with the electorate at large, having the power does not necessarily mean exercising it. Crooks keep getting elected, and unless you are a CEO, please do not try to drive away company property or charge your spouse’s birthday celebration to petty cash.
