Wednesday, January 29, 2014

CRIME PAYS FOR JPMORGAN CHASE, BUT DOES ANYONE CARE?

 
By Ronald Fox

In previous postings on corporate crime I expressed outrage that top executives at JPMorgan Chase, and other giant corporations, have been able to avoid criminal prosecution for law-breaking. Outrage yes, but I can’t say that I’m greatly surprised by their apparent criminal immunity. In the boardrooms of corporate America, strict adherence to the law is not a high priority, especially if it conflicts with the bottom line of making big money for the company and its shareholders. Profit is the name of the game; whatever it takes is justified. For me the saddest aspect of all this is that most Americans don’t seem too bothered by the anything goes business culture, even when it involves breaking the law.

Big corporate profits are widely welcomed: by company owners, executives and employees, stockholders, free market worshipers, and much of the general public, including those who own no corporate stock. If a few laws are broken, corners cut, lies and deception employed, or backs stabbed to boost the bottom line, so be it. Such practices are part of the business plan. And why not, if the worst one can get for wrongdoing is a fine?

I turn again to the case of JPMorgan Chase and its chief executive, Jamie Dimon. Mr. Dimon has presided over a decade of fraud and criminality, for which his company paid over $20 billion in fines in the last year alone. Crimes committed during Dimon’s tenure in senior management include: mortgage, investor, consumer and credit card fraud, forgery, bribery, perjury, sanctions violations, and other misdeeds. Yet he’s escaped criminal prosecution. Worse than that, JPMC’s board of directors, in their ultimate wisdom, last week decided to nearly double Dimon’s salary. He will receive a $20 million package for 2014. Other long-standing chief executives at JPMC also received substantial raises.

I’m not exactly shocked that Dimon was given a large pay increase. After all, the fraud committed under his watch produced a healthy booty that went almost exclusively to Board members and other senior officers. What particularly grates on me is the timing of the reward. You’d think the Board might have waited until the company’s criminal misdeeds were less fresh on the public consciousness. Would a year have been too much to expect? But so it goes in corporate America. As long as the profits keep rolling in and share prices stay high, corporate big wigs will enjoy strong support among shareholders and much of the wider political elite. I’m sure Dimon has garnered much admiration in corporate boardrooms for his skills in negotiating through the sea of Morgan legal troubles. Other Wall Street executives hope to be so successful when their companies face pending criminal investigations.

Where’s the outrage? I can understand why government regulators who regularly pull punches against corporations, journalists who often miss the real criminal story and are reluctant to speak ill of powerful friends, and prosecutors who settled for non-criminal punishments might be circumspect in condemning corporate law breaking, but what about average Americans? My sense is that a large majority of Americans, most of whom share little in corporate profits, are indifferent to corporate crime. I haven’t heard much outrage voiced, even by those who believe that corporate executives have gotten away with crimes for which ordinary folks would serve time. Is it that people feel powerless to do anything? Have they become so cynical about the legal double standard that they don’t care? Are people simply not interested? (Maybe there isn’t much interest; my corporate crime postings have received the fewest number of Phronesis readers.)

Powerlessness, cynicism, and apathy no doubt help explain public passiveness and resignation to corporate crime. A more complete explanation, however, must look to fundamental American beliefs that lead them to cut corporations slack. Most Americans believe in the American Dream, individual initiative, free markets, minimal government regulation, and have bought into the assumption that capital accumulation at the top is a necessary condition for national prosperity: the proverbial what’s good for General Motors is good for the country. It doesn’t seem to matter that the trickle-down theory has little factual basis, especially in recent years as income inequality has reached gargantuan proportions. (For an in-depth study of what Americans think about inequality, see Class War? What Americans Really Think about Economic Inequality, by Benjamin Page and Lawrence Jacobs.)

Wealth has skewed to the very top of the social strata, and behind its gilded gates it resides while the rest of us law-abiding citizens labor on to make ends meet. Yet Americans, while concerned about wealth inequality, remain reluctant to engage in a national conversation about class, and reluctant, I might add, to protest loudly about corporate crime and executive compensation. Just how bad do things have to get?








1 comment:

  1. Hi Ron,

    The lack of outrage is disconcerting. I think there are two major reasons. First, there is a disconnect between corporate crime and its impact on regular citizens. Those in the corporate and media elite don't see the connection between corporate wrongdoing and the financial crisis/crash. I believe the reason for this is that few in the corporate / media elite know anyone severely impacted by the economic crisis. Contrast this with the undeniable impact (even across economic class)that occurred in the 1930's.
    The second reason is the cult of celebrity surrounding anyone that gets on national TV. I think that many of the CEO's (like Dimon) are perceived as rock stars among the media and corporate elite, so the media rarely says unflattering things about them. Further, they don't connect the dots that corporate crime and misdeeds do impact John Q citizen.
    Unfortunately, I suspect it will take an even wider economic crisis to awaken the citizenry.

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