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# Government must cut corporate greed
- URL: https://www.smdp.com/revenge-is-sweet-for-lucas/
- Published: 2005-05-18T15:00:00.000Z
- Updated: 2026-10-23T07:10:37.000Z
- Author: Dan Dunn
- Tags: Opinion, Santa Monica, #archive-import

*By GUEST COMMENTARY BY BENNET G. KELLEY*

President Bush in 2002 responded to the wave of corporate accounting scandals by calling for “a renewed sense of corporate responsibility.” That was then.

Last year, the annual “100 Best Corporate Citizens” and the “Misfortune 100: Top Corporate Air Polluters in the United States” lists were released with neither of them receiving significant attention, nor having a major impact on any of the companies listed. This illustrates how promoting corporation responsibility requires more than platitudes, since the market neither rewards good conduct nor punishes bad conduct. Unfortunately, over the past three years Republicans have moved from platitudes on corporate responsibility to actively seeking to undermine corporate reform efforts.

There is one market force, however, that can encourage good conduct — the government which is both a significant buyer and investor. Federal and state governments spend more than $230 billion on goods and services annually, and state and local pension funds control more than $3 trillion in private assets — making them the sole market actor with the potential to create the market discipline necessary to ensure compliance with both the letter and spirit of the law.

Public pension funds have actively sought to promote corporate responsibility, in part because they were some of the biggest victims of corporate fraud. California Public Employees Retirement Systems (CalPERS) — the nation’s largest pension fund and leader in the corporate reform movement — lost more than $1 billion in the Enron and WorldCom scandals alone. CalPERS has had many successes in fighting excessive executive compensation, most notably leading the fight against New York Stock Exchange Chairman Richard Grasso’s $140 million salary.

Public funds are increasingly succeeding in getting corporations to evaluate the “negative externalities” — like costs imposed on others through pollution or failing to observe health or safety standards — created by their operations. Last year, Connecticut’s pension fund succeeded in its three-year effort to get the nation’s largest producer of carbon dioxide emissions to conduct a study on the climatic impact of its power plants.

Instead of being heralded for their leadership in promoting corporate responsibility, CalPERS and other public pension funds have been targeted by Governor Arnold Schwarzenegger, Grover Norquist and other leading conservatives as part of a “national battle” to “starve the beast” and dismantle public funds.

Corporate governance expert Nell Minow, however, warned that since public pension funds play “an essential monitoring role that sustains and gives credibility to our capital markets. The loss of that critical oversight would be devastating.” That is why the nation watched closely when Gov. Schwarzenegger was forced into full retreat and abandoned his “pension reform” plan before a single vote was cast.

At the federal level, President Bush has thwarted efforts to use the federal government’s market authority as a tool. In his first month in office, Bush eliminated a requirement that government contractors demonstrate satisfactory compliance with tax, labor, environmental, antitrust and consumer protection laws. He has since resisted efforts to bar contracts to “tax haven contractors.” As a result, General Electric received approximately $2.8 billion in contract awards for 2003, despite having accumulated nearly $1 billion in fines, penalties and settlements for 63 separate acts of wrongdoing between 1990 and 2002 while Tyco receives more than $200 million per year in government contracts, despite sheltering $400 million annually by reincorporating in Bermuda.

President Bush and Gov. Schwarzenegger are caught in a contradiction, since they cannot praise the power and efficiency of the market’s “invisible hand” in calling for less regulation but then oppose the introduction of market forces only when this hand is caught in the cookie jar. By seeking to eliminate the government’s market authority without offering an alternative market force, the Republicans are essentially advocating unilateral disarmament in the battle against corporate misconduct.

The two principal lessons from the California pension fight are that if Washington and the states remain serious about addressing corporate responsibility, they need to recognize that the government can give the market’s “invisible hand” some needed muscle and direction. The other lesson, however, is that a mere three years after passage of Sarbanes-Oxley and with Enron criminal trials still to come, the Republicans have abandoned platitudes on corporate responsibility for the politics of greed. (Bennet G. Kelley is a Santa Monica attorney and a contributing author of “Big Bush Lies,” White Cloud Press 2004)

*Originally published in the Santa Monica Daily Press print edition on May 18, 2005.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/051805.pdf?ref=smdp.com)