Consumer advocate Ralph Nader yesterday renewed his call for federal chartering of the country's largest corporations at a Securities and Exchange Commission hearing on corporate accountability.
As grounds for this radical reform, he cited the "corporate crime epidemic," ranging from illegal payoffs to production of harmful chemicals to use of business aircraft for personal trips.
He noted the apparent inability of shareholders and directors to hold corporations to account due to weak state charter laws and the ineffectiveness or sanctions he called no better than "wrist-slaps."
Nader's testimony came on the second day of a series of hearings to be held in four cities across the country. The SEC effort is an attempt to improve its own regulations regarding shareholder communications, participation in corporate elections, and the governance of corporations generally.
The SEC will hear recommendations for federal legislation from businessmen, investors, government officials and academicians who have been invited to testify.
Federal chartering - or alternatively, federal minimum corporate standards - would include, according to Nader's proposal, a full-time board of outside directors. These "constituency directors" would each be responsible for a particular aspect of management, such as consumer protection or research and development. They would review all fundamental decisions, set executive salaries, and hire and fire the chief executive officer.
Stockholders would have a greater role in important issues like mergers or stock offerings. Disclosure of corporate information such as contacts with lobbyists and tax returns would also help to make managers more accountable, he said.
Ralph Lazarus, chairman of Federated Department Stores, presented the Business Roundtable's opposition to federal standards, saying there were already enough checks and balances built into the corporate system.
"Our experience has been that shareholders lack the time and inclination to participate more extensively in corporate governance," he testified. "Most shareholders are concerned with economic results, such as earnings, dividends, capital appreciation, rather than the details of operations. We believe that (such proposals do not realistically promise greater accountability." He asked that business be left alone to respond to needs it already feels.
Lazarus's testimony contracts with the results of a recent Harris poll which found that 59 per cent of those surveyed agreed with the statement: "Most companies are so concerned about making a profit, they don't care about quality."
A Chase Manhattan survey found four out of ten persons believe big corporations are above the law and can get away with just about anything."
The polls were eited by Michael Pertschuk, chairman of the Federal Trade Commission, who announced to the SEC on Thursday the establishment of an FTC task force on corporate accountability. The task force tends to study the possiblity of stiffer regulations relating to competition and consumer protections in the following areas: "revolving door" exchanges between industry and government; selection, performance and payment of directors.