The nation's largest waste hauler, Waste Management, Inc. (WMI), has lost its contract to collect trash for the City of Chicago because a local ordinance prohibits that city from doing business with companies whose officials have been convicted of bribery or bid rigging. Executives of a subsidiary of WMI, Ohio Waste Systems, pleaded guilty to bid rigging in federal court in Toledo and were convicted in late 1987; as a result, the City of Chicago notified WMI in early 1989 that Chicago's trash contracts would be given to other firms for three years. At the end of the three years, WMI can try to regain Chicago's trash hauling business again. The Chicago ordinance does not affect contracts that WMI has with private companies, only those with the city.

State legislatures have even more power than local governments to pass this kind of law. In Florida, the 1988 legislature considered a bill that would have prevented a company from winning state, county or municipal contracts with public agencies if company officials were convicted of, or pleaded "no contest" to, crimes such as bid rigging, bribery, fraud, price fixing, or racketeering. (Pleading no contest, or nolo contendere, is a way of saying to the judge, "I am not admitting guilt, but I am not going to fight the charges against me.") The Florida bill died in committee; it was modeled on a similar law that Florida has on its books already, preventing state or local contracts with road builders convicted of crimes.

Ralph Nader has long urged Congress to pass a federal law changing the way all corporations gain a license to do business in America. Although many people don't know it, doing business is not a right, it is a privilege. Today, corporations gain the privilege of doing business by becoming "chartered" in one of the 50 states. Once chartered, a company can do business in all other states as well.

In principal, a company that breaks the law could lose its charter and be driven out of business entirely. Unfortunately, states almost never revoke a corporate charter because states compete with each other to gain corporate charters. Why? Corporations pay taxes to the state that charters them. The states compete with each other to gain the most corporate charters, and thus the most tax. For this reason, states typically take a "hands off" approach to corporate control. (The state with the least controls and the lowest taxes tends to get the most corporations seeking a charter--which is why the large majority of Americans firms are chartered in Delaware today.)

Ralph Nader favors FEDERAL chartering of corporations. Under such a plan, there would be only one place to get a corporate charter--from Uncle Sam--and if corporations didn't play by the rules, they could lose the privilege of doing business in America. Congress has never been very enthusiastic about the Nader plan.

But even without state or federal action, grass roots citizens can pass local laws preventing crooks from getting lucrative local contracts. Losing a contract hurts Waste Management--or any other large firm--far beyond the dollar loss. It damages their credibility, and reduces their momentum. Such laws are an easy way for us to curb the excesses of our adversaries.
--Peter Montague, Ph.D.

Descriptor terms: wmi; waste management, inc.; il; chicago; bid rigging; bribery; fraud; price fixing; nader; federal chartering of corporations; corporate charters;