In recent months, failures at BP's Deepwater Horizon Gulf of Mexico facility injured and likely killed 11 oil rig workers and spawned an unprecedented environmental catastrophe; an explosion at Massey Energy's Upper Big Branch mine in West Virginia killed 29 miners; and a recall of millions of Toyota vehicles occurred after an acceleration defect was linked to injuries and deaths. These events have a few things in common, not the least of which is that they all illustrate a governmental failure to effectively regulate business activity and protect the public.
In each instance, businesses with poor safety records have continued to operate in a system of voluntary regulation. Federal agencies, battered by lengthy procedural hurdles, slashed budgets, and anti-government sentiments, rely on business to police themselves. After each "accident," Congress and the media begin a crusade: how can such things happen and why didn't somebody see this coming? But after all the hand-wringing and finger-pointing, rarely is anything done to prevent future catastrophes. Instead, we continue to be stuck with "government by reaction."
Unfortunately, BP, Massey Energy, and Toyota are only the tip of the iceberg. Nearly every day, there is a story about contaminated lettuce or meat, financial misfeasance, drug recalls, or dangerous children's products. Either because of a lack of news coverage or because these crises appear isolated, the public has not been able to connect the dots. But a pattern of government inaction, coupled with a cozy relationship with regulated interests, is beginning to take its toll.
These and other incidents result from a failure of politicians to provide regulatory agencies with the resources and authority to set and enforce standards. The public may understand and support the government's role in providing public protections, but until the public begins to hold elected officials accountable for government's failure to prevent or mitigate these disasters, we can't begin to rebuild government's capacity to develop and enforce effective regulations.
The Mine Safety and Health Administration (MSHA) could not place Massey Energy on the agency's list of companies with patterns of violations because Massey was able to appeal citations, delaying agency action. The pattern of violation program identifies the worst mining companies and invokes enhanced MSHA enforcement efforts. Companies can escape this status, however, by contesting citations to the independent Federal Mine Safety and Health Review Commission (FMSHRC), which has a backlog of approximately 16,000 cases.
Filing challenges has been a normal business practice in recent years because the backlog at FMSHRC means companies will not pay fines for contested citations, or MSHA will choose to settle the proposed penalties. With the cost of violating the law put off or reduced by the agency, violations become just another cost of doing business.
Incidents of sudden acceleration that led to the recall of millions of Toyota vehicles have sparked a debate over whether the National Highway Traffic Safety Administration (NHTSA), the federal agency in charge of auto safety, needs enhanced powers and resources. In congressional hearings in March, witnesses noted that NHTSA should be able to levy greater fines on delinquent automakers, those that don't issue voluntary recalls quickly enough. The current statutory limit on civil penalties is $16.4 million. "This amount might be considered by a large, multi-billion dollar manufacturer as just the 'cost of doing business,'" Amy Gadhia of Consumers Union, publisher of Consumer Reports, told the House Energy and Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection. "We recommend removing this cap on civil penalties to act as a deterrent for future violations of the law."
At BP, it's the same story. The Washington Post reported that during the first 20 days of the Deepwater Horizon oil spill, BP spent $350 million, or $17.5 million per day. Under federal law, the company is liable for no more than $75 million in damages. For a company that nets $93 million per day, according to the Post, this is just the cost of doing business.
Agencies aren't without fault. When foxes are appointed to guard the henhouse, as happened most egregiously during the Bush administration , agencies may actively guard their "clients" from regulations. At the Minerals Management Service (MMS), the Department of Interior agency overseeing oil and gas operations in the Gulf of Mexico, Alaska, and elsewhere, the staff was more than cozy with companies they were supposed to be regulating. MMS is responsible for collecting oil and gas revenue royalties from companies. Relations became so friendly between agency staff and oil company employees that they socialized together and MMS staff received gifts from the companies. Small wonder the staff had a hard time telling the hand that feeds the agency what safety procedures might be needed in oil drilling operations. The result is quite perverse: in the case of BP, the company got a waiver from conducting an environmental impact analysis, no inspections were conducted of the blowout preventer, and other special favors flowed in.
Speaking of the hand that feeds an agency, MMS and other federal agencies literally receive money from regulated industries in the form of royalties and fees. If a chunk of your revenue is coming from the industry you regulate, you think twice about enforcement.
President Obama has countered the foxes in the henhouse by appointing qualified, public-service oriented leadership to most agencies. Overcoming the lack of resources and legal authority, changing the revolving door nature of Washington, and delinking royalties and fees from those writing and enforcing rules are much larger tasks. Although many agencies have received budget increases to help rebuild parts of their regulatory and enforcement offices, Obama has called for a freeze in discretionary spending to confront the short-term budget deficits facing the country. Cutting spending for agencies that have to confront these disasters is irresponsible.
So what is to be done? Here are three steps to shake things up:
Enough is enough. As a society, we need to realize that corporate scofflaws are dangers to the American people. Corporate responsibility needs to become more than an advertising slogan. Companies need to pay a heavy price when they act irresponsibly, and Congress and the president should be held accountable for ensuring that our government truly acts in the public interest.
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And of course there is the financial industry that caused the current world-wide recession.
And finally, the Supreme Court is going to let all these businesses capture even more control on the system by allowing them to dump unlimited money into political races. Fundamentally, companies have one goal - to make money, especially short-term money. That IS the ethic of business. The flaw in treating companies like people is that, unlike people, who have a full range of ethics driving their decisions, companies do not. Companies measure the costs of accidents only in short-term money, and that is not adequate.
for the last 40 years to name-only empty rooms. SEC? FDA? The few
worn down but well meaning career staff that remain are powerless
in relation to the political appointees and the anti big gov't propaganda.
There is still a structure there to be revived if we insist, however.
To be grownups and stop irresponsibly leaving competitive corporations
unaccountable is reasonable, necessary, and urgent.
Our economy's in the tank because of the sham American business has become. Toxic loans, loan fraud, the infamous mortgage backed securities. The FBI reported 80% of mortgage fraud is done by the industry, it's on the fbi.gov site's reports on white collar crime and mortgage fraud. There's an agency with no teeth--it warned these crimes would take out the economy but congress denied funding to combat it in about 2004. As you say, the fox guarding the henhouse. A good old boy club.
The CEO's of irresponsible or crooked co's are not affected one bit, even if their customers lose everything, the economy tanks, or the environment is shot to heck. They'll have their millions and their own corner of the world where luxury living goes on. Until the CEO's are thrown in jail, nothing's going to change. Consumers are losing confidence that ANY American business is operating ethically anymore, or that ANY politician or agency head can do his/her job.
flaunt their unconcern for their employees and surroundings,
even bringing them to the point of becoming uninsurable
because of the frequency and size of their fines might be
an effective way to stop enabling them. Protecting them
just keeps the whole cycle going. Certainly employees
need safety education, but I can imagine that real safety
education may only underline the joke that the companies
give a damn.
I have spent my whole career in mines in the US and all over the world, and although they are a pain to deal with, OSHA an MSHA have done an admirable job of decreasing injuries and fatalities in American industry. Recordable incident rates for work place accidents and illness have declined by fifty percent since 1992, despite the damage to workplace safety and health left behind after eight years of the Bush administration.
http://www.bls.gov/iif/oshsum.htm http://www.ethiopianreview.com/news/48690
If the government had not created those agencies there would be many more serious accidents, injuries and deaths in work places nation wide, and mandating training in safety procedures, hazard recognition, etc. has been a big part of the success.
However, if president Obama wants to follow up on his campaign promise to make government more efficient, the Labor Department and the safety administrations would be a good place to start. He has made the right choice in appointing Joe Main and David Michaels (both industrial safety experts) to replace anti-union, anti-regulatory, industry shills David Lauriski and Edwin Foulke. Hopefully they can cut through the bureaucracy and the B.S. and get the focus back on enforcement of rules that prevent accidents.