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Ian Reifowitz Headshot

Time to Put the Fear of Prison into Executives Who Would Put Profits Over People

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GM DEATHS JUSTICE DEPARTMENT
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Maybe 13 really is a haunted number. Either way, 13 is a number that has haunted General Motors over the past few years. Since filing for bankruptcy in 2009, GM has now recalled over 13 million cars, well over a million more than they've actually sold in that time period. And 13 people have died as a result of a faulty ignition switch in GM cars, a problem the company's executives knew about for a decade and ignored. At least this week they hired a new head of global communications to help with the PR fiasco. Priorities, right?

And this isn't the first time something like this has happened recently in the auto industry. Failures in Toyota vehicles caused 37 deaths over a number of years. Not just consumers, but employees are all too often injured or killed as a result of their bosses' decisions to sacrifice safety for profits, as the families of the miners who lost their lives at the Upper Big Branch mine in West Virginia can tell you. Something is fundamentally broken, and we need radical changes in order to fix it. We need to put the fear of prison time into the heads of top executives before they make the decision to put profits over people.

But wait a minute. We have regulators, right? People who are supposed to keep an eye on this kind of stuff. First of all, understaffing is a major problem at regulatory agencies across the board. In one frightening example, after an oil train wreck (one of nine "significant" such incidents in the past year in the U.S. and Canada) U.S. Secretary of Transportation Anthony Foxx lamented: "We have a million shipments of hazardous materials moving around this country every day, and we have 50 inspectors." Let that one sink in.

Beyond the need for more regulators, there's the matter of what they actually do. Joan Claybrook, who once led the National Highway Traffic Safety Administration (NHTSA), criticized the revolving door through which automobile industry employees become regulators and then go back again. There's more from Claybrook in this report from NPR:

"If you're at NHTSA and you want to get a higher-paying job and you want to go to one of the auto companies, and they come in and request something from the agency, you're not going to be the hard taskmaster," she says. "You're not going to be the cop on the beat. You're going to be very gentle on that company, because you want them to hire you."

So, while we definitely need tough regulations (it's worth noting that a recent study of an array of regulations found that -- despite the hysterical cries of Republicans -- they were not "job-killing"), we also need to make sure the foxes aren't guarding the henhouse. On the NHTSA specifically, in 2010 Sen. Barbara Boxer (D-CA) introduced a bill that would have made it against the law for agency employees to work for a car company in any sort of job in which they'd be in contact with the NHTSA for three years after leaving it. Unfortunately, the bill died in committee.

I'm certainly not the first person to suggest that someone at GM needs to go to jail. Leo Ruddy's 21-year-old daughter Kelly was killed by the Chevy Cobalt she was driving, leaving her father to conclude that "the only way the public is going to be protected from this negligence by companies is if there will ultimately be prison sentences." Michael Moore, who otherwise opposes the death penalty, called for the ultimate sentence to be imposed on the "criminals" at GM, adding:

The executives at GM knew for 13 years that their cars had a defective ignition switch that would, well, kill people. But they did a "cost-benefit analysis" and concluded that paying off the deceased's relatives was going to be cheaper than having to install a $10 part per car. They then covered up their findings and continued to let millions drive around with the defective part in their cars. There would be no recalls. There would only be parents and the decapitated body parts of their dead children.

Here's what I believe. Beyond GM, there needs to be a change in the corporate calculus. This is really a problem with human nature, in the end. People weigh the costs against the benefits when making any decision. But what's different inside a corporation is that the hyper-competitive nature of capitalism as well as simple greed leads too many people to make decisions that are divorced from human morality.

If a company's leaders are forced to choose between cutting corners on safety or going out of business, some will roll the dice and hope for the best. Even worse, some will make that same choice even if they aren't at risk of going out of business, just to make a few extra bucks for themselves and/or raise the price of their company's stock. Strong safety regulations, applied equally across industries, can reduce that temptation and reward honest business people by protecting them from having to make those choices. Regulations can help them compete on a level playing field with those who would otherwise follow an unscrupulous path. But beyond regulation, fear of punishment may be the only force powerful enough to get some of them to make the right choice.

From the deadly fire at the Triangle Shirt Waist factory a century ago to GM today, there have been so many examples of these kinds of unscrupulous choices that we must conclude that this is a feature, not a bug, of industrial capitalism. I remain convinced that capitalism, broadly defined, is preferable to other economic systems, but I am equally convinced that capitalism requires strict regulations and clear punishments for corporate wrongdoing (not to mention a strong safety net) in order to serve the interests of the majority of people in the societies where it operates.

Right now, it is clear that the cost-benefit analyses being done in the boardrooms of large corporations or even the back offices of small businesses and franchises are deeply flawed. They weigh the dollar cost of fixing potentially dangerous problems versus the dollar cost of lawsuits that might result.

It's all about dollars and cents. Even if executives who make the wrong decision lose their job, they still have their lives, their freedom, and, almost certainly, the money they've made on that job. We need to make sure that these executives weigh another factor when they think of cost, namely the cost of going to jail.

We need every executive faced with the choice of fixing a problem or sweeping it under the rug to be asking himself or herself whether it's worth risking a whole bunch of years figuring out whether orange really is the new black. Because the way things stand now, the ones being compelled to wear black are the families of corporate greed's victims.