Are Corporations Better than People?

With the VW emissions scandal recently coming to light (with a severe backlash), maximum and minimum fine amounts have been tossed around. One figure pegs the total amount Volkswagen could end up being fined around 18 billion dollars. Is this enough, though?

The problem with fining corporations when they commit criminal acts, especially knowingly, is the time doesn’t fit the crime, so to speak. It’s easier to levy sentences against normal humans, because they have one commodity that cannot be earned: time. If you sentence a person to jail and fine them, you’ve taken away the time required to earn that money, and the time from their lifespan after the fact. If you levy a fine against a corporation, you’re hitting them where it matters. A company exists to generate profit and make money, and by actually enforcing fines, they can be held accountable for their actions, instead of forgiven and forgotten.

What’s more, if the fine is low enough or can be estimated ahead of time, some companies can just… Factor it into the cost of doing business, like the banking sector of Wall Street when the government brought fraud charges against them, like JPMorgan in November 2013 getting hit with a 13 billion dollar fine and just copping up to it, but not actually changing anything. Without anyone held accountable beyond “just confess and pay,” there’s no motivation to actually change any behavior.

After the oil spill in the Gulf of Mexico, the government banned BP from bidding in any leasing auctions for oil fields that were being put up for sale. After a couple of years, BP sued to lift the ban and reinstate their ability to basically, participate in the global economy. The government said “okay.”

A felon can’t leave jail and just ask to get his ability to vote back, or have his record scrubbed. No one that worked for BP was jailed or sentenced, the worst thing that happened was a long list of court orders, the CEO stepping down, and, by BPs estimate, $42 billion in damages. For a company with over $350 billion in yearly revenue, that is a pretty significant hit. But not enough, right?

Arguably, the law shouldn’t be built to bankrupt people if they make a mistake. BP and others didn’t make “one mistake,” though. BP committed willful fraud by ignoring safety warnings, failing to maintain pipelines, and then failing to stop the largest marine oil spill to ever occur. A company with over $400 billion in assets isn’t hurting for financial backing or research: they have as much money as entire countries. Ignorance isn’t an excuse when your company has enough money to research and most likely, with your expertise, accurately predict disasters years before they could occur. Indeed, especially when the reports had decided the reason for the spills and accidents was cost-cutting in the first place.

Image Source: CBS
Image Source: CBS

One of the richest companies in the world isn’t making enough money. A tragedy.

That’s the problem though, really. The law shouldn’t apply universally to companies and people because companies cannot be people. It’s a twisted dichotomy where corporations are allowed the same financial concessions that individuals are, including donations and lobbying efforts, but not held the same standard of sentencing in a court of law. The people managing the companies are never forced to resign. The issue is, a large fine is at most, a mere annoyance for a corporation as large as some of these. Nothing is really lost except some branding, quarterly earnings, and profits. When a person is sentenced to prison, they lose their job, contact to the outside world, relationships, home, and most of all, time. A company loses nothing but a minor snag on the ladder.

The main focus recently has been on Volkswagen. The carmaker admitted to installing defeat devices that could sense when a diesel car was being emissions tested, and tweak the engine’s emission to make it fall in line. During regular driving, it would output up to 40x the maximum allowed emissions. The Environmental Protection Agency (EPA) could fine VW $37,500 per vehicle, and with nearly half a million VW diesel vehicles in the US having been sold since 2008, it could cost VW up to $15 billion in fines.

The CEO resigned in the week following the public announcement and apology on behalf of VW. The company actually admitted they were aware of the non-compliance issues with their diesel automobiles as early as 2014, but was assured by engineers that they would correct the issue. It seems they did, in a way. While potentially caught in a lie, it might not be enough to convict VW as having committed a crime, since they aren’t held to the same kind of standard an individual would be. As faculty members from Pepperdine University’s Graziadio School of Business write in their Business Review Journal, lying is technically illegal and a crime all by itself. Isn’t lying about emissions enough?

VW committed a crime, a white collar crime, but a crime nevertheless. As an associate professor at Norwich University, Dr. Kabay, states when discussing some commentary on white collar crime:

“Lying about motivations and behavior (what the authors describe as creating “front activities”) can create a habit of dishonesty that fosters white-collar crime. Some businesses fall so far from normal standards that they effectively become organized crime.“

The Occupational Safety and Health Administration (OSHA) is another regulatory agency that establishes and enforces safety guidelines for corporations to keep their employees safe. OSHA is severely understaffed, with about 2400 investigators to oversee 8 million businesses and 130 million employees. By OSHA’s estimates, if they had to go through every single violation report or oversight audit, it would take over 150 years to finish. There isn’t an unlimited amount of time for perfect record keeping.

You have to wonder how important safety really is, or if it’s just a talking point. Dust explosions have only been regulated by OSHA in reference to grain dust, which was killing people every year by way of grain silo explosions. The grain silo dust regulation reduced fatalities by 60% and was well received by industries, but there hasn’t been anything for general dust in workplaces. All of this doesn’t even get into the fines that OSHA can dole out for violations of regulations that are in place.

They’re in charge of levying fines against companies that fail to meet their standards, as outlined on their site. The thing is, they charge ridiculously low amounts of money: $7000 for serious offences, and $70,000 maximum for repeat or wilful offences.

Sure, $7000 could affect a mom-and-pop shop, but even the $70k per violation is easy to justify if the time shaved off from skirting safety regulations can be calculated. More to the point, because of the way data works in businesses since the beginning of time, it’s very easy to determine. As a regulatory agency with government backing, it would be possible for OSHA to be decimating businesses with shady practices or ones that are ignoring the law and endangering their employees or customers. Sure, you could factor in civil lawsuits from the victims on top of other criminal penalties, alongside the OSHA fines, but since when has any fine or law taken ‘concurrent’ violations into effect? Having a parking ticket on your car doesn’t stop a second one from getting placed on top of it, because “they’ve already been warned.”

A company that doesn’t install railing, or implicitly encourages workers to perform dangerous tasks (maybe by making the chain of command aggressive and irritated whenever issues are brought up, or directly threatening employees with job loss), shouldn’t be slapped on the wrist. They didn’t “forget” that safety railings are important, they did the math and decided it was cheaper and more effective to just wait until someone was hurt or to pay the fine if they were caught. Might as well let the money build up in your account.

Image Source: en.mehrnews.com
Image Source: en.mehrnews.com

Going back to Volkswagen, it’s surprising they admitted to the defeat systems in place, and even went so far to explain how the defeat systems worked. Companies need to be held accountable and responsible, or they’ll damage their own brand, value, and employee’s satisfaction. Even the willful and blatant dismissal of regulations won’t affect them very severely. The CEO resigned, which was a good move, and let someone else step up to take his place. Maybe some engineers, who were probably trying to save their jobs, might lose their jobs, but the company won’t go under. Early estimates, from VW itself, say they’ll probably be back on their feet in 3 years.

What about class action lawsuits? Almost five hundred thousand people are left with cars in an uncertain state of repair, with VW saying they’ll begin recalls in January, and hope to finish by the end of 2016, hundreds of thousands of people are left with cars with abysmal resale values. Shouldn’t the fines be taking these things into account? What about health concerns?

The government has the power to regulate when it’s given the chance. Obviously, there should be some kind of restrictions in place, but when the issues at hand are about human safety and health, it seems insane to not afford as much cost or care as necessary to bring companies in line. Capitalism acts as a very powerful force of erosion, and without any regulations or standards in place, will quickly carve a canyon out of its hill, until it dries up completely. A snake so ravenous it’ll eat its own body to spite itself.

OSHA, the EPA, and other agencies have the reach to make a difference in millions of people’s lives, but they have to be better than the companies they’re fining. They have to care enough to be willing to dismantle or decimate companies that don’t care about their employees and threaten people’s lives.

Considering the fact that the supreme court has dismantled huge monopolies (see AT&T and the resulting splinter of phone companies), which they’ll execute if one company gets enough control over a market, but won’t do anything except slap some minor fines and misdemeanours on companies that literally get people killed.

The balance has shifted in the wrong direction, by any standard. And it can be so much better.

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