Monday, September 25 , 2017, 9:44 am | Fair 71º


Randy Alcorn: Greed, Crime Flourish While Hiding Behind Corporate Veil

Toyota has been fined a record $1.2 billion for intentionally concealing a defective gas pedal on millions of its vehicles, and for misleading its customers about the problem. More than 37 of those customers died as a result of the defective pedal.

Pacific Gas & Electric is facing a $2.25 billion fine for the 2010 gas pipeline explosion that killed eight people and destroyed 38 homes in San Bruno. A federal investigation found the giant power company had committed more than 100 safety violations, including 12 infractions of the Pipeline Safety Act.

General Motors has been questioned by a congressional subcommittee over allegations that the Detroit-based auto maker intentionally concealed a defective ignition switch on its compact cars, resulting in crashes that killed at least 13 people. Company documents reveal that GM knew of the defect back in 2001 and could have corrected it for less than one dollar per vehicle.

These three cases are the most recent in a long history of corporate villainy. A good memory or a little research will recall many more. Still fresh in our memories is British Petroleum’s calculated negligence that resulted in the explosion of its Deepwater Horizon rig in the Gulf of Mexico. The disaster killed a dozen workers and untold sea life as it devastated the shorelines and the economies of several Gulf states.

The nation still suffers the lingering affects of the worst economic catastrophe since the Great Depression, triggered by “too-big-to-fail” banks knowingly dealing worthless mortgages.

Corporate criminal negligence and premeditated crime has been fined over and over again, and although the fines get steeper, corporate crime continues unabated. PG&E, for example, has incurred multimillion-dollar fines several times in the recent past before the San Bruno disaster. Apparently, fines are just a cost of doing business — getting caught doing business improperly is just another calculated risk.

Some have argued that corporations are people. The absurdity of this assertion is no more obvious than in cases in which corporate criminal behavior results in homicide. If corporations are people, are they subject to capital punishment when they commit homicides? If so, how do you lethally inject a corporation?

A corporation is a legal fiction existing independently from the existence of the real flesh-and-blood people who manage it. Corporate executives come and go but the corporation endures. The corporation is an association of transitory individuals whose liability for their decisions, even those resulting in pandemic economic misery or homicide, is quite limited. The corporate veil may be thin but it can afford effective cover for the guilty.

Large, publicly traded corporations have a hive-like dedication to growing profits and driving up the price of company stock. Within the management hierarchy are many ambitious folks carefully attending to their careers and working to achieve personal goals. The typical goal is to rise up the hierarchy and retire financially independent whenever they choose.

Many of these executives are looking to reach that goal as quickly as possible, then move on, leaving their successors to deal with any consequences of selfish short-term management.

While corporate strategic planning is far-sighted, tactical planning is too often myopic, focusing no further than the tenure of key executives. With most corporations, a huge portion of executive compensation derives from annual bonuses and stock options. The bonuses are typically tied to annual profit goals and the market value of the company stock. Consequently, the temptation is to manage for short-term gain rather than for long-term vitality.

A culture of ambitious greed among the executive corps can not only negatively affect corporate decision making but can also result in detrimental consequences to customers and to the public at large. The transitory nature of corporate management can allow guilty executives to essentially escape the consequences of their bad management practices.

There were decision-makers at Toyota and GM who were aware of their companies’ defective products and who knew that people were being killed because of the defects, but who, nevertheless, chose to ignore or conceal the problems.

When the problems reached critical mass, prompting inquiry and allegations, corporate executives directed their companies to delay remedies and withhold information from investigators. These are criminal acts — ultimately committed out of greed, and, as we have seen, greed can kill.

Legal entities do not commit crimes, people do. Without consequences there is no discipline. Without discipline there is no order. Corporate criminal behavior continues because the culpable corporate employees can and usually do escape legal consequences for their malfeasance.

Until greedy, corrupt corporate managers are held personally liable and prosecuted for their criminal behavior, they will continue to commit crimes secure in the knowledge that the fictional corporate person will have to pay for it, not them. They will have retired with their “screw you money,” no matter who they screwed to get it.

— Randy Alcorn is a Santa Barbara political observer. Contact him at .(JavaScript must be enabled to view this email address), or click here to read previous columns. The opinions expressed are his own.

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