Does the Punishment Fit the Crime?

Posted by Laura Otten, Ph.D., Director on September 23rd, 2010 in Articles, Thoughts & Commentary

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The 13 September issue of Newsweek had a headline that grabbed—not merely caught—my attention:  “Do fines EVER make corporations change?”  And the answer, as you soon will learn, if you didn’t already know, was at this rate, how could they?

Newsweek provided data on three companies.

  • BP:  2007 was its worst year in the fines department, fined a total of $391 million dollars for such behavior as “illegally manipulating energy markets, breaking environmental laws, and anticompetitive practices.”  In 2007, BP had revenue of $284 billion.  Thus, its fines for 2007 amounted to a mere .14% of its revenue in 2007.
  • Goldman Sachs:  its worst year for fines (are you getting the point:  year after year, these companies are fined, but the behavior is just repeated, or new fine-producing behavior occurs, the next year) was 2009.  Its fines totaled $550 million, out of total revenue for the year of $51.7 billion.  These fines cost them only four days worth of revenue.
  • Massey Energy (owners of the Raleigh County, West Virginia coal mine that exploded this past April killing 29 miners):  it, too, had its worst year of fines, to date, in 2009.  It was fined a mere $13 million, out of its annual revenue of $2.7 billion, meaning its fines totaled less than half of 1% of its annual revenue.

Now, if the US government only wanted to fatten its coffers by levying fines, my guess is it achieved that goal.  I would think that $954 million could do a little something to help out our government’s bottom line.  But if the fines were intended to correct behavior, make things better for people and communities, fines, as depicted above, are clearly not doing the trick.  They are not affecting behavior, which means attitudes haven’t changed and it will be business as usual.

So, let’s come up with a different “punishment”.  I know that for so many in the corporate world money is the basis for all exchanges, for judging the “success” of people and companies, for rewarding “good” performance, etc.  Thus, a monetary fine fits in perfectly with that world.  But what about an alternative?  What about fining the lifestyles of every senior manager and employee who took a part in the behavior that lead to the fine?  That would mean everyone in the board room, in the executive suite, several floors down and more.

What if they had to work in the mines for a month or literally clean up the gas spill instead of appearing in pretty television ads saying how hard they are working and will work to clean things up, or move out of their homes and live with relatives or on the street or in a one-bedroom, fourth floor walk-up because they were now in foreclosure?  explain to their children that their savings were gone?  What if they had to report to the unemployment office once a week and wait for their welfare check to arrive to make ends meet?

Too harsh?  Too difficult to achieve?

Well, the courts in our country regularly sentence people to fines and community service.  So let’s go for the community service option and get some real benefit for the nonprofits that are serving all the people who have been harmed by the behaviors that led to the fines.   What if a company’s board members, executive suite residents, senior managers and all others involved in the negative behavior are required to spend a month working in the nonprofits that serve the people harmed by their greedy behavior, willingness to ignore laws and regulations, to bend a little here and there, lie, dupe, etc?  Don’t worry, they would be paid and have benefits—but in accordance with the compensation package of the nonprofits where they were employed for the month?  (And some of the billions of dollars in fines could be used to pay those salaries and benefits costs; I’m sure the US government could spare that chump change.)  What if they had to see the consequences of their behavior as they stocked food pantry shelves, did intakes at the local health or mental health clinic, counseled at the jobs training center, etc.?  What if they had to pay back with their own time and talent and not just the company’s bottom line?

Might they not learn some lessons that might actually stick when they return to their board rooms and executive suites?  And in that learning process, they could help individuals and communities recover from their figurative raping and pillaging.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.

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