Most of us were raised to believe you always try to “do the right thing” living your life with integrity, truthful in your word and trustworthy in your actions. Sadly, although corporations are deemed “people” under the law, they frequently fail to “do the right thing” when choosing between people and profits. Profits usually dictate corporate decision-making, and innocent people are paying with their lives.
The recent GM scandal involving defective ignition switches illustrates this sad corporate reality in deadly detail. GM internal documents show that as early as 2004, GM engineers knew about a safety problem with defective ignition switches that caused ignition keys to move out of the “run” position, and turned off engines while in use thereby disabling airbags, power steering, and power brakes. GM chose not to notify the public or issue a recall until February 2014, and not before at least 124 people died and 275 were injured because of the defective switches.
So we wonder, when individuals knowingly make corporate decisions that end up in death or injury, why are these individuals not being held personally criminally liable? When do consumers finally say enough is enough, and hold individuals responsible for making decisions that cost people their lives or livelihood? Members of Boards of Directors, corporate attorneys, engineers and many others involved in the manufacturer of good and services make deadly corporate decisions that breach their duty to provide safe products to consumers, yet criminal charges for corporate wrong-doing are never pursued. Why is no one screaming for a change?
There is a lone judicial voice that may have finally been heard. Washington Federal District Judge Emmet Sullivan has been very vocal in his support of individual criminal responsibility, and wonders why individuals are not being criminally charged for their deadly corporate decisions. He’s been openly critical of Justice officials for failing to prosecute individuals in white-collar criminal cases who instead offer corporations “deferred prosecution agreements” through which corporations agree to monetary fines, and submit to certain conditions for a finite period of time, after which criminal charges are dismissed. He calls these types of agreements “sweetheart deals” for corporations who tow the line for a period of time, pay a fine, and then it’s back to business as usual. Individuals walk away scot-free, are exempt from liability and never held personally responsible.
In a recent written opinion wholly unrelated to the GM ignition switch settlement, Judge Sullivan criticized the Justice Department for entering into one of these agreements with GM through which it settled criminal charges accusing GM of concealing information from U. S. regulators about defective ignition switches for more than 10 years that GM now admits claimed at least 124 lives and injured 275 more. He criticized Justice officials for not going after those individuals responsible at GM who knew about the deadly defect yet failed to issue a recall or warn their customers, and called the GM agreement a “shocking example of potentially culpable individuals not being criminally charged.”
Through the agreement, GM will pay a $900 million fine and allow independent monitoring of its safety practices, providing its engineering and recall data, for a period of 3 years after which all criminal charges will be dismissed against GM. Judge Sullivan commented, “Despite the fact that the reprehensible conduct of its employees resulted in the deaths of many people, the agreement merely imposes on GM an independent monitor to review and assess policies, practices, and procedures relating to GM’s safety-related public statements, sharing of engineering data, and recall processes’ plus the payment of a $900 million fine.”
The question then becomes: how do we change corporate decision-making so that it is focused on people and safety, and not solely on profits? How do we incentivize individuals to change their corporate behavior, choosing to “do the right thing” no matter the monetary cost? Will the threat of individual criminal responsibility for the corporate decisions provide that incentive? Boards of Directors are responsible to investors and are tasked with making a profit or risk losing their positions and others losing their jobs, so how can corporate decision-makers balance the pursuit of profit and responsibility to their corporate shareholders with their duty to provide safe products?
We may get our answer from one approach being suggested by the U. S. Justice Department, which just announced new guidelines encouraging prosecutors to develop evidence and pursue charges against individuals in white-collar criminal investigations. Under the new guidelines, corporations would only get credit for cooperating with a federal investigation if the corporation names the individuals responsible for making these deadly decisions.
What do you think of this new approach? Do you believe individuals should be held criminally responsible for corporate actions and inaction when they learn of deadly problems with their products yet fail to report problems to federal regulators, issue recalls, or warn their customers? We applaud the Justice Department’s new guidelines, and support prosecutors in their pursuit of individual criminal liability for corporate decision-making because until these individuals are held personally liable, corporate behavior will remain unchanged, consumers will continue to be victimized, and lives lost or destroyed in the name of profit.