Monday, July 19, 2004

Column 6: Accountability

Double shot today...
 
Imagine a criminal convicted of a crime that injured innocent people. Now imagine that this criminal is claiming that he should not be punished for his actions. Furthermore, this criminal is claiming that punishing him would be detrimental to society. And on top of this, the criminal is blaming the attorney that prosecuted him for the problems of society, and denigrating his entire profession. He'd be nuts, right?
 
Now, imagine that half of Americans agreed with this criminal. You'd be scared, right?
 
This is a true story, folks. It is the story of negligent corporations who claim that their negligence should not be punished. It is the story of corporate heads who tell us that large legal settlements hurt the economy. It is the story of people who denigrate trial lawyers for holding corporations accountable. Republicans have been all too eager to make political hay out of the fact that Edwards has spent his career fighting legal battles against injurious corporate negligence.
 
Somehow, I expected better out of the party of Lincoln - who was a trial lawyer. But that's modern Republicans for you - stringent accountability for teachers, no accountability for corporations.
 
There is, of course, a problem with huge corporate negligence lawsuits. It is a problem that does diminish profits, cost jobs, and hurt the economy. It is a problem that is easily fixed. That problem is - take a deep breath, folks, this one's a shocker - corporate negligence.
 
Claiming that a corporation should not be subject to a multi-million dollar penalty because their faulty product caused an injury is like saying that a bank robber should not be imprisoned. And to claim that a company that is knowingly selling dangerously faulty products is above punishment is even more absurd. These settlements are hurtful, I agree. So is hard time for criminals who hurt people. CEOs can take their pick.
 
What is even more absurd about this whole argument is that the problem is easily solved to the benefit of everyone involved. Take, for example, John Edwards' most famous case, a multi-million dollar suit against a manufacturer of faulty pool drains. Not only did the drain hurt Edwards' client severely, but they also had a history of faulty performance. The company could have saved tons of money by not cutting corners during the design process - a little extra money spent now saves a lot down the line. If that was not possible, the company should have recalled the drains and fixed the design flaw after the first reports of faulty behavior. Either of these courses of action would have saved Edwards' client from injury and would have saved the company lots of money.
 
The lesson for corporations here is - another shocker - not to be negligent. Cross your i's and dot your t's every step of the way. It may cost a little bit more now, but it pays off down the line. Not only are you not subject to gigantic lawsuits, but you're also building a reputation as a dependable manufacturer of goods. You're making more money by dealing with less lawsuits. People aren't getting hurt. Everybody's happy.
 
To put it another way, corporations need to stop being shortsighted. A farsighted corporation would provide all its employees with affordable care, since it recognizes that added productivity of a healthy workforce will more than make up for the added cost of the health care program. A farsighted corporation will provide its employees with adequate safety training so they can avoid costly on-the-job injury compensation claims down the line. A farsighted corporation will provide workers with a living wage and adequate vacation time, since a happy worker is a more productive and dedicated worker. (Farsighted energy corporations would also put far more reserch money into renewable energy sources, but that's another column for another day.) The result of all this? Corporate farsightedness would make most government regulation of corporate activity unnecessary, which makes the conservatives happy. It would make sure everyone who works can live a decent life, which would make the liberals happy. Employee morale is high, profits are up. As I said earlier, everyone's happy.
 
But, of course, this isn't the lesson corporations are actually taking from the string of corporate negligence lawsuits and the threat of new labor laws. They would prefer to go on with their negligent and detrimental ways. It's time we held them accountable - not just for our good but for theirs as well.

6 comments:

Anonymous said...

Those damn selfish corporations, not doing all these good things that would raise their profits! Instead they "prefer to go on with their negligent and detrimental ways" because they... because they... well, because they just prefer to!

I can understand arguments that corporations should be regulated because they selfishly DON'T take all of their costs into account or they can escape liability. I don't see where you get off telling corporations how they could more profitably run their businesses. Unlike webloggers, the CEOs of coorporations have a great deal of money on the line when they decide on their policies. Unlike webloggers, they operate in a highly competitive investment system that aggressively rewards profit-seeking. Corporations face strong incentives to find the margin where additional employee benefits no longer pay off. What incentives do you face on the matter?

If you want workers to demand better benefits, great. If you want to argue for regulations to ensure them, that's fine too. But if you want to say that you know the optimal policies and that they will benefit everyone, including the ignorant corporations, I have to call bullshit.

Welcome to the blogoshphere!

-- Jacob

Jeff said...

Jacob - the limitations on benefits that corporations may work well - in the short term. The problem is, corporations don't often think about the long term until it's too late. That's one of the points of the article: that something needs to keep the CEOs looking further than next quarter's earnings.

(I know not all the things I list will be profitable to corporations, but I doubt that corporations have really done an in-depth analysis of these things over a 10-year-or-more time span. If they have, I'd like to see it.)

Let's look at a few cases in point. The negligence thing is an obvious one - it would definitely save the corporations money to put an extra $100K into the design process so they don't end up losing $2M later. Wal-Mart is another one. Ruthless benefit-cutting and pay-cutting created huge short-term benefits for Wal-Mart. But it also created a huge undercurrent of resentment among liberals and workers. The result: do you think this gigantic sex discrimination lawsuit (which threatens to severely hurt the organization - you try paying off 1M plaintiffs plus legal fees) would have happened if Wal-Mart had sowed goodwill among the workers from the beginning? Another case: why are energy companies so reluctant to put research money into alternative energy sources? A viable power source - which we're no more than 5 years away from - would be a huge cash cow for energy companies.

Quite frankly, I think short-term corporate greed gets in the way of long-term benefit. Regulation may or may not be the answer (and I think I know your feelings on this one), but the culture of instant gratification has got to change now.

Anonymous said...

Yes, I can probably go along with you on the liability issues much more than I could on the issue of worker benefits. I think it's an open question, though, as to whether the cause of the trouble is corporation's being short-sighted or liability law being too unpredictable at this point in time.

And yes, you can guess my thoughts on regulation. :)

-- Jacob

Anonymous said...

Hey, I just found out John Stossel will be reporting on trial lawyers on this week's 20/20/ If you know Stossel, you know that's going to be a libertarian presentation.

-- Jacob

Jeff said...

Give me a break! :-P When's that on usually? I don't watch TV much...

And it's difficult to make liability law much more specific. "Pain and suffering" is real, but it's difficult to put a monetary value on. Then there's wildly varying health care costs... The ins and outs of liability law are more Ben's area of expertise than mine though.

Anonymous said...

I think it's on Friday nights, but I don't watch it much either. Getting the Stossel email beats staying home on Friday's to watch him.

-- Jacob