A nonprofit publication of the Kentucky Center for Public Service Journalism

Gena Bigler: Rather than impose penny-ante fines, hold corporations truly accountable


General Motors' response to the defective ignition switch was to take other keys off the key ring so it wouldn't be heavy and "accidentally" turn off the car while driving. (Photo from Wikimedia Commons)

General Motors’ response to the defective ignition switch was to take other keys off the key ring so it wouldn’t be heavy and “accidentally” turn off the car while driving. (Photo from Wikimedia Commons)

 
If it weren’t for accountability, we’d be in trouble for society is built on being held responsible for one’s actions.
 
We have a complex justice system constructed with checks and balances to limit power and control and to limit corruption. But, all of our careful planning isn’t foolproof.
 
Multinational billion-dollar companies are often not held accountable. Despite all of our complex rules, laws and carefully constructed system, sometimes there is no meaningful impact. General Motors is one such example.
 
GM has made several car models with defective ignition switches. Some of the keys can easily and accidentally be bumped while driving to the ‘off’ or ‘accessory’ position, turning off the power steering, power brakes and disabling airbags. Essentially, if you bumped your keys with your knee or your keyring was especially heavy, your car could stop without warning and without airbags to help protect you. Any driver sees how dangerous this could be.
 
For at least 10 years, GM knew about the problem. The flaw affected approximately 1.6 million cars including Chevrolet Cobalts made from 2005-2007, Pontiac G5s, Saturn Ions and Pontiac Soltices, among others. The company’s response in 2005 to this potentially deadly flaw was to tell dealers to recommend drivers remove extra keys from their key chains. Then waited until multiple deaths before issuing a recall in February.
 
So far, according to GM, 13 people have died and 31 car crashes have been linked to this defect. That’s more than a baseball field of players, more than a football team’s starting line-up, dead because a company thought suggesting removing keys from a key ring was a better solution than fixing their flawed equipment. Really, 13 deaths are surprisingly low when you consider this flaw affected 1.6 million cars.
 
GM has reported their profits for 2013 as $3.77 billion. Their profits were even larger the year before. How can we as a society hold a mammoth accountable for 13 deaths?
 
Civil litigation which once brought the now infamous Ford Pinto flaws to light has been constrained in many states by limiting jury awards. Knowing they cannot inflict financial harm on corporate giants, many families settle quietly out of court to avoid a long painful trial. This insures silence, since most settlements include confidentiality clauses.
 
The Justice Department has launched an investigation to determine if the flaw was willfully and illegally hidden and Congress will hold hearings. If GM is found to have delayed reporting the problem the company faces a very mild $35 million dollar fine. Considering that GM measures yearly profits in billions, a fine of that size will barely register and certainly won’t have a meaningful impact on the corporation.
 
We saved GM while they were letting their customers crash and die. American taxpayers gave GM billions of dollars in bailout money and we continue to give the company massive tax breaks worth billions more. Some experts question how it happened, but GM was allowed special tax breaks that should have been eliminated when the company filed for bankruptcy. The special tax breaks are estimated to be worth up to $45 billion dollars in tax savings for the company.
 
GM is certainly not the only large corporation to place profits over safety. Recently, a chemical spill left 300,000 West Virginians without water. The company responsible has filed for bankruptcy, leaving the taxpayers to literally clean up their mess and hundreds of thousands of Americans relying on buying imported water.
 
How can a tiny fine encourage good behavior when it is more efficient to pay it than disrupt profits? It simply can’t. We need to reshape how we regulate industry.
 
Fines need to be meaningful and painful. Guidelines for fines should be set in percentages of corporate net worth or percentages of profits. Regulators should not be permitted to inspect a company one day and work for it the next. The ethics of that are appalling and yet it is a regular occurrence.
 
There is a saying that “what you allow, will continue.” We cannot allow this to continue. Society demands accountability.
 
 

Gena Bigler is passionate about public service and credits her time serving nonprofits in AmeriCorps and Volunteers in Service to America (V.I.S.T.A.) with teaching her extreme budgeting and bargain shopping. Gena is now CFO of McNay Settlement Group and serves on the board of the Lactation Improvement Network of Kentucky (L.I.N.K.). Gena would be happy to hear from you at lgbigler@gmail.com.

 

Click here to read more columns from Gena Bigler.


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