Criminal penalties for CEOs?

Product-safety cases raise issue of corporate ethics.

At least since the 1970s, when the Ford Pinto rolled off the assembly line with its gas tanks prone to explode, US corporations have faced a moral conundrum: In a capitalist society, how do you balance safety with profit?

It's a foggy area of corporate ethics. Executives must decide, for example, whether to spend the money to make a product safer, if it costs less to pay off a few injury lawsuits. And they must come to terms with the question that underlies most such decisions: Is it ever ethical to put a price on human life?

The wrong step in this ethical swamp can lead to retribution, as executives of Bridgestone/Firestone and Ford Motor Co. are finding out. Already, a group of lawmakers and prosecutors is considering adding criminal penalties to the civil litigation now being launched against the tiremaker. Some observers even call for jail time if executives are found to have engaged in egregious conduct.

But it's not clear more penalties solve the underlying problem. What's needed, ethicists say, is a moral compass and a hard look at company values.

"Those values are intended to give guidance in new areas that pop up, which aren't covered by their existing code of conduct," says Steve Voien of Business for Social Responsibility.

Sadly, many corporations could do a better job of following their values, ethicists say.

"There is no reason why industries can't do more to make sure they put out the safest possible products that would be attractive to consumers," says W. Michael Hoffman, executive director of the Center for Business Ethics at Bentley College in Waltham, Mass.

The growing flap over Bridgestone/Firestone's defective tires, now linked to at least 100 fatalities, is driving a push to add criminal charges in product-liability cases.

The US Senate Commerce Committee last week approved legislation that would allow up to 15 years of prison time and $50,000 in fines for manufacturers who knowingly introduce safety defects in vehicles that cause deaths. The House is working on similar legislation. Backers hope they can pass a law in the waning days of Congress.

In California, the regional Consumers Union has asked the state attorney general to launch a criminal investigation of Ford and Bridgestone/Firestone. Already, attorneys general in three-quarters of the states have pooled resources to probe the case. Unlike other states, California has a law that calls for fines and imprisonment for up to three years for individuals who know of a "serious concealed danger" in a product or business practice and don't report it promptly.

Local prosecutors are taking a close look at filing criminal charges in the case. "If we receive such information that there was a serious injury or death in Milwaukee County, we will initiate a criminal investigation," says Michael McCann, the Wisconsin county's district attorney. So far, none of the 19 known instances involving suspect Firestone tires in Wisconsin has caused serious injury or death, according to the National Highway Traffic Safety Administration.

The jailhouse balk

So far, society has opted not to put executives behind bars for selling unsafe products. From tobacco firms to food companies, executives who have misled the public have avoided prison time.

Supporters of criminal sanctions also argue that multimillion-dollar civil fines against companies have not stopped the manufacture of unsafe products.

"We're not for lots of lawsuits at all, but we really believe that consumers' interests and consumer safety should be at the top of the list [in corporations]," says Elisa Odabashian, an analyst in the San Francisco office of Consumers Union, publisher of Consumer Reports magazine.

"One thing that puts the fear of God in executives is the jail cell," says Russell Mokhiber, editor of Corporate Crime Reporter, legal weekly based in Washington. "It sends a strong message."

Within the legal profession, opinions are mixed about whether criminal prosecution of executives in product-liability cases is warranted.

Some, like Kathleen Brickey, a law professor at Washington University in St. Louis, say it is "when management ... makes a decision on profit maximization and is fully aware that that exposes consumers to needless and excessive risks." But executives should not be tried in criminal court, she says, for the normal business of balancing safety and profitability.

Other legal experts argue against criminalizing product-liability, saying second-guessing a corporation's cost-benefit analyses is exactly what juries would be called upon to do.

"You don't want companies to save lives at all costs; you want companies to save lives at reasonable cost," says David Bernstein, a law professor at George Mason University in Arlington, Va. "Juries do not have a good record of making determinations in these kinds of cases involving civil damages. And there's no reason to believe they'd do so in criminal cases."

Instead of punishing companies after the fact, Mr. Bernstein suggests that government should create a whistle-blower reward to encourage workers to inform government safety officials as soon as they see a problem.

'Let values be your guide'

Corporate ethicists, though, suggest the real need is for more training in ethical decisionmaking.

How does anybody decide, for example, whether it's worth spending, say, $10 million to reduce the risk of one fatality?

"What we're talking about here is a gray area," says Mr. Hoffman. "And what ethics are all about is navigating that gray."

Companies can't rely solely on costs in making such decisions, ethicists say. They need to look to their core values for guidance.

In 1968, for example, Bridgestone adopted this motto: "serving society with products of superior quality." If the company really means that, ethicists say, then it must address safety with great sensitivity.

"Safety risks should be examined at the very highest levels of an organization," Hoffman says.

If the costs of fixing a defect would make a product uncompetitive with competitors' models, ethical companies look for creative alternatives, he adds. That may include lobbying Congress for higher safety standards that everyone must follow or launching an industrywide push to address the issue.

And when an unexpected problem arises, the ethical company ignores the profit-loss statement and fully discloses risks to the public and the company's plan to remedy the problem, these ethicists say.

One reason the Bridge-stone/Firestone case has sparked such a backlash is mounting evidence suggesting that executives at Bridgestone/Firestone and Ford knew about the defective tires weeks, perhaps months, before they issued the voluntary recalls in the US.

"These decisions are never easy," Mr. Hoffman says. But "corporations are more and more going to be faced with the risk factors of their products blowing up in their face."

(c) Copyright 2000. The Christian Science Publishing Society