The Way To Stop Corporate Lawbreaking Is To Prosecute The People Who Break The Law

Today (Thursday, June 5) GM releases the results of its internal investigation about why it failed to respond to an ignition switch defect in millions of cars that has been linked to at least 13 deaths.

But who’s really to blame when a big corporation breaks the law? The government thinks it’s the corporation itself.

Wrong.

“What GM did was break the law … They failed to meet their public safety obligations,” scolded Sec of Transportation Anthony Foxx a few weeks ago after imposing the largest possible penalty on the giant automaker.

Attorney General Eric Holder was even more adamant recently when he announced the guilty plea of giant bank Credit Suisse to criminal charges for aiding rich Americans avoid paying taxes. “This case shows that no financial institution, no matter its size or global reach, is above the law.” 

Tough words. But they rest on a bizarre premise. GM didn’t break the law, and Credit Suisse never acted above it. Corporations don’t do things. People do.

For a decade GM had been receiving complaints about the ignition switch but chose to do nothing. Who was at fault? Look toward the top. David Friedman, acting head of the National Highway Traffic Safety Administration, says those aware of the problem had ranged from engineers “all the way up through executives.”

Credit Suisse employees followed a carefully-crafted plan, even sending private bankers to visit their American clients on tourist visas to avoid detection. According to the head of New York State’s Department of Financial Services, Credit Suisse’s crime was “decidedly not the result of the conduct of just a few bad apples.”

Yet in neither of these cases have any executives been charged with violating the law. No top guns are going to jail. No one is even being fired.

Instead, the government is imposing corporate fines. The logic is that since the corporation as whole benefited from these illegal acts, the corporation as a whole should pay.