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July 20, 2010

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if there was a market for blood-free coal, someone would be selling it.

I think we could solve quite a bit of this by charging the truly safety-flaunting managers with manslaughter. As long as the penalties for this sort of behavior are 1)only financial and 2)smaller than the costs of adhering to the regulations, then there's no way businesses can be competitive wop breaking regs.
But you put people in jail, they start paying attention.
Also, Id like to see capital punishment for corporations. ie &$^# up enough times on serious enough matters, and (after a trial) the entire operation is seized & sold. If shareholders cannot prevent serial lawbreaking and risk to others, then they lose their assets.
I know that effectively the same thing can be done if fines are large enough, but Im thinking more along the lines of how ordinary people are treated- if you break the law and pose a threat to people around you, you lose your freedom rather than just getting fined.

Show me an industry that caters to a highly mobile and informed customer base or highly mobile and informed workforce and I'll show you the invisible hand of the free market at work. - see the auto industry, at least from the consumer perspective.

But show me any industry that caters to a trenchant customer base or workforce, or an ill-informed customer base or workforce, that does not have a track record of poor service, poor product, or poor work conditions due exterior-imposed regulations. I.e. show me an industry where the customers or workforce are captive or trenchant yet, without government protections, are not taken advantage of or are exploited for corporate gain

I think we could solve quite a bit of this by charging the truly safety-flaunting managers with manslaughter.

A couple of years ago, one of the ceiling panels in the newly-completed Big Dig tunnel through Boston fell, and a woman was crushed to death by 3 tons of concrete.

Martha Coakley, then AG of MA, took the extraordinary step of bringing criminal charges against one of the companies involved, Power Fasteners. They were charged with involuntary manslaughter, for having recklessly used an inadequate fastener on the tunnel ceiling.

If you or I were charged with involuntary manslaughter, we would be looking at up to twenty years in jail. If explosives were involved, we could be looking at life.

Because corporations can't be sent to jail, the maximum penalty that could be assessed against Power Fasteners if they were found guilty was $1,000.00.

I understand the miners themselves requested the safety monitors be disconnected because it would eliminate their estate taxes if they died this year, plus it lowered their marginal tax rates for 2010.

April... hmmmm.... they were probably sick of working for the government up until then.

Apparently, Breitbart has the video.

John Boehner has the ticket --- eliminate all regulations for a year. It's called the Methane Enhancement Act. Number Seven on the new Contract To Kill Americans below a certain marginal tax level.

Satire will get us nowhere. Enough whimsy.

Replace Jon Stewart with "The Dead Motherf*cker Meets the Final Incentive Hour".

First show: Take Don Blankenship deep into the mine with a canary. When the canary falls off of his perch, shoot Blankenship in the head.


Self regulation is bad enough for coal. We see in the Gulf of Mexico what can happen with oil.
Imagine this cycle...lax regulation followed by a disaster...with nuclear power.
Maybe we should quit worrying about Iran getting nuclear weapons, and worry about American industry using nukes.

It should be handled as it is in the military. You are required to disobey an illegal order ( an order the calls for breaking a law ). You must report it or face prosecution. You are guilty if you knew or should have known of the act. I agree with Carleton about penalties.

Agreed with Carleton and others. There need to be criminal penalties for this level of malice and disregard for human life. As long as the penalty for breaking the law is only monetary, businesses will simply chalk it up to the cost of doing business. Start putting peope in jail for reckless endangerment and other appropriate crimes for flaunting safety regs. Combine it with enhanced whistleblower protection so that employees feel safe to refuse illegal instructions and report them, and I think you'll see the industry start to clean itself up.

I like the idea of a corporate death penalty as well. Seize and dissolve the assets of the really egregious repeat offenders.

I think we could solve quite a bit of this by charging the truly safety-flaunting managers with manslaughter.

I don't mind the safety-flaunting ones. It's the safety-flouting ones that make trouble. :-)

As long as the penalties for this sort of behavior are 1)only financial and 2)smaller than the costs of adhering to the regulations, then there's no way businesses can be competitive wop breaking regs.

And even if the costs are greater, if there's a decent chance of getting away with it some businesses will break the rules.

But you put people in jail, they start paying attention.
Also, Id like to see capital punishment for corporations. ie &$^# up enough times on serious enough matters, and (after a trial) the entire operation is seized & sold. If shareholders cannot prevent serial lawbreaking and risk to others, then they lose their assets.

Managers and directors and large influential shareholders need to be seriously accountable, including facing the possibility of criminal charges. Since small shareholders have no real control, it's tough to just seize their shares. They are going to lose a lot of money anyway. Maybe making it easier to file derivative lawsuits, or whatever they are called, would solve this.

That's true- small shareholders could get punished for behavior that they couldn't easily control. But
1)they are somewhat protected by the self-interest of the big shareholders, who do have control and stand to lose their investment if the corporation is 'killed'
2)they can always sell if they aren't comfortable with the corporation's track record, disclosure, etc. This is a feature, not a bug: downward pressure on the stock of corps that don't have good safety records or disclosure will encourage good behavior.

Insofar as it might encourage small investors to diversify more, it's also a good thing. But Id want to avoid creating a loophole for classes of shareholders to not be punished for their corporation's behavior- otherwise, I suspect stockholders would merely move towards whatever governance kept them in the dark enough so that they weren't liable to lose their investments. It's the usual game played at the confluence of finance and regulation: Heads they win, tails they don't lose anything.

Also, I wouldn't envision this being a common event; it's not like some Intel plant manager makes a deal to illegally dump waste and then the whole corp is gone. I would think of it as an extreme measure again corporations that display constant flouting of regulation and endanger their employees and neighbors. eg 'ignore the safety rules and run coal' ought to never, ever show up in a memo unless the author wants to get repudiated and fired, or thrown in jail.

Since small shareholders have no real control, it's tough to just seize their shares.

In practice, I think that would rarely be an issue. If the management and big shareholders are at serious risk of losing their money, they'll put in place the kind of safeguards that will also protect the small shareholders.

Alternatively, you could institute some kind of liquidation that didn't necessarily take everything from the shareholders. All of the company's assets would be liquidated and the corporate officers would be fired and lose any deferred compensation including golden parachutes. The money from the liquidation would be used to pay off the company's creditors, starting with any fines and judgments against the company as a result of the illegal actions that caused the liquidation. If there was money left over after paying off the creditors, it would be paid to the shareholders. The company would be guaranteed not to exist as a whole after the judgment, but the shareholders could still wind up with something.

@ Thullen
...shoot Blankenship in the head.

Naah. Shooting's too good for him. Let him just sit there in the mine, while the air... runs... out...

Serious question for the attorneys out there (Eric, you listening?):
Can a top company officer, like Blankenship, be prosecuted personally?

Can a top company officer, like Blankenship, be prosecuted personally?

In theory, yes. See, ie, some of the Enron boys and Dennis Kozlowski from Tyco (still in the clink he is).

Would have to know more about the evidence against Blanky.

My own modest proposal is even more radical.

For mining specifically, every time a worker dies underground, *regardless of cause*, one of the CEO, CFO, and COO loses a finger joint. One finger joint per death. We don't have to prove mal- or mis-feasance, it's just a *consequence*.

So for this particular disaster, that would be 29 finger joints from 3 people. Hey! That's only 10 each! What are you complaining about?

I am absolutely 100% certain that Blankenship, for example, cares a lot more about his own little finger than he does about any 3 miners. It would encourager les autres, don't you think?

The thing is, guys like him are too rich and well-connected to realistically spend time in jail, or for taking any amount of money away from them to seriously cramp their lives. The only punishment that truly has a leveling effect is corporal.

Carleton,

I'm generally dubious about the whole "shareholders can always sell" argument, whether on the question of corporate political contributions or here. There are huge practical problems, not the least of which is that many shares are held indirectly, through mutual funds, pension plans, and the like.

The fact is that even if we don't seize the small stockholders' shares, they are going to take a big hit from various fines, civil judgments, loss of business, etc. No need to punish them beyond that.

The responsible parties are top management and those who are supposed to supervise top management - the board of directors.

My suggestions (may not be solutions, but whatever)....

1. In the event of a worker death due to company negligence, the worker's designated heir and/or agent is given a seat on the board of directors, replacing a sitting director. Said seat shall be held in perpetuity unless replaced due to yet another worker death in the event that 100% of the board has been so replaced.

2. The costs of safety regulation and enforcement shall be borne by a direct tax on firms in the affected industry. The more unsafe the industry, the greater the tax.

3. Executives and officers of corporations shall be required to place any/all bonuses, stock options, etc., in escrow for at least 5 years, and the corporation shall be granted first standing to reclaim any and/or all personal assets in the event that their stewardship is found to be recklessly criminal in any court of law.
4. 40% of all Board seats shall be assigned by random selection from the phone book, unless otherwise assigned per No. 1 above.
5. The corporation cannot vote company held shares. Such shares have no voting rights.

....that's just the start.

6. In the event that a corporation is found guilty for the 3rd time of a felony, said corporation assets shall be seized and sold to the highest bidder. Proceeds shall be disbursed equally amongst all employees with bonuses for length of service, and payout inversely correlated with employee pay.

....hey, this is fun!

As usual, liberals make things too complicated.

See, conservative sadists who run corporations and have their d#cks sucked by Washington politicians hire attorneys to count on their fingers how many fingers are going to be lopped off, and then they hire Sean Hannity and his brother and sister sub-human filth to wave around false hands and pretty soon no fingers have been severed and Obama is a Nazi and taxes get cut.

Or, we have a six-step program with people sitting on boards and shareholders having discussions and assets siezed and pretty soon what you have is yet another elitist, ineffectual, intellectual plan that Moe Lane and his murderous company can spin into the water that will refresh the tree of liberty, unless it's in a national forest, and then you can kiss it goodbye, because there might be coal underneath it. ......

... skip the canary and the trip into the mine. Take Blankenship into the street and kill the motherf*cker. Give the families of the miners machetes and let them have at it.

You won't need another Bureau of Mines (didn't Reagan kill that organization?) bureaucrat to ever inspect a mine again.

Safety will be foremost.

As for the Tea Party racist scum, pop over to Balloon Juice and see the post about calling them out too.

It's not extreme enough, but it's a start.

I'm not going through an argument about race again.

Better to just nuke the joint.

End it.

An Injury To One Is An Injury To All...One Big Union. One Big Strike.

What about the obedience collar in reverse?
Each day each employee has the right to press the button (once). The strength of the electric jolt the wearer receives depends on the number of employees that exercised the option. Let's put the lethality level at 2/3 of employees opting in*. Executive collar wearers may only quit job after hours and after receiving the daily dose.

*instant adjustement of numbers. Should all employees die before button-pressing time (firing also will not take place before clsoing time) the system will automatically go for max amp. max voltage.

In case of Mr.Blankenship I vote for simple shovel behind the shed. Widows get first strike.

In case of Mr.Blankenship I vote for simple shovel behind the shed.

In the case of Mr. Blankenship I vote for making him personally financially liable for the damages that flow from his decisions.

Jail won't mean that much to him, he'll do some time and come out of jail a wealthy man.

Take his money.

Limited liability is supposed to apply to investors in a corporation. I'm not sure why it should shield operational folks.

Take his money. That will strike a healthy and appropriate fear in the hearts of C level executives everywhere.

Given this, the belief that if we left corporations, who are required by fiduciary duty to maximize profits for their shareholders, to their own devices without any regulation, they would put a premium on worker/public safety is irrational at best.

I realize this is an article of faith in the progressive venue, but has anybody bothered to check out their own premises? Seriously. Does anyone think that when a corporation makes a conscious decision to forgo safety in favor of profit, that the corporation is not required to respond in damages?

As but one example, in 1980 there were 15 or so companies that, from the early 40's thru 1972 sold products that contained asbestos. Anecdotal evidence (medical case reports) in the late 50's associated asbestos exposure with asbestosis (scarring of the parenchyma of the lungs being the classic diagnosis) and a lesser number of case studies suggested a relationship between asbestos and some forms of cancer. In 1964, Irving Selikoff did the first major epidemiological study of asbestos exposure and disease. That year, warnings first appeared on asbestos containing products. His study was published in 1966. It demonstrated a direct causal link between asbestos and lung disease (asbestosis) and various lung cancers (with smoking being a major contributor) and two kinds of mesothelioma (pleural and peritoneal) which bore no relationship to smoking. Of the 15 companies, two remain in existence. The rest went bankrupt defending and settling lawsuits.

This lesson has not been lost on others. Just because everyone doesn't understand the risk to a company of mass tort/civil liability doesn't mean that most don't understand. Taking a single bad actor--BP is notoriously lax--and using that as the bloody shirt to condemn industry-wide is the worst kind of arguing a general proposition from a specific instance. Taking BP yet again, plenty of evidence is emerging that BP ignored industry standards repeatedly in the run-up to the blow out.

Dow Corning went into bankrupctcy over breast implants.

The cars we drive today are at least an order of magnitude safer due to safety enhancements produced mostly by corporations paying a high price for ignoring safer designs.

A board of directors does not discharge its fiduciary duty by encumbering its shareholders' equity with massive tort and other civil liability.

More regulation doesn't produce compliance. Enforcement produces compliance. Eric's argument is a non sequitor and his premise is a convenient myth that allows for intellectually shallow progroms against disfavored entities.

A board of directors does not discharge its fiduciary duty by encumbering its shareholders' equity with massive tort and other civil liability

McTex, I've worked on some of the biggest pharma litigation in recent years, and I can assure you that the board and management did not put customer safety first (in this instance, patience health), but rather did not want to mothball drugs that were dangerous (as in quite deadly) but which had received heavy investment.

Automobile safety is another area where this pattern prevails. Food safety. Mine safety is notorious. Manufacturing safety. Etc.

Corporations actually do cost/benefit analysis factoring in the cost of lawsuits from faulty products, and then decide based on that what to do in terms of recalls/product canellations.

That's one of the reasons why we have punitive damages, and one of the reasons the GOP wants to do away with them: they are a way of exacting a huge toll on a corporation that was aware of the dangers, but went ahead because of profits.

This is basic, accessible history. Especially for someone with a JD.

More regulation doesn't produce compliance.

Never said it did. Although regulations are certainly necessary to force compliance, they are not sufficient.

Enforcement produces compliance.

Which is what I said about industry friendly regulators.

Eric's argument is a non sequitor and his premise is a convenient myth that allows for intellectually shallow progroms against disfavored entities.

Neither is true, nor do said pogroms ever actually materialize. The "pogrom" story is actually the myth.

I mean, what, the poor, poor oil industry that was driven to bankruptcy by the shallow thinking, but extremely powerful...[insert group of mythical muckrakers]? Or was it the coal industry? Big Pharma? Help me out here.

Eric, I make my living off of stupid decisions. It is rare, very rare, for a company to do what your client (or your adversary) did. It happens, but it is the exception, not the rule.

I have a client--Fortune 500--that does most of its work in refineries, plants, heavy construction, etc. Its safety program--coupled with a draconian zero defects policy--disproves pretty much your entire premise. I represent at least a half dozen 100-500mm a year commercial construction operations with aggressive, termination-for-violation, safety policies. Their OSHA logs are pretty much blanks. Accidents happen--90% are worker negligence in disregarding safety rules--and I either win or settle for chump change 90% or more of the time. My point is that finding a bad actor or even 20 bad actors in sea of hundreds of thousands of actors proves only that humans are defective and some are venal.

Most companies avoid litigation like the plague. What you describe is the Ford Pinto mentality. I don't deny that. I've seen it too. But, as I said in the beginning, it's the exception, not the rule.

Its safety program--coupled with a draconian zero defects policy--disproves pretty much your entire premise.

Wait, that one company does this disproves the premise? And the premise being that absent tough regulation, and enforcement thereof, companies will cut corners? I got more than one counterexample McTex.

To set the record straight, I never said that "all companies always do this everywhere," such that one counterexample would disprove my premise.

Mine is a general commentary on the fact that many companies will cut corners when allowed to, and when the financial costs will not outweigh the financial benefits. That companies want to avoid litigation and regulatory heat does not disprove this. Quite the opposite.

Most companies avoid litigation like the plague. What you describe is the Ford Pinto mentality. I don't deny that. I've seen it too. But, as I said in the beginning, it's the exception, not the rule.

Yes, and more "exceptions" crop up when the regulatory environment is either non-existent, or overly lax. As with BP. As with Massey and the mining industry. As with Goldman Sachs, which just paid a relatively miniscule fine for rather sizable misdeeds.

The problem is that with such industries, the "exceptions" can cause enormous damage, so we need to put tough regulations in place to minimize them, and ensure that those regulations are enforced.

Nothing you've written changes this basic truth. In fact, it reinforces it.

I think you guys need to chill a bit, as the spelling errors (sequitor, patience health) followed by the unclosed tags suggest...

I have a client--Fortune 500--that does most of its work in refineries, plants, heavy construction, etc. Its safety program--coupled with a draconian zero defects policy--disproves pretty much your entire premise.

One counterexample disproves an entire premise?! Yikes. In that case, I'll just toss out GSK and the current accusations that they deliberately hid evidence (with the help of a regulatorily-captured FDA) that diabetes drug Avandia caused heart attacks.

There, now my counterexample disproves your premise. Either that, or that's not actually the way these things work. One or the other.

I represent at least a half dozen 100-500mm a year commercial construction operations with aggressive, termination-for-violation, safety policies.

Didn't you just say that policies don't matter, enforcement does? Do they enforce these policies?

McTex,

Are you saying that an effective regulatory regime that benefits society by preventing some significant number of accidents that would occur in its absence it impossible? Are you saying that there is no point in government regulation of industry; that it's utterly futile? Or are you simply expressing general skepticism and suggesting that critical evaluation of any proposed regulation is in order? Or is it something else? I'm not clear on the particular point you're making.

One thing to consider is that OSHA protects workers from unsafe work environments, which is a great thing to do, but it's not the same as protecting the public from unsafe products or larger-scale practices. A company could have a zero-accidents worker-safety record and still poison a river with mercury or produce drugs with undisclosed and deadly side effects. (Too bad BP and their subs failed on both accounts.)

Tort law helps, but to think of it as a solution to the problem is a mistake.

It is an expensive and time-consuming process, in which, business complaints and a few examples notwithstanding, the company enjoys enormous advantages. It has more resources, and delays both inherent and manufactured work hugely to its advantage. Among other things, an injured party needs money to live on, and so is under terrific financial pressure to settle early and cheaply. Not for nothing did Hamlet list "the law's delay" as a motive for suicide.

Besides, monetary payments are imperfect and inadequate compensation in many cases. This is obvious for loss of life, and I wonder how much money regulation opponents would want to paid to be blinded, or lose a limb. Ounce of protection, anyone?

McK mentions the Corning bankruptcy. But bankruptcy cuts both ways. It is a thraet to the shareholders, certainly, but it also means there is a limit to the total amount of damages the company can pay. That may not matter for for BP, but it surely does for smaller companies.

Finally, let me note that I think McK is wrong to say that auto safety improvements were largely driven by liability concerns. Seat belts, at least, were put in as a result of legislation - which the auto companies fought fiercely

My point is that finding a bad actor or even 20 bad actors in sea of hundreds of thousands of actors proves only that humans are defective and some are venal.

And, to protect ourselves against such people, we have eg laws with very strong penalties against assault, rape, and murder. This does not imply that most would commit those acts even if there was no punishment.

I can't imagine you'd suggest weakening the laws against murder on the grounds that many people still wouldn't do it. But that seems to be what you're suggesting here- that since many or most corporate citizens aren't badly behaved, we don't need to protect ourselves against the ones that are a danger to their employees or to their neighbors.
Either that, or as HSH says, Im not sure exactly what your point was.

As Bernard says, seat belts were put into cars by regulation, which the car companies complained would ruin them, RUIN!

Just as they have said about every single other change or upgrade, from fuel efficiency standards, to safety standards, to...

Compare what an opprssive government forced the automakers to put into their cars with what The Free Market forced them to put in:

emmission controls vs. cup holders
air bags vs. DVD players
uniform-height bumpers vs. "real silverdust hand-polished into the wood"

--TP

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