Regular readers of this blog will not be shocked to learn that I am skeptical about corporate ethical standards and the effectiveness of this country's regulatory machinery. It came as a bit of a surprise to me that fines were levied recently against some big names for alleged wrongdoing.
Oil giant BP was fined $87 million by the Occupational Safety and Health Administration (OSHA) following a 6-month inspection that revealed hundreds of violations of a 2005 settlement agreement resulting from an explosion that killed 15 workers and injured another 170. According to the Associated Press, OSHA said that "the company also committed hundreds of new violations at the nation's third largest refinery by failing to follow industry controls on pressure relief safety systems." (Of course, the company disagrees and formally contested the OSHA action.)
Meanwhile, according to the Los Angeles Times (11/6/09), "three major retailers have agreed to pay nearly half a million dollars to settle a lawsuit stemming from the companies' sale of toys containing excessive amounts of lead." Collectively, Target, Toys R Us, and Kmart will pay a total of $454,000 in civil penalties and other fines. California State Deputy Attorney General Harrison Pollak is quoted as follows: "The settlement provides a remedy for past violations and makes it less likely that there will be future violations of lead standards."
So far, so good. But suppose I, as an individual, violate a safety standard that results in an increase in mental retardation in children (like lead poisoning does) or that results in 15 unnecessary deaths. Will it impact my behavior if the state, to punish me and make it "less likely" that I will become a repeat offender, fines me $1?
It's not a rhetorical question. Fining me $1 is, within an order of magnitude or two, the same type of punishment as the actions described above.
In 2008, BP reported revenue in US dollars of about $367.053 billion. The fine of $87 million amounts to .02% of such revenue.
Toys R Us, Target/Dayton-Hudson, and Sears Holding Company (owner of Kmart) reported total annual revenue in recent years of approximately $83.9 billion (combining reports from different years, as available). The fine of $454,000 represents .00054% of such revenue.
Ah, justice at last!