It had been my plan to avoid reading the news while eating my lunch today, as increasingly the practice sours my mood and triggers my outrage about the sorry state of leaders running U.S. corporations. Regretfully, the folks at Bloomberg, one of only two publications I allow to send me alerts (the other is the Wall Street Journal), had other plans for me.
This was the story the news service flagged. Here’s a screen shot of the first three paragraphs:
At first blush, it might seem alarming that a U.S. company ignored its own safety regulations and knowingly put the public’s health and safety at risk. No doubt, some folks in Congress will be clacking, cable news anchors will be furrowing their brows interviewing safety “experts,” and some tweeters might express alarm. But here’s something that likely won’t get mentioned: American corporations have a long history of knowingly jeopardizing the health and safety of the U.S. public.
Here’s just some examples that readily came to mind.
A Georgia jury last August awarded $1.7 billion in punitive damages to two children whose parents were crushed to death after their Ford “Super Duty” F-250 pickup truck rolled over. What contributed to the record verdict was evidence that the F-250 pickup failed Ford’s own internal crash test standards. Ford sold the truck regardless.
It wasn’t the first time Ford knowingly sold vehicles it knew were hazardous. It’s estimated that as many as 900 people died of burns because the Ford Pinto subcompact they were driving burst into flames when their gas tanks ruptured in a collision. Internal company documents revealed at trial that Ford secretly crash-tested the Pinto more than forty times before it went on the market and that the Pinto’s fuel tank ruptured in every test performed at speeds over twenty-five miles per hour.
New Jersey’s attorney general filed a lawsuit last June alleging that Ford dumped waste on the homelands of the Ramapough Lenape Nation, a Native American tribe recognized by the state. The lawsuit accused the company of disposing thousands of tons of toxic paint sludge and other pollutants on the site of a former iron mine in northern New Jersey in the 1960s and 70s, then donating or selling the land without disclosing the contamination. As a result, tribal members say they have experienced cancer, birth defects, and other negative health effects.
For Ford, incurring lawsuits are just the cost of doing business, which perhaps explains why Steven Croley, Ford’s chief legal counsel, reports directly to CEO Jim Farley and Jon Huntsman, Ford’s vice chair for policy and a senior advisor to Farley and Executive Chair Bill Ford. Croley is a legal heavyweight: He earned his law degree from Yale, holds a doctorate in government from Princeton, held influential legal roles in the Obama White House, and made partner at the powerhouse law firm Latham & Watkins. He also served as associate dean at the University of Michigan Law School.
With Croley at the legal helm, the company’s alleged legal arrogance is understandable.
“Ford is unique and singular in the extent to which they exhibit disdain for the law, for courts, and for jurors,” James Butler, the lead plaintiff counsel responsible for the landmark $1.7 billion punitive judgement, told me.
Butler isn’t some backwards southern ambulance chasing lawyer. He’s won several record setting verdicts but why he chose to become a personal injury lawyer relates to the faulty Chevy Corvair that GM knowingly sold in the 60s, a vehicle highlighted in Ralph Nader’s automotive industry expose called, “Unsafe at Any Speed.” Butler inexplicably fell asleep driving his Corvair one early evening and hit a double power pole, severely damaging his hip and disfiguring his face. Months later, Butler’s father received a GM recall notice, alerting him that carbon monoxide was possibly leaking into the vehicle.
In 2004, GM knew its ignition switches were faulty but chose not to recall them until years later, after at least a dozen people were killed because of the neglect. The faulty switch automatically turned the car’s engine off and prevented air bags from deploying — while the car was in motion.
One of Mary Barra’s first official acts when she took over as CEO in 2014 was to apologize for the ignition switch debacle.
“Something went wrong with our process in this instance, and terrible things happened,” Barra said in her video message to employees. “We will be better because of this tragic situation if we seize the opportunity. And I believe we will do just that.”
That doesn’t appear to be the case.
Multiple safety warnings have been issued about GM’s monster electric Hummer, including one from the head of the National Transportation Safety Board who unfortunately is only empowered to investigate crashes, not take measures to prevent them. The Hummer weighs more than 9,000 pounds; its battery weighs as much as a Honda Civic. I’ve written multiple posts about the Hummer’s dangers (see here and here).
A veteran production manager in one of Boeing’s factories warned senior management that the company’s workforce was exhausted and overly strained trying to keep up with 737 Max manufacturing demands and recommended that production be halted.
“Frankly right now, my internal warning bells are going off,” the manager said in an email. “And for the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane.”
The manager acknowledged that a temporary halt in production “would take a lot of planning” but noted that “the alternative of rushing the build is far riskier.”
The manager’s warning was ignored, and he quit his job. Sales of the 737 Max were halted after two of them crashed, killing 346 people.
Goodyear knew that some of its recreational vehicle tires could fail and cause severe crashes, yet it didn’t recall them for as many as 20 years. Goodyear wouldn’t recall the tires even as late as March of last year, despite investigators finding that their failure caused crashes that killed eight people and injured 69 others from 1998 through 2009.
Elon Musk has repeatedly been alleged to have made false claims about Tesla’s autonomous and self-driving capabilities, which have been linked to multiple deaths.
CEOs typically have underlings to take the fall for them. In the Ford Pinto case, it emerged in litigation that engineers knew better than to tell then CEO Lee Iacocca about the vehicle’s dangers.
“Hell no,” said an engineer who worked on the Pinto when asked if anyone informed Iacocca. “That person would have been fired. Safety wasn’t a popular subject around Ford in those days. With Lee it was taboo.”
Iacocca used to say, “Safety doesn’t sell.”
I’m aware of only one CEO held criminally liable for the deaths caused by safety risks he knew about it. That was Stewart Parnell, who in 2015 was sentenced to 28 years in prison for knowingly selling salmonella-tainted peanut butter. More than 700 cases of salmonella poisoning were linked to contaminated peanut products. Nine people died.
Parnell ran a family business and obviously couldn’t afford the legal firepower big publicly traded corporations can afford.
Alan Shaw, the current CEO of Norfolk Southern, didn’t assume command until May of last year. His predecessor was paid $13.2 million in 2021. GM CEO Mary Barra was paid $29 million in 2021 and Ford CEO Jim Farley made $23 million that year. (Farley wasn’t running the company when Ford sold the F-250 with the allegedly faulty roofs.) Boeing CEO Dennis Calhoun, a former private equity executive and a Boeing director who drove much of the company’s cost cutting, was paid $22.5 million last year. He was denied an additional $7 million bonus for failing to get a new jetliner in service by the end of the year.
Suffice to say, American CEOs don’t get rewarded their obscene compensations because of their concerns for the safety of the public or their customers.