Last month, Volkswagen agreed to pay $14.7 Billion in settlement money to the customers who were affected by the company’s emission scandal. This will be one of the largest settlements in the United States from a class action lawsuit. Despite the massive amount of money Volkswagen is required to pay, Harvard Business School historian Nancy Koehn said on Boston Public Radio that she does not believe this punishment is severe enough to deter future corporate white collar crime.
The crime Volkswagen committed was lying to the EPA and their customers about the emission levels of nitrogen oxide in over 11 million cars. The company had installed software in their cars that lowered the emissions of nitrogen oxide to meet EPA testing standards and then after the testing would revert back to emitting higher levels of nitrogen oxide once the cars were sold and on the road. Volkswagen marketed these high-emitting cars as environmentally friendly, which in reality was far from the truth.
Koehn says that only the prospect of serious jail time will help to stop these types of corporate crimes from continuing to happen. “Deterrents are incredibly important and financial fines are not nearly as great a deterrent as jail time. Even short bursts of jail time for executives… doesn’t turn out to be quite high in terms of deterrents for corporate white collar crime.”
According to Koehn, the cost of white collar corporate fraud is $350 billion a year. Even with this astronomical number, it's expected that the perpetrators of these crimes will never see jail time. “People don’t really think-- with good reason-- that CEOs engineers, middle managers will go to jail for breaking the law,” said Koehn.
Koehn attributes the glaring lack of prosecution in corporate crimes to the dwindling budget at enforcement agencies like the FBI, the Attorney General’s offices, and the EPA. “One of the reasons you can’t offer credible commitment or rally what you need to really prosecute and win some of these cases, is places don’t have the resources.”
Listen to the entire interview with Harvard Business School historian Nancy Koehn above.
