Why No One at General Motors is Going to Jail, Why Maybe Someone Should

Last week brought news of the settlement between the US federal government and General Motors over faulty ignition switches the company installed in millions of vehicles, which have been potentially linked to over 150 deaths. In the settlement, GM agreed to pay $900 million in fines—this is in addition to over $625 million the company expects to pay to victims and the billions it has spent on recalls—while federal prosecutors have signed off on a "deferred prosecution agreement" and will not seek conviction against any GM employees.

Already in July, the chances of the federal government seeking criminal convictions against individuals was dwindling, despite the fact that the firm's employees (apparently) actively covered up the defect for years. As one news outlet put it, the problem was "legal loopholes" in American auto safety regulation. Put simply, the National Traffic and Motor Vehicle Safety Act of 1966—the law that enabled national auto safety standards in the USA—did not include criminal sanctions. Why? Answering that question requires returning to the law's history.

Already in the 1950s, forward-thinking lawmakers, like Rep. Kenneth Roberts, and safety advocates, like the rocket-sled-riding Col. John Stapp, were pushing for automakers to adopt safety standards that made cars safer during crashes. Most earlier efforts had focused either on making drivers better, for instance, by mandating driver's education or on promulgating standards that increased drivers' control over the car, including the kinds of headlight and brake tests that became a part of annual auto inspections. In opposition to these earlier approaches, Roberts, Stapp, and other safety thinkers of the 1950s joined hands around a theory known as the "second collision." The core idea of the theory was that drivers and passengers were not injured during the "first collision" between their car and another object, like a tree, but in the "second collision" between their bodies and the car's interior. The safety standards that these thinkers pushed, sometimes known as crashworthiness standards, were meant to reduce injuries by softening the car's interior and removing knobs, handles, and other objects that might gouge or beat the body during crashes. But auto safety advocacy in the 1950s did not get far. The automakers resisted it vehemently at almost every turn.

In the early-to-mid 1960s, however, political pressure mounted to change auto design. Partly this was a result of auto safety advocates gaining new positions of power in the federal government. Daniel Patrick Moynihan, who had worked on auto safety for the State of New York, became Assistant Secretary of Labor and promptly set up a commission on the topic. Abraham Ribicoff, who had initiated auto safety initiatives as the Governor of Connecticut, was elected Senator. Eventually, even President Lyndon Baines Johnson, in full Great Society swing, joined the call for safer cars.

In their new roles, both Moynihan and Ribicoff worked with a young lawyer named Ralph Nader, who was one of the foremost experts in the nation on the political and legal dimensions of auto safety. Nader published his book, Unsafe at Any Speed, in 1965, and he helped Ribicoff's staff members write the bill that would become the National Traffic and Motor Vehicle Safety Act.

A Young Ralph Nader

The passage of that law was far from certain, however, until GM President James Roche was forced to admit before the Senate that the company had hired private investigators to peer into Nader's private life. The investigators asked Nader's acquaintances about his sexuality, mental health, and political associations and may have hired an attractive woman to make a pass at him.  Roche's confession made Unsafe at Any Speed a best-seller, turned Nader into an icon, and guaranteed the creation of auto safety standards that cover every vehicle sold in the United States. The auto safety act passed both houses of Congress unanimously.

Yet, as is so often the case, the National Traffic and Motor Vehicle Safety Act was a compromise between several bills. For instance, the first bill that the Johnson White House sent would have enabled the Department of Commerce—an agency that many saw as industry-controlled—to set safety standards if the auto industry failed to create its own. All of the bills from the Congress and Senate were stronger than that, but they were weaker than Nader and other safety advocates hoped. Most important, the final compromise bill dropped provisions that Nader and Ribicoff included, including criminal penalties for corporate executives and others who sold produced and sold unsafe cars. Congressional political processes weakened the resulting law.

In this way, the National Traffic and Motor Vehicle Safety Act lacked teeth: it enabled the federal government to set safety standards that all automakers had to follow, and it gave federal administrators the power to force recalls and set civil penalties for offending corporations, but it contained no criminal provisions to put automaker executives and employees behind bars.

In the wake of this new General Motors settlement, there have been calls to revisit the National Traffic and Motor Vehicle Safety Act amend it with criminal provisions. It's a discussion worth having.

I do not believe that it's a forgone conclusion that such criminal provisions are a good. Certainly, it would be emotionally, maybe even morally, fulfilling to punish individuals who knowingly make unsafe vehicles and cover up such knowledge. But in the end, the law and public administration around matters of safety should aim pragmatically to save us from death and injury. We should think carefully about what kinds of incentives criminal penalties would create for individuals within auto companies. Would criminal provisions make individuals more likely to report problems and generate recalls? Or would it have exactly the opposite effect, leading to even more conspiracies of silence?

Federal agencies have a tradition of trying to create incentives that encourage industry self-policing and self-reporting. For example, in their first years, both the National Highway Traffic Safety Administration and the Environmental Protection Agency decided that they would not bring the full weight of the law to bear against companies that self-reported problems. Harshly punishing self-reporting companies would create an environment where no one in their right mind would self-report.

It seems that adding criminal provisions would also change incentives around auto safety standards: such provisions may lead to more reporting and whistle-blowing, or they may foster more cover ups. They should be approached with great care, but if there was ever a time to consider them, it is now.