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David Mittleman
David Mittleman
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Fines Do Little to Stop Corporate Greed

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These days, corporate greed and crime are commonplace. Authorities try to prevent future bad behavior by levying fines, but if you're talking about a multi-million dollar company, it may be difficult to use this as an effective punishment. True, the amounts of money that corporations pay for their actions are large–Skecher's paid $40 million to settle claims that it lied in ads about Skecher's Shape-Ups shoes and their ability to help users shape their bottoms. There are so many examples of corporate lies, greed, and corruption that it is hard to keep track of it all, but regardless of the crime one thing is for sure–you aren't hurting corporations' wallets much even if you fine them.

For example, reports show that companies that have faced the largest class action lawsuits rebound at a quick rate. GlaxoSmithKline faced criminal and civil suits for misbranding their drugs to interstate commerce, making false claims and covering up safety data. GSK paid $3 billion in fines levied by the Food and Drug Administration, the largest settlement in U.S. history. However, it takes just 26 days for GSK to make that money back. Do you think a giant pharmaceutical company will change their behavior if a peasely fine is all they face? Probably not, since the $3 billion is tantamount to $10 for the average person.

Research on corporate behavior is limited, but behavioral and social researchers do know that companies may pay the fines, but the big players usually escape the penalties. Also, the marketplace doesn't punish corporations with past bad behavior since data show that none of the 27 companies fined $30 million or more in the past eight years faced declines in their stock. Perhaps the jury is still out on the best methods of punishing corporate bad behavior, but it is clear that something needs to be done to protect consumers.