Facebook friends have been reposting several recent news stories, primarily the ones about Volkswagen lying about emissions from its diesel models, the former CEO of the Peanut Corp. of America distributing a product he knew was tainted with salmonella and a hedge fund manager – whose company purchased Turing Pharmaceuticals in August – raising the price of a medication used to treat cancer and AIDS patients from $18 to $750 per pill.
The theme among my (primarily) liberal friends is: These are prime examples of everything that is wrong with capitalism.
My response is: Don’t blame capitalism for this! Blame greed. These are blatant, headline-generating examples of executives placing profit over people. While it might pay off in the short term, it rarely does in the long term.
Volkswagen now acknowledges that as many as 11 million vehicles (many of them sold in Europe) contained software that allowed vehicles sold in the United States to circumvent U.S. Clean Air Standard requirements. These diesel cars were sold to consumers as a "cleaner" alternative to Volkswagen’s regular cars. The company faces penalties in the United States alone of up to $18 billion, class-action lawsuits from outraged customers and dealers and scrutiny from other countries where it sells vehicles.
Volkswagen has set aside over $7 billion to cover the cost of recalls, which is nearly half of its profit for the year. The market already is punishing the company for this breach of public trust: in two days, the company lost a third of its value.
VW North American CEO Michael Horn at a launch event Sept. 21 in New York for the 2015 Passat told the audience: "We have totally screwed up," adding that the company’s actions did not line up with its core values.
When 11 million cars are emitting nitrogen oxide at a rate 40 times what is allowed because software installed in the cars detects when testing is being conducted and prompts the car to compensate for it, that’s not a screw up. That’s a systemic corporate failure to be honest and obey the law, and Volkswagen’s top leaders are responsible. The fish, as they say, rots from the head.
And then we have Stewart Parnell, who was convicted by a Georgia jury a year ago on 72 counts of fraud, conspiracy and the introduction of adulterated food into interstate commerce. He was sentenced Sept. 21 by a federal judge to 28 years in prison.
The former CEO of the Peanut Corp. of America (PCA) faced a potential sentence of 803 years in prison for selling and distributing a product that he knew was tainted. Nine people died and 714 others became ill as a result of salmonella poisoning traced to a peanut paste manufactured at PCA.
Parnell’s attorneys portrayed him as a small business owner being scapegoated by the government. He wasn’t a bad guy, they claimed. At his sentencing, Parnell claimed PCA had engaged in corporate fraud, but that he didn’t know about the salmonella.
However, damning emails from Parnell to employees indicate he did know about the salmonella. "Just ship it,' one of his emails infamously ordered.
Now, he’s lost his job, his company, his wife, his home and his freedom. Two managers also face jail time while two others worked out deals with the Department of Justice.
"The sentence that was handed down today means that executives will no longer be able to hide behind the corporate veil," said U.S. Attorney Michael J. Moore of the Middle District of Georgia.
"The tragedy of this case is that at a peanut processing plant in middle Georgia, protecting the public lost out to increasing of profits. This case was never just about shipping tainted peanut product; it was about making sure individual wrongdoers were held accountable..."
Which brings me to my final example of corporate greed: Hedge-fund-manager-turned-Turing-Pharmaceutical CEO Martin Shkreli who, with a sense of moral outrage at being questioned, is able to justify a 4,100 percent price increase for a 63-year-old drug that is used to treat toxoplasmosis in cancer and AIDS patients. Shkreli said the drug was not profitable at $18 per pill, and called the new profit from the drug "reasonable…not excessive at all" during an interview on CBS This Morning.
"I can see how it looks greedy but I think there’s a lot of altruistic properties to it," he said, claiming the profit will be used for R&D for a new drug to treat and cure toxoplasmosis.
Interestingly, researchers and medical professionals claim there is no need for a new drug; the one that costs $750 per pill works just fine, although now it’s out of the financial reach of many patients.
Will Shkreli be punished or rewarded for his greed? Only time will tell.