Featured Research

from universities, journals, and other organizations

How to punish corporate wrongdoers to deter bad behavior

Date:
October 17, 2011
Source:
Inderscience Publishers
Summary:
If courts were able to award appropriate punitive damages that punish wrongdoers at a level tied to a company's financial worth, then businesses big and small would be at risk of being put out of business by punitive damages unconscionable offenses and would be deterred from bad behavior in the first place, according to one expert.

If courts were able to award appropriate punitive damages that punish wrongdoers at a level tied to a company's financial worth, then businesses big and small would be at risk of being put out of business by punitive damages unconscionable offenses and would be deterred from bad behavior in the first place, according to Judy Feuer Zimet of the Phoenix School of Law in Phoenix, Arizona.

Related Articles


Writing in the International Journal of Private Law, Zimet points out that in many legal cases over the last two decades, companies have repeatedly been fined for breaking environmental and other laws, but have not suffered losses to their profit line that were adequate to deter them from repeating offences. She cites the case of Wright County Farm Eggs and owner Jack Decoster's long list of repeated violations that culminated in 2010 with a national salmonella outbreak. She also cites the oil company BP, which since 2005 has been held to account for a staggering 760 safety violations that resulted in a mere $373 million in fines.

Meanwhile, BP's annual profits are in the double figure billions of dollars. The serious oil spill in the Gulf of Mexico in 2010 forced the company to create a $20 billion victims' compensation fund. Zimet suggests that had fines for the 759 prior violations been sufficiently punishing, BP might have been more effective in addressing the problems that led to the 2010 spill.

"A punishment that successfully deters future wrongdoing requires an amount sufficient to impact a defendant's financial condition," says Zimet, Current factors used to assess the amount of punitive damages should be reassessed. Courts can better punish and deter wrongdoing by calculating punitive damages based upon a defendant's wealth rather than the relationship between compensatory and punitive damages."

Zimet discusses two cases in which appropriate punitive damages had the desired effect on changing corporate behavior. Two successive cases against motor vehicle manufacturer BMW of North America saw the company accused of fraud after a customer discovered that it had repainted a car yet withheld that information when the car was sold. In this first case, the trial court awarded a mere $4600 in compensatory damages and BMW made no changes to its behavior. A second case saw BMW North America forced to pay $4 million in punitive damages. The company immediately thereafter changed its policy and began reporting refinishing work to new car purchasers. This shows that when the risk of liability is substantial, companies will reform bad behavior.

"No longer should compensatory damages steer punitive damages," asserts Zimet. "The Supreme Court should replace this factor by a formerly existing factor: determine the financial position of the defendant and its ability to pay."


Story Source:

The above story is based on materials provided by Inderscience Publishers. Note: Materials may be edited for content and length.


Journal Reference:

  1. Judy Feuer Zimet. Bad eggs and oil slicks: a defendant's wealth is an important factor in properly assessing punitive damages. Int. J. Private Law, 2011, 5, 1-21

Cite This Page:

Inderscience Publishers. "How to punish corporate wrongdoers to deter bad behavior." ScienceDaily. ScienceDaily, 17 October 2011. <www.sciencedaily.com/releases/2011/10/111014095629.htm>.
Inderscience Publishers. (2011, October 17). How to punish corporate wrongdoers to deter bad behavior. ScienceDaily. Retrieved December 18, 2014 from www.sciencedaily.com/releases/2011/10/111014095629.htm
Inderscience Publishers. "How to punish corporate wrongdoers to deter bad behavior." ScienceDaily. www.sciencedaily.com/releases/2011/10/111014095629.htm (accessed December 18, 2014).

Share This


More From ScienceDaily



More Earth & Climate News

Thursday, December 18, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Ivory Trade Boom Swamps Law Efforts

Ivory Trade Boom Swamps Law Efforts

Reuters - Business Video Online (Dec. 17, 2014) Demand for ivory has claimed the lives of tens of thousands of African elephants and now a conservation report says the illegal trade is overwhelming efforts to enforce the law. Amy Pollock reports. Video provided by Reuters
Powered by NewsLook.com
Indictments in West Virginia Chemical Spill Case

Indictments in West Virginia Chemical Spill Case

AP (Dec. 17, 2014) A grand jury indicted four former executives of Freedom Industries, the company at the center of the Jan. 9, 2014 chemical spill in Charleston, West Virginia. The spill contaminated the Elk River and the water supply of 300,000 people. (Dec. 17) Video provided by AP
Powered by NewsLook.com
Uphill Battle to Tackle Indonesian Shark Fishing

Uphill Battle to Tackle Indonesian Shark Fishing

AFP (Dec. 17, 2014) Sharks are hauled ashore every day at a busy market on the central Indonesian island of Lombok, the hub of a booming trade that provides a livelihood for local fishermen but is increasingly alarming environmentalists. Duration: 00:42 Video provided by AFP
Powered by NewsLook.com
France's Sauternes Wine Threatened by New Train Line

France's Sauternes Wine Threatened by New Train Line

AFP (Dec. 16, 2014) Winemakers in southwestern France's Bordeaux are concerned about a proposed high speed train line that could affect the microclimate required for the region's sweet wine. Duration: 01:06 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Plants & Animals

Earth & Climate

Fossils & Ruins

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins