White collar crime: types, causes, and prevention

Ford Pinto and Corporate Crime

Experts on corporate crime such as David O. Friedrichs (1996) used to lament the lack of attention given to white collar crime. This was due to the mistaken assumption that unlike violent street crimes, white collar crimes were victimless and therefore, less harmful.

However, recent events such as the recent Firestone tire blowouts, the rollover of Ford's rollover vehicles and Enron Company's padding of profits and Arthur Anderson's creative accounting practices have generated new interest in white collar crime. The growing litigiousness of the American public and media coverage generated by product failures have likewise put more attention on what Rosoff, Pontell and Tillman (2002) label as "the other crime problem."

Friedrichs (1997) identifies three major types of white collar crime - government crime, occupational crime and finally, corporate crime.

This paper focuses on the issue of corporate crime through a close examination of the Ford Pinto case, one of the landmark cases in corporate criminology. The first part of the paper examines the facts of the Ford Pinto case, from the supposed decision to "rush" the production of the unsafe car to the effects of the 1980 criminal trial of the Ford Motor Company for reckless homicide. The paper then uses the framework of research on white collar crime and studies on organizational culture and structure to examine the lack of safety and recall regulations that may have contributed to as much as 500 deaths (Dowie 1977).

This paper concludes that in addition to the drive for profit, the institutional norms embedded in the organizational structure of the Ford Company, as well as within the NHTSA at the time contributed significantly to the lack of both internal and external regulations. The lack of these regulations, in turn, resulted in unsafe cars caused many of its occupants their lives.

Review of Literature

Much of the literature on the Ford Pinto case focuses on how consumer safety was willingly sacrificed in the face of "corporate greed." Dowie (1977) wrote the first and definitive account in his Pulitzer Prize winning "Pinto Madness." In this expose, Dowie unearthed documents proving that the engineers and managers Ford Company knew of the Pinto's safety problems for at least seven years, but refused to make the necessary safety changes. This decision, Dowie charged, was based on the concept of profit maximization.

Strobel (1980) follows suit, with an examination of why the Pinto became "the most controversial car ever built" (169). In addition to the accidents, Strobel also discusses the ensuing recall of the Pinto, the $125 million in punitive damages awarded to a Pinto burn victim and the subsequent criminal trial over the question product safety and company liability.

Kramer (1982) argues that Ford's decision to leave the unsafe and easily-dislodged gas tank in the Pinto was a deliberate decision. This decision was again made in light of Ford management's need to profit.

Many studies on white collar crime point to the Ford Pinto case as the best-known example the evils of corporate greed. Simon and Eitzen (1990), for example, point to the Ford Pinto case as an example of a company that, for almost a decade, knowingly marketed an unsafe product. Hagan (1994) goes even further, stating, "Choosing profit over human lives, the company continued to avoid and lobby even eight years later against federal safety standards that would have forced modification of the gas tank" (376).

While these accounts present the facts of the case and compelling analyses on capitalist and corporate greed, they do not shed light on how a deliberate decision to market the unsafe product went unchallenged by any regulations, both internal (within the Ford Company) and external (within the NHTSA and other relevant government authorities).

Towards this, Cullen, Maakestad and Cavender (1987) locate the Ford Pinto case within the larger field of white collar crime and corporate criminal liability. The authors argue that part of the reason for the absence of regulations in the early 1970s was the lack of a social movement for consumer rights.

Going beyond the Ford Pinto case, is useful to look at case studies of other agencies or corporations that have experiences similar safety-related tragedies. Vaughn (1996) and Adams and Balfour (1998) for example, have conducted research on the factors that have led to the Challenger tragedy at the National Aeronautics and Space Administration (NASA).

Vaughn concludes that the organizational and institutional processes at NASA contributed to the lack of communication regarding safety regulations.

Adams and Balfour (1998) offer a more compelling analysis; locating the lack of safety within the concept of "administrative evil."

Using the NASA case as just one example, Adams and Balfour argue the which arises because a culture or society's emphasis on technical progress causes people to unwittingly act in ways that cause pain and suffering to other people.

The concept of administrative evil and the highly compartmentalized organizational structure present a useful framework to analyze the failure of safety regulations in the Ford Pinto case. Thus, this paper argues that while corporate greed may have contributed significantly to the accelerated marketing of an unsafe car, the lack of communication between Ford's different divisions further compounded the problem. As a result, Ford managers and engineers became the unwitting instruments of "administrative evil," causing much injury, suffering and death.

Background of Ford Case

The heart of the Ford Pinto case was the marketing of a dangerous product known to be dangerous. The deaths that would ultimately result in the lawsuit against Ford for reckless homicide resulted from a road accident in Indiana in 1978. After being struck from behind by a 1972 Chevrolet van, a1973 Ford Pinto carrying three teenage girls exploded into flames. Two girls burned to death in the car, while one died later in the hospital. The accident happened two months after Ford recalled all Pintos manufactured between 1971 and 1976 (Strobel 1980).

Dowie (1977), however, charged that Ford engineers already had evidence of the Pinto's explosive nature before even beginning production. However, the assembly line machinery was already tooled by the time the engineers discovered the defect. In Dowie's account, the Ford officials thus gave the go-ahead to manufacture the Pinto, to fight off the growing competition from Volkswagen and other Japanese carmakers in the sub-compact category.

The most inflammatory piece of evidence used against Ford was the cost-benefit analysis sheet. An internal Ford memorandum calculated that a human life was worth $200,000. Based on this figure, it was more cost-effective to pay the estimated 180 estates of victims who burn to death in a Pinto, rather than to spend $11 per car to make the necessary safety corrections to the gas tank (Dowie 1977).

Though Ford was later acquitted of reckless homicide charges, it still settled many cases out of court. One judge awarded $6.3 million to a young boy who suffered burn injuries in a Pinto crash. Though Ford lawyers initially believed that the acquittal would absolve corporation leaders from responsibility for their products. The ongoing trials against Kenneth Lay and other Enron officials, however, do not lend credence to this prediction.

Ford's Organizational Structure

Most people see the Ford Company as a giant monolith, where people worked together, shared a single goal and freely exchanged information between the different departments. However, as with many other organizations, Ford was not so tightly-organized. Instead, it was composed of several other "loosely coupled" units, each with its own tasks and organizational culture (Weick 1995). Thus, the marketing department was separate from the manufacturing division. Research and development staff rarely interacted with human resources.

Thus, the entire Ford organizational structure was a larger-scale representation of Henry Ford's original assembly line. Instead of working in tandem to one goal, each division was given its own narrow range of duties, and were thus unaware of many of the issues faced by its other department.

Vaughn (1996) draws many parallels between the organizational structure at the Ford Company and NASA. At Ford, she observes how the compartmentalized departments resulted in amorphous work activities. Thus, there was hardly any communication between the employees who actually worked on the Pinto (the "technical core") and those "boundary spanners" who interacted with the government regulators, the media and other members of the general public.

Corollary to this, it was also the task of the boundary spanners to insulate the designers and engineers in the technical core from any outside distractions. Protected from disturbances, the employees in the technical core could devote their energies to designing and building the Pinto in the shortest possible time, to meet the growing American demand for sub-compact vehicles and to successfully keep the encroaching foreign car companies at bay.

Towards this, boundary spanners also mediate the technical core's access or knowledge of outside regulations. Though it was not possible to completely keep the engineers and designers in the dark, Scott (1998) notes that the boundary spanners often classified confusing regulations as government "red tape" (211).

The spanners also worked with the media and lobby groups against many regulations that would result in a loss of profits or otherwise cause difficulties for Ford.

While such a "seal" seems improbably today, it should be noted that this dichotomy of duties were in place in the early 1970s, before the era of the Internet or even cable television. Many of the regulations were written in complex legal terms, and new ones were being developed each day in response to the growing pressure from consumer activists like Ralph Nader. As such, the system worked well to regulate the information that was relayed to the technical core, as well as the information that went out to the other departments.

Furthermore, many analysts point out that the Ford Pinto crashes came at a time when vehicle designs were still unregulated by the government. Despite efforts on the part of people like Nader, the prevailing view was that automobile accidents were caused not by flawed designs, but by reckless or careless drivers (Gusfield 1980). Furthermore, the prevailing ideas regarding safety held that a company was only responsible for a consumer's safety during the "normal operations" of a vehicle. Accidents and collisions resulting in burns, however, fell outside the realm of normal operations (Mashaw and Hartz 1990).

All these factors contributed to several automobile industry norms that provided a rationale for accepting the lower crash-test safety levels on smaller cars. At the time, the norm was to offer safety devices such as the gas tank modification as an additional option rather than standard equipment with the purchase of a vehicle.

The prevailing wisdom also held that smaller cars could not be expected to be as "crashworthy" as their bigger counterparts. To hold smaller cars like the Ford Pinto to higher fuel tank integrity standards would therefore constitute a form of discrimination against the smaller vehicles (Eastman 1984).

Viewed in this light, the Ford Pinto case could be studied beyond the narrow confines of greedy, profit-hunger or amoral executive. Instead, it is a confluence of many social and internal regulatory factors, which in turn have greater implications for other organizational structures as well.

Administrative evil and the lack of regulation

Technical Core closer inspection of Ford's organizational structure shows many instances where an unchecked "administrative evil" furthered the lack of communication in Ford. The engineers, designers and other workers in Ford's technical core were thus working in a fairly insulated environment, informed of the increased competition and unaware of the campaign for greater safety standards.

After all, the secondary importance of safety standards was not unique to their company alone. Instead, the late 1960s were an era of automobile styling. For most other automobile makers and ostensibly, consumers, the issue of safety took a back seat to how the car looked (Eastman 1984).

Because of the compartmentalized departments and the strict division of labor within the company, most of the original engineers who designed the Pinto were no longer part of the safety and marketing tests (Strobel 1980). A technical core engineer's presence at the testing facility may have gone a long way to improving the small car's safety.

Based on Adams and Balfour's interpretation (1998), this insulated working environment has thus made the designers and engineers of the Ford Pinto into the unwitting agents of administrative evil. In the beginning of their work, these workers were largely unaware of the necessary standards that would have contributed to the creation of a safer product. Instead, they were charged with a compartmentalized task - designing and building a small car. The results of their efforts (i.e. The car's safety tests) were also conducted outside their purview. The result of these factors was the creation of an unsafe vehicle.

The Boundary Spanners

In his book Reckless Disregard, Kunen (1994) sheds more light on the infamous cost-benefit memo that supposedly stated how it would be more profitable to pay 180 burn victims $200,000 each rather than to install a $11 safety feature on every Pinto gas tank. To the general public, this document was seen as the ultimate proof of Ford's callousness.

However, Kunen (1994) also acknowledges that the memo was written well into the Ford Pinto's marketing stage. The memo was never shared with the engineers in the technical core, and in fact was written after the car had already been designed.

As such, the memo could not have influenced the Ford Pinto's design.

Furthermore, the memo pertained not only to the Ford Pinto, its performance in crash tests or the Pinto's fuel tank. Instead, the memo addressed a separate federal proposal to install a valve to prevent fuel leakage in cars and trucks during rollovers.

In addition, the figure of $200,00 was estimated by the NHTSA, and not by Ford (Kunen 1994).

It is also important to note that the spanners were not engineers themselves. Rather, they were considered "egghead" economists and risk analysts, who were charged with calculating possible costs and imagining possible scenarios. The incriminating report should thus also be read not only as a calculation of human life, but also in light of the prevailing safety standards and the compartmentalized organizational structure at Ford.