How Weak Regulations Cost Jobs, Businesses and Lives: Case Study From The Verso Plant Closing
Section: Business & the Economy
The Verso Paper Mill garnered national attention last year when an explosion and subsequent fire killed one, injured five and cost 260 employees their jobs. In addition, the Verso corporation paid $350,000 to the Sartell fire department for the cleanup and the structural damage cost $50 million. The company also lost future earnings from the plant that was ruined beyond repair. The plant had operated successfully for over a hundred years.
An OSHA report of the disaster found that the paper mill had ignored simple safety regulations that could have prevented the disaster which would have saved a man’s life, all the jobs lost and helped Verso maintain a profitable paper mill. Was this an onerous regulation that conservatives would decry? The regulation simply stated that Verso management needed to have a written policy for how to shut down the mill when the need arose. The purpose of the policy was so that safety regulators could determine if the shut down plan would work. The lack of an internal safety inspection of a nonexistent policy led to the disaster because improper shut down procedures caused the plant to explode.
There is another reason that may have contributed to the lack of a plan. OSHA fined the company $39,000. For a large company, such as Verso, such costs are relatively minor. Some have argued that, fines should match the crime without big legal hassles that cost business and government millions in legal fees each year. They argue that such an approach would discourage risk taking. The magnitude of the fine should make certain that the company can’t make a profit calculation that encourages them to risk the fine. That is, companies should return profits from unsafe decisions that cause unnecessary job losses and loss of life.
However, the willingness of Verso to allow the avoidance of such regulations that risked a disaster that has already cost the company over $50 million suggests that no fine may be high enough. The BP disaster and many corporate examples illustrates that short-term profit thinking seems to dominate every other concern in corporate America.
Some argue that such disasters illustrate the need for independent well trained government inspectors to insure plant safety. However, such inspections are subject to political influence, budget cuts and can lead to lawsuits that can go on for decades. Others argue for the need for legislation that makes individuals within companies personally responsible for plant safety. It’s logical to assume that ridding industries of individuals who are unconcerned with safety may help more than fines which allow the same unsafe players to continue making unsafe decisions. The problem has been that in large corporations, diffusion of responsibility has become a successful legal defense.
So how could legislation could be crafted to avoid diffusion of responsibility? If the plant manager was held responsible, then what would prevent higher ups from putting enormous pressure on plant managers to put short-term profits over safety?
Others have argued that the best solution is make CEOs responsible for plant safety. CEOs frequently argue that safety and profits are not incompatible even though their behavior suggests otherwise. If the CEOs don’t address safety concerns then another approach would be to have laws that force them out of an industry for a certain period time depending upon the degree to which safety concerns were ignored. CEOs frequently argue they should be able to control wages without unions and fire employees at will. If CEOs want the freedom to destroy their employees ability to make a living, shouldn’t they take responsibility for employee safety? The problem with this approach is that courts have been extraordinarily sympathetic toward those who are only indirectly responsible for events. Politicians including attorney generals have shown a similar deference.
People who show deference argue that such deference is useful for promoting business even though business leadership has pointed out that’s not the case because quality leadership needs to develop plans for the long-run. The problem is that current law and profit-making strategies encourage risk-taking for short-term profits. This suggests that corporations require multiple mandates that incorporate ideas about longterm profits, safety, quality and other issues that reflect quality leadership. It also suggests that corporate boards should be more independent and required to include safety expertise. The problem with the single profit-making criterion is that it’s a principle of science that any single criterion is corruptible. Multiple independent methods for evaluating success are far more difficult to corrupt.
All CEOs can’t be expected to be experts on safety. However, a requirement to have a working safety structure in place that has independent checks to make certain that the system is performing that includes a government safety regulatory system makes more sense that a system soley driven by profits. Experts have suggested the development of safety subsystems not influenced by profit motives that cannot be subverted by desires for increased profits. That’s a radical change from the existing environment but given the constant stream of disasters including environmental disasters and a rising medical error rate, it would seem a radical change is necessary.
The Verso Mill was in congresswoman’s Michele Bachman district. Her meager response to the crisis nearly cost her the election but thanks to her deregulatory corporate-minded supporters she was able to outspend her opponent 11 to 1 and with substantial gerrymandering she eeked out a 1% victory. This illustrates another explanation for why such problem go unaddressed. How can the public make good decisions about safety when PR campaigns can spend eleven times as much confusing the public. This suggests that reigning in CEO profits and campaign spending could allow more common sense politicians and solutions to prevail.
by Todd Miller
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