Corporate crime pays well, even when it’s punished

First Published in the Chronicle Journal Monday, September 21, 2015

Corporate crime pays. A lot. So does covering it up. Exhibit A: Healthcare giant Johnson and Johnson develops and markets a drug called Risperdal. Risperdal is a billion-dollar antipsychotic medicine that has both real benefits as well as some serious side effects.
For example, Risperdal increases the risk of strokes among the elderly, and can cause boys to develop breasts, a condition known as gynecomastia. One teenage boy developed a 46DD bust.

Johnson and Johnson knew this. It regularly conducts studies on the drugs it develops. In one of its studies, according to an investigative report for The Huffington Post authored by journalist Stephen Brill, Risperdal caused 5.5 per cent of boys to develop large breasts.
Johnson and Johnson not only covered this up, but it also proceeded to enthusiastically market the drug to boys. The company pushed the drug on pediatricians. By the year 2000, more than 20 per cent of Risperdal sales were for children and adolescents. In 2003, it launched a “back to school” campaign. Internal company documents reveal that one Johnson and Johnson manager proposed inserting “lollipops and small toys” into Risperdal packages.
By 2004, with aggressive marketing to children and the elderly, Risperdal had become a $3-billion-a-year drug.
Johnson and Johnson eventually got caught, pleaded guilty and initially paid $2 billion to settle the matter.
$2 billion sounds like a big figure, and it is, but $30 billion is bigger, and represents Johnson and Johnson’s revenues from the worldwide sale of Risperdal.
Johnson and Johnson ultimately paid $6 billion in settlements for its misconduct. But it made $18 billion in profits on Risperdal within the United States alone on the steam of $20 billion in domestic sales.
Exhibit B: The oil giant Exxon has known about global warming for a long time. How long? Since as early as 1977, when one of Exxon’s own scientists, James Black, briefed company scientists and managers as follows:
“In the first place, there is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels.”
A year later, Black, a top technical expert in Exxon’s Research and Engineering division, warned an even larger audience of Exxon’s senior managers that independent scientists estimated that a doubling of carbon dioxide concentration in the atmosphere would increase global temperatures by as much as two or three degrees Celsius, and by as much as 10 degrees Celsius at the poles.
So how did Exxon’s senior management respond?
They covered it up.
In a speech to the World Petroleum Congress in Beijing in 1997, Exxon’s chairman and CEO Lee Raymond argued against a binding international treaty to curb greenhouse gas emissions. “Let’s agree there’s a lot we really don’t know about how climate will change in the 21st century and beyond.”
Umm . . .
According to the British newspaper The Guardian, Exxon agreed eight years ago, in response to pressure from its own shareholders, to stop funding climate change denial groups, to whom it had donated as much as $30 million. But according to a report published this summer based on tax records and financial disclosures, Exxon has continued to pour millions into the coffers of U.S. congressmen and others who deny the existence of climate change and oppose regulations on greenhouse gas emissions.
Exxon denies that it denies climate change and regularly trumpets its commitment to sustainable development. But as Columbia University economics professor and special advisor on climate change and sustainable development to the United Nations Jeffrey Sachs explains: “If Exxon was very clear about this, it would be a big help. If this is what they believe, they ought to make it known and they ought to make it known very publicly because we have the entire Republican party in denial and fighting tooth and nail every step of the way against reasonable action. Exxon could make a very big difference.”
No kidding: Exxon earned $32.5 billion in profits in 2014.
Prof. Sachs is the author of The Age of Sustainable Development (Columbia University Press, 2015), a book that legendary Harvard biologist E.O. Wilson calls “my candidate for most important book in current circulation.” According to Sachs, sustainable development entails balancing the imperatives of the global economy, social interactions of trust, ethics, inequality, consumer choices and networks of social support, Earth systems, including climate and ecosystems, and governance, including the performance of governments and businesses.
But as the Johnson and Johnson and Exxon criminal cover-ups illustrate, our public and private governance of public health and the environment is in shambles.
As the Canadian federal electoral campaign heats up, let’s start asking our candidates about how they intend to protect our health and the environment.