What kind of criminal activity must a corporation commit to face real consequences—for the justice system to compel the company into nonexistence or jail its executives? In recent weeks, there has been some cheerful news on that front: Sunny Balwani, the president of Theranos, will join his former flame and company founder Elizabeth Holmes in a lengthy prison sentence—a deserved punishment for their outlandish lies about their fraudulent blood-extraction machine.
But for every Theranos, there’s a Wells Fargo, who readers might remember as the ne plus ultra example of a bad bank, its executives seemingly bent on finding newer and more innovative ways to scam its customers. Wells Fargo has been given permission to constantly apologize for its wrongdoing and immediately return to it, with no one facing real consequences. The truth is, instances like Theranos, where clear-cut corporate criminals face clear-cut punishments, are considerably rare. All of which brings us to Hertz, which this week joined the ranks of those who’ve gotten away with egregious malfeasance.
Hertz, a car rental firm that’s joined at the balance sheet with several other well-known brands (Thrifty, Dollar), made some blink-and-you’ll-miss-it news: It was forced to “pay about $168 million to settle disputes with hundreds of customers,” reported The New York Times. “Disputes” puts it too politely. Over the course of many years, the company sicced the police on its own customers, who were wrongly accused of having stolen vehicles. This was all due to Hertz’s error: The company mistakenly misclassified cars as stolen or failed to account for customers making payments to extend their rentals.
As CBS News reported a year ago, dozens of customers were wrongly subjected to terrifying encounters with police. But some customers were subjected to even worse. According to the Times, one woman who was arrested, despite having paid her rental extension, was jailed for 37 days—during which time she was “separated from her fiancé and two children, missed her nursing school graduation and discovered she was pregnant.” Another renter, after learning there “was a warrant for his arrest on charges that he stole a Hertz car, had actually paid for and returned the vehicle.” But after he missed a hearing date, he was “arrested again, and jailed for six and a half months.”
Now a $168 million fine might seem like a lot, but it pales in comparison to the company’s $7.3 billion in revenue and $19.7 billion in assets at the end of 2021. Additionally, no company executives have been punished for what amounts to a wholly fraudulent exploitation of the criminal justice system.
Hertz was a troubled firm beyond the crimes it committed; the company filed for bankruptcy during the pandemic, and its employees are thus familiar with their jobs being at risk. But this episode still provides an illuminating example of why our labor politics needs a big rethink. Firms do things all the time that put jobs at risk. Sometimes they commit crimes. Sometimes an idiot just acquires a company and starts firing everyone who won’t join his inane ego trip. An economy in which employers have to compete for labor allows workers to be more mobile and more capable of leaving bad jobs behind, which can help soften the blow whenever the justice system lowers the boom on bad corporate actors. Moreover, this episode is simply the latest and greatest example of why it pays to have a unionized workforce.
But an even better solution would be to promote and enact policies granting workers larger ownership stakes in companies like Hertz. This would give workforces that are already too vulnerable to the errant whims of overpaid executives more transparency into the decisions cascading from the company boardroom as well as a better opportunity to prevent bad, costly actions that put workers’ jobs at risk. Democrats have, in the recent past, proposed such ideas; as The New Republic’s Osita Nwanevu noted in May 2020, polling from YouGov indicated that there was broad support for them among voters, including for “policies incentivizing the voluntary transfer of ownership stakes to employees, and even making companies with more than 250 employees grant those employees half of their stock over time.”
Without the emergence of a course-altering remedy, we will be stuck with a status quo in which we have to hope that slap-on-the-wrist financial penalties will be enough to steer our corporate masters onto more just and prudent paths. The New York Times’ reporting offered some insight into how that will play out at Hertz: “On Monday, Hertz said it believed it would recover a ‘meaningful portion’ of the settlement amount from its insurance carriers and that the $168 million would be paid by the end of this year.” The system works, just not for you.
This article first appeared in Power Mad, a weekly TNR newsletter authored by deputy editor Jason Linkins. Sign up here.