Corporate Boards and Private Prison Corporations

This month, I’ve posted about the moral dilemma that I see facing the Board members and Executives of Private Prison Corporations.  As Board members are duty bound to increase profits for shareholders, I’ve suggested that one of the primary ways that Board members can increase profits for shareholders is to engage in planning for, lobbying for and affirmatively making efforts to imprison more American citizens (and increasingly, illegal immigrants).  In comments to these posts, I’ve been queried as to whether this practice is illegal or why I believe that the profit maximization duty would necessarily lead private prison executives to engage in this kind of planning.

I want to be clear that I do not believe that a duty exists for private prison executives and Board members to aggressively seek to imprison more human beings, I am simply suggesting that the duty to increase profits requires executives to consider growth as one way to maximize profits.  Growth in companies that manufacture products or deliver most services, does not implicate locking people up and increasingly locking up people of color.  I am perfectly willing to believe that private prison Board meetings consist of discussions about cutting costs and running more efficiently to increase profits.  I also believe that private prison Board meetings involve long and intense discussions about how to convince state legislatures and federal politicians to privatize more prison facilities.  Still, I remain convinced that the duty to increase profits leads private prison Boards to discuss growth which necessarily includes increasing prison sentences for those already locked up and seeking new avenues to criminalize and imprison those that are currently free.  That said, the business judgment rule likely protects any and all of the above considerations.  Moral or not, these are business decisions.

To the commentator that states: “There is nothing unlawful about convincing politicians seeking to be “tough on crime” to lock more people up for longer,” Professor Annette Gordon-Reed captures my thinking and states it eloquently (per her comment):

“As is often the case, what is “legal”/“lawful” is the real scandal. The end of slavery in this country brought new methods to “deal with” the black population that was not to be truly assimilated into society and was, in fact, despised. Legislators, former slave owners and their kids and grandkids, used law–being “tough on crime”– to round up black men and women whose labor was then hired out. Whether it was for profit or just to get them out of sight, law was used as a direct tool for social oppression. It was all legal, and all morally reprehensible.

The US locks up more people than any nation in the world, certainly any other industrialized nation. There is no question that blacks and people of color are disproportionately represented in the prison population. The policy of targeting those communities in the war on drugs helped to drive the rise in the jail and prison population over the past few decades. History’s fingerprints are all over this. So, I see a difference between being tough on crime because you want to raise profits and being tough on crime out of a desire to protect the public. If it’s about profits, there will be an incentive to criminalize behavior whether it harms society or not. You can do that more easily with disfavored members of society, blacks and Hispanics, for example.”

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8 Responses

  1. Let me be more direct in my response. The duty to increase profits is a legal one, not a moral one — executives at private prison corporations have no moral duty to imprison people (especially people of color) unjustly. And their legal duty to increase profits is subject to the business judgment rule, which means that a board which decides not to lobby for increased criminalization because it’s unjust will have an easy comeback to any argument they’ve violated their duty to shareholders. “We believe that the public relations consequences of this form of lobbying will be detrimental to the Company’s long-term profitability” seems like it would be more than sufficient as a response.

    So I don’t see the moral dilemma here as coming from corporate law imposing a duty on the executives to increase profits. It comes from the executives’ desire to make money for themselves by increasing profits and the share price. Describing this in terms of “duty” just obscures the actual pressures and conflicts at work. The moral dilemma is between self-interest and justice, not between corporate obligation and the obligations of justice, no?

  2. A.J. Sutter says:

    Hang on, both of you — from whence cometh a legal duty to increase profits that is binding in most leading jurisdictions? And I mean specifically regarding business operations, not an M&A situation. Cite some authorities, please. You’ve got to do better than an old Michigan case, even assuming Dodge is still binding there.

    Before you answer, you might want to look at a hornbook like Cox & Hazen 3d. E.g., in § 4.3[1] they mention that both judges and corporate statutes have grown more liberal in allowing charitable and humanitarian contributions. And in § 4.5 they mention that more than half of the states in the US have enacted statutes that allow, or even require, the board to take into account the interests of persons or groups other than the company’s stockholders.

    I look forward to your answers.

  3. No argument there, A.J. Feel free to put an “(to the extent such a duty exists at all)” in my second sentence.

  4. Brett Bellmore says:

    “There is no question that blacks and people of color are disproportionately represented in the prison population.”

    The problem is, given racial disparities in crime rates and victimization, (And it’s not just discriminatory enforcment, as victimization surveys demonstrate.) there’s simply no way to avoid blacks being disproportionately represented in the prison population, short of deliberately excluding black neighborhoods from law enforcement. Which would be serious discrimination against black non-criminals.

    It might not look good, but it’s not going away short of blacks becoming more law abiding. And how is the government supposed to accomplish that?

  5. Joe says:

    Greater wealth redistribution would have the effect of decreasing crime. The problem though is that the costs of redistribution (both the disincentive to produce placed on those from whom the wealth is being drawn and also simply from administration) probably will far outweigh the costs of crime itself.

  6. AYY says:

    I find the post hard to follow. There’s apparently no concern for the law abiding Black or Hispanic who doesn’t want to have to live in fear of going out because of the drug trade on the corner. Yet one would think that they deserve as much consideration as those who prey upon them.

    Also the post assumes that private prison officials have some say in the enforcement of laws. Granted there was a significant problem a few years ago with a couple of juvenile court judges in Pennsylvania, so is that what the post is referring to?

    What happened there was patently illegal,and the judges involved suffered criminal convictions. But if you’re talking about the cop on the beat rather than a situation where the prison officials do something that affects a judge’s sentencing decisions, then you haven’t made the case that prison officials have much control over the situation.

    Nor do I see the point about the disfavored members of society. Disfavored by whom? We have a Black president, a Black attorney general, Black legislators, Hispanic cabinet officials, and plenty of grass roots organizations that make sure that the voices of these so called disfavored groups are heard.

    The post also says that the US locks up more people than any other country. Maybe so, but that might be because the US has more people than most other countries. But then what about China? Maybe I’ve missed something but I haven’t heard anything about them emptying out the reeducation camps

  7. Joe says:

    When I google “america imprison population china” the first two hits are a NY times article which states:

    “The United States has [. . .] 2.3 million criminals behind bars, more than any other nation. . . .
    China, which is four times more populous than the United States, is a distant second, with 1.6 million people in prison. (That number excludes hundreds of thousands of people held in [. . .] China’s extrajudicial system of re-education. . . .)”

    The second hit is a Wikipedia article. The first three sentences are as follows:

    “The United States of America has an incarceration rate of 743 per 100,000 of national population (as of 2009), the highest in the world.[2] In comparison, Russia has the second highest 577 per 100,000, Canada is 123rd in the world with 117 per 100,000, and China has 120 per 100,000.[2] While Americans only represent about 5 percent of the world’s population, one-quarter of the entire world’s inmates are incarcerated in the United States.”

    So, we are competing with China for the top spot. I don’t think it has to do with America having a larger population than the rest of countries of the world.

    If anything, I suspect it has to do with America having a robust law enforcement regime. I am sure crimes are being committed in other countries which often go unpunished where they wouldn’t otherwise in the U.S.

    We have a bad track record on race in this country, and I think the prison population reflects that bad track record. If we use emancipation as a starting point on a timescale of race relations, it will still take two-hundred years before America reaches Loving v. Virginia. As long as our prison population disproportionately reflects the racial make-up of our society at large we are still stuck on that bumpy and slow road toward equitable racial integration.

    Let’s hope it is not another few hundred years?

  8. Joe says:

    Meant to type “one-hundred.”