Incentives and Inverted Corruption
by Ben Perreira
I was introduced to the movie Runaway Jury during a business law course two years ago and have seen it a couple more times since. It’s a great story. The protagonists hijack a jury to convince them to award a massive judgement for a shooting victim’s family from the gun company defendant.
Bloomberg ran an article today that details how the IRS awarded $104 million to a corporate whistleblower who exposed a UBS tax evasion scam. The gentleman in question worked for UBS, was complicit in the scam for years, and has served time in prison for his involvement.
These stories have a lot in common. In Runaway Jury the payment goes to a victim who cannot possibly be compensated enough for the loss of her husband (plus a tidy extorted sum for the protagonists), and in the IRS case the money goes to one man who sold out his former lifestyle. The gun company is paying to dissuade other gun companies from making dangerous products, whereas the IRS is paying to incentivize those connected to scams to come forward.
Sure, the whistleblower’s actions may net much more than $104 million in tax revenue for the United States government, but what kind of message does this send vis-a-vis ethics in business? Are we only supposed to do the right thing when a nine-figure payoff is dangled in front of us? Or as a business, are we only supposed to create safe products when we know a jury may bring down the hammer with a crippling judgement?
For the whistleblower case, if corruption is businesspeople paying the government for favors, is this simply the inverse of corruption? And is the inverse of corruption any more desirable than traditional corruption?