VW Executives Can Learn From Wall Street

What's the Wall Street lesson for Volkswagen executives? Too big to fail companies can rip-off the American public, executives can earn millions in additional compensation, and no one is held accountable for "corporate" decisions.


There is a glimmer that this travesty may not happen this time. The Justice Department is considering criminal indictments against the VW executives who made the decisions to sell cars that violated U.S. pollution laws. But, don't hold your breath. There is a good chance no VW executives will actually go to jail. It will get down to political connections and a Justice Department that would rather fine corporations than prosecute politically connected executives.

But maybe, and this is a definite long-shot, the decisions made by VW executives to damage the environment and the health of millions of Americans is considered more egregious than Wall Street's decisions to damage peoples' ability to retire and be financially secure for the remainder of their lives. It is health versus money. Maybe it is easier to get money back.

Wall Street executives made decisions to rip-off the American public for hundreds of billions of dollars. You have seen the headlines, the biggest companies on Wall Street paid billions of dollars of fines, but no senior executives were indicted or sent to jail. Very few even lost their jobs. One executive even received a bonus for minimizing the amount of the fine that was paid by his corporation.

So if VW decisions were a "criminal" act, as the Department of Justice said they were, why won't any Volkswagen executive go to jail?

The Supreme Court, in a little publicized 2010 "Citizens United" case, considers corporations people under the First Amendment. This is a ludicrous conclusion. Corporations aren't people. They exist on a piece of paper. Corporations don't make decisions. The executives who run the corporations make decisions.

It's a replay of the Justice Department prosecutions of big Wall Street banks that resulted in no jail time for key executives. There will be no "justice" if VW, the biggest car company in the world, has the right political connections. Even if any deal with Volkswagen violates new Department guidelines, announced earlier this month, that directed its attorneys to indict real people when they pursue criminal charges against corporations.

Big corporations, starting with Wall Street companies, will not play by the rules until there is accountability for corporate executives who make decisions that damage the public. Greedy executives should not benefit when they make decisions that damage public health or the financial security of millions of Americans. Corporations should not be able to pay fines for criminal acts without jail time for the executives who made the decisions.

Don't be deceived. Martin Winterkorn's resignation is not an adequate response from Volkswagen. He did not commit these criminal acts on his own. Hundreds of senior VW executives and managers had to be involved in the scheme to violate U.S. pollution laws.

How can you send a message to VW and other big corporations that are run by greedy executives who believe their companies are too big to fail? Vote with your wallet. Boycott VW products until the executives who made these decisions have been fired. This will send a clear message to the Boards of Directors that run these companies that there are serious, long-term financial consequences when they rip-off consumers.

There will be some unfortunate side effects. Innocent car dealers and their employees will be damaged by your boycott. This is one more reason why VW executives, who made these decisions, belong in jail.

About the Author: Jack Waymire worked in the financial services industry for 28 years. For 21 years he was the president and chief investment officer of a registered investment advisory firm with more than 50,000 clients. He left the industry in 2003 when his book (Who's Watching Your Money?) was published by John Wiley. That same year he launched an investor information website (www.PaladinRegistry.com) that was based on the principles in his book. Jack is a columnist for Worth magazine, a frequent blogger on major financial sites, and widely quoted in the media including the Wall Street Journal, Forbes, BusinessWeek, Bloomberg, and Kiplinger. Follow Jack on Twitter @PaladinRegistry.