DuPont, one of the most respectable U.S. companies, caused environmental damage that ended up costing the company around a billion dollars. By using internal company documents disclosed in trials we rule out the possibilities that this bad outcome was due to ignorance, an unexpected realization, or a problem of bad governance. The documents rather suggest that the polluting was a rational decision: under reasonable probabilities of detection, polluting was ex-ante optimal from the company’s perspective, even if the cost of preventing pollution was lower than the cost of the health damages produced. We then examine why different mechanisms of control – legal liability, regulation, and reputation – all failed to deter a behavior that was inefficient from a social point of view. One common reason for the failures of deterrence mechanisms is that the company controls most of the information and its release. We then sketch potential ways to mitigate this problem.
A trove of documents reveals the corporate decision-making that led to an environmental disaster, and could lead to other bad behavior.
When It Makes Sense to Pollute—and How to Change the Equation
