The Consumer Product Safety Commission is thinking of fining Toyota for reacting too slowly to complaints of accelerator problems, but the maximum fine it can impose is $15 million. Former administrator Joan Claybrook would like to see that amount increased to $100 million.
Even that amount would hardly make a difference. Toyota is likely to spend about $900 million on its recall, its lost sales are costing it $155 million per week, and the damage to the company's reputation will surely add billions more over the coming years. If those kinds of numbers weren't already a sufficient incentive to avoid this mess, I don't think the prospect of an extra $100 million fine would really have made much difference, although it would always be nice for the U.S. government to get the revenue.
The problem is cultural. I'm sure Toyota saved a few million here and there by not being careful enough in its design and testing phases to avoid the problem it's now having, and no one listened to the people who said wait a minute, we're saving a million now but we're running a risk that could cost us billions. It's the same business spirit that encouraged making money through mortgage-backed securities, which looked great until the risks almost destroyed the entire economy, or that encourages newspapers to rush stories into print to make a quick splash without sufficiently considering the tremendous harm that can be caused by reputational damage, or that encourages development that makes money now by not caring about wetlands erosion but risks disasters like Katrina.
There's a place for bold risk-taking in the world of business, but there's also a place for caution. The smart people who run these companies need to create incentives that don't just measure how much money the company made this year, but how much risk it took on too.
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