How Higher Education Abets Corporate Crime

The social costs of corporate partnerships.
By Michael Schwalbe

My course on corporate power in America looks at how corporations dominate government in the United States. One influence strategy I examine is the formation of partnerships between corporations and governmental bodies. A problem with such partnerships, as Joel Bakan argues in The Corporation, is the implication that corporations and government are on the same team, pulling together as equals toward common goals. “If corporations and governments are indeed partners,” Bakan says, “we should be worried about the state of our democracy, for it means that government has effectively abdicated its sovereignty over the corporation.”

Democratic government, I tell students, is the only institution in our society powerful enough to bring corporations to heel. I propose that partnership arrangements lead us to forget that the government’s proper role is to regulate corporations in the public interest, not to join them in the pursuit of profit. Most students, like most Americans, have given little thought to these matters. As Bakan also says, “The notion that business and government are and should be partners is ubiquitous, unremarkable, and repeated like a mantra by leaders in both domains.” If students have any inkling of such partnerships, they don’t see much to be alarmed about.

When the topic came around again last fall, I hoped to arouse student interest by adding material about the university’s corporate partnerships. I searched North Carolina State University’s website—discovering there my university’s “partnership portal”—and learned that the university claims seventy-five industry partners, boasts of being at the forefront of research commercialization, and touts its fourth-place rank among US universities for share of research supported by industry. “In fact,” says the university, “we have an entire department dedicated to supporting corporate partnerships.”

The university also seeks to allay the nimble businessperson’s fear of entanglement with a fusty academic institution: “Our value to industry stems from more than just the resources we offer. We design business-friendly research agreements that make it easy for partners of all kinds to collaborate with NC State.” The university further extends a hearty welcome to businesses to join forces with NC State, a place where “students, faculty, and industry leaders generate groundbreaking research and business ideas.” One might fairly get the impression that capital accumulation is what the university is all about.

Some of the oft-alleged benefits of these relationships are real enough: funding for research and students; development of potentially beneficial products; student training and job placement; support from conservative legislators who expect public universities to be engines of economic growth. In light of these benefits, partnering with corporations appears, as Bakan suggests, unremarkable. It is just what NC State and hundreds of other universities do, seemingly without qualms. The Chronicle of Higher Education even sells an issue brief on the subject, The Outsourced University: How Public-Private Partnerships Can Benefit Your Campus.

It didn’t take long, however, to find enough information on NC State’s website to make a larger point about how public universities—no less than other public entities we might expect to remain independent and dedicated to the common good rather than to private gain—can succumb to the lure of corporate partnerships. I had planned to stop there. But a few more clicks took me to a page on which NC State featured, as shining examples of success, its affiliations with GlaxoSmithKline and Eastman Chemical. Recalling the scandals involving GlaxoSmithKline, I searched the internet again. The headlines filled pages: “Glaxo Agrees to Pay $3 Billion in Fraud Settlement”; “GlaxoSmithKline Fined $3bn after Bribing Doctors to Increase Drug Sales”; “GSK Chinese Bribery Scandal Ends in $489 Million Fine, Executive Sentenced”; “GlaxoSmithKline Most Heavily Fined Drug Company.” On Violation Tracker, a database on corporate misconduct, I found that, since 2000, GlaxoSmithKline has paid nearly $8 billion in fines for various forms of illegal activity.

By comparison, Eastman Chemical is a piker, though hardly an innocent. According to Violation Tracker, since 2000 Eastman has been fined nearly $82 million for 103 environment-related offenses, 37 safety-related offenses, and 1 competition-related offense. If nothing else, it was clear that engaging in illegal activity did not make a corporation an unacceptable partner for NC State. A corporation could be a repeat offender and still have its relationship with the university highlighted as a success story.

Having previously written about NC State’s addiction to tobacco money, I added a few slides about the university’s historic and ongoing, though now low-key, relationship with cigarette-maker Philip Morris USA to my course last fall. At one time, Philip Morris donated regularly to the College of Agriculture and Life Sciences and endowed thirteen professorships at the university. The tobacco-industry example reveals in obvious ways some of the problems inherent in reliance on corporate funding.

My students—all social science majors—were surprised to see how unabashedly open the university was to partnerships with corporations with histories of misconduct. In the interest of fairness, I reminded them why administrators, at NC State and elsewhere, see corporate partnerships as good and necessary. But the point of our discussion was to examine the rarely mentioned downsides: skewing of a university’s priorities toward service to business; waning faculty attention to corporate crime, to harms caused by profit-seeking behavior, and to the need to regulate corporations; and shrinking support for disciplines that do not bolster corporate profits. It was a good class, but I came away thinking there was more to be said.

Partners in Crime?

After the semester ended, I revisited NC State’s roster of corporate partners. I chose a handful of the largest corporations with which the university proudly advertises its relationships and used Violation Tracker to look up the fines they had accrued over the past twenty years: Alphabet Inc. ($875,134,618 in fines for 20 offenses); BASF ($172,230,481 in fines for 226 offenses); Bayer ($13,728,215,508 in fines for 140 offenses); Caterpillar, Inc. ($107,310,205 in fines for 110 offenses); Corning, Inc. ($74,530,705 in fines for 38 offenses); Deere ($2,872,551 in fines for 34 offenses); Fluor ($29,637,087 for 35 offenses); General Electric ($2,062,740,375 in fines for 142 offenses); and Lockheed Martin ($242,111,233 in fines for 100 offenses).

In one sense, my findings just confirmed what I’d found earlier: a record of criminal behavior was no obstacle to establishing and maintaining a relationship with NC State. But now the scope of the problem became clear. It was not a matter of ties to a few bad apples. The problem is much larger. It would be more accurate to say that most universities, not just NC State, draw their corporate partners from a rotten barrel.   

Universities do not merely partner with law-breaking corporations; they abet that lawbreaking by normalizing it. If respected institutions dedicated to science, education, and scrupulous truth-seeking are not put off by corporate crimes, then surely such crimes are no big deal. That’s how normalization works. If no one objects to untoward behavior, that behavior is implicitly redefined as acceptable.    

It’s precisely this sort of legitimacy—the impression of being good corporate citizens capable of self-regulation—that the tobacco industry long sought through its associations with universities. Many corporations want the same positive aura that comes from associating with higher education and academic science. In business-speak this is called “investing in corporate citizenship goals.” This kind of public-relations payoff can be had apart from new product development or employee recruitment. Normalization of corporate crime, in other words, is not just a fringe benefit that no one intends; it’s a reliable part of the payoff package.

The charge that partnering with criminal corporations is a problem is likely to be met with a defense built on circular logic. Yes, corporations (or, rather, the people in them) break the law occasionally, admits the defense. But for the most part this is routine business behavior; it’s nothing to get wound up about—it’s normal. How do we know it’s normal? Because people who are trusted stewards of the public interest—university administrators, professors—aren’t bothered by it. The complaint is thus dismissed; the normalization of corporate crime is not a problem, because upstanding folks see corporate crime as normal.

Another line of defense invokes the proverbial slippery slope. At one time, slippery-slope rhetoric was used to defend the practice of universities accepting tobacco-industry money. If we reject tobacco money, what will be next? Will we reject money from, say, pharmaceutical companies, just because of a few fines here and there? This defense didn’t hold, because it was easy enough to show that the tobacco industry had a long and well-documented history of misusing science, distorting public debate, and engaging in criminal conspiracy to keep people addicted to nicotine and delay regulation—a track record that finally led many universities to ban tobacco-industry funding.

What the case of the tobacco industry showed is that on every slope there are lines that most people agree, or can be persuaded to agree, should not be crossed, because the costs are too great. Once the full range of its harms was understood and its criminal actions exposed, the tobacco industry was shunned—though it took decades of investigation, court proceedings, and argument. Today, it would be uncontroversial to object to a university’s taking money from the Ku Klux Klan to endow a chair in ethnic studies. Most people would find it easy to see that this would cross an ethical line. Tomorrow, we might see, given a fuller understanding of what it costs us when we normalize corporate crime, the need to move the line marking what is acceptable when it comes to partnering with corporations.

AAUP Policies

For its part, the AAUP deserves credit for taking seriously, more so than any other organization, the problems associated with university ties to industry. Over the years, AAUP committees have considered the costs and benefits of these ties and have offered recommendations for policies to counter potential threats to academic freedom, the free pursuit of knowledge, and the open sharing of that knowledge—all the practices that make academia, in the words of the AAUP’s 2014 book Recommended Principles to Guide Academy-Industry Relationships, a “unique and distinct enterprise.” Yet nowhere in more than three hundred pages does the term corporate crime appear. Corporate crime, so it would seem, is a nonissue. 

The AAUP’s commitment to academic freedom at the individual level, a commitment that makes the organization essential to the preservation of academia as a unique and distinct enterprise, has nonetheless led to myopia when it comes to problems at the societal level. For instance, in 2003, a report of the AAUP’s Committee A on Academic Freedom and Tenure defended, in the name of academic freedom, the practice of researchers taking tobacco-industry money. And the report went further, claiming that trying to judge corporate misdeeds is “too uncertain to sustain a clear, consistent, and principled policy for determining which research funds to accept and which to reject.”

The same 2003 report punted on the question of how, or even whether, we ought to exercise judgment about the moral worthiness of corporate partners, implicitly using slippery-slope logic to put the question out of bounds: “An institution which seeks to distinguish between and among different kinds of offensive corporate behavior presumes that it is competent to distinguish impermissible corporate wrongdoing from wrongful behavior that is acceptable. A university which starts down this path will find it difficult to resist demands that research bans should be imposed on other funding agencies that are seen as reckless or supportive of repellent programs.” The individual-level thinking behind this statement is exposed a paragraph later, when the report says, “Denying a faculty member the opportunity to receive research funding for such reasons [that is, corporate misdeeds] would curtail that individual’s academic freedom no less than if the university acted directly to halt research that it considers unpalatable.”

The line quoted above is limited in scope to the acceptance of research funding and does not speak to university-corporate partnerships more generally. The point, however, is that the statement reduces the issue to a matter of what is desired by and beneficial to an individual researcher. Missing are concerns about how individual actions—accepting research funds from a problematic source—might implicate the university in legitimating illegal corporate action. It is also fair to wonder why, in the academic realm, where we are supposed to be experts, we suddenly become incompetent to make the kinds of complex moral decisions we make in other realms of life—decisions about whom we will work with, given the likely outcomes of such collaboration.  

A more recent Committee A statement, In Defense of Knowledge and Higher Education, adopted by the AAUP Council in November 2019, acknowledges that corporate partnerships are part of a larger process of corporatizing the university—a process that is perhaps the biggest threat to shared governance today. This statement lists a variety of detrimental effects caused by funding cuts to public universities. These cuts, the report says, “have produced ‘partnerships’ with industry in which sponsoring corporations receive privileged access to and control of the direction of faculty research and teaching.” This is indeed a problem, one that has become all the more clear and undeniable in the years since the 2003 report. But it is still not the whole problem, which, to echo an earlier point, has to do with how partnerships can make criminal corporate behavior appear normal. As an organization, the AAUP has yet to come to grips with this reality.

The general public, in contrast, seems ready for a reckoning. Recent polling data from Data for Progress show that upward of 70 percent of US adult voters are very or somewhat concerned about criminal behavior by corporations and the wealthy; more than 80 percent agree that “regular Americans pay the price” when corporations and the wealthy get away with crime; and nearly 90 percent agree that unpunished corporate crime causes people to lose trust in government and the rule of law. So there is reason to hope that the public, perhaps sensitized by recent scandals (for example, at Boeing, Volkswagen, and Purdue Pharma), is becoming less accepting of corporate crime, even if there is little trust that government will crack down on it with sufficient force.

Other evidence suggests that lax enforcement in recent years has led to an increase in corporate crime, which has been estimated to cost the country between $426 billion and $1.7 trillion every year—up to thirty times the costs of street crime, depending on what is counted. According to one line of analysis, rising rates of corporate crime tell us that entity-level fines are weak deterrents, and a better strategy would be to prosecute more executives. Another analysis proposes that heavily stigmatizing lawbreaking firms can compel changes in corporate behavior, because stigma can have real economic costs if customers and prospective employees turn away from pariah corporations. The latter analysis suggests how universities can be part of the solution.

Denormalizing Corporate Crime

Instead of being public-relations cheerleaders for criminal partner corporations, universities should make partnerships contingent on corporations abiding by the law. Most universities claim the prerogative to deny admission to prospective students whose criminal records suggest they might pose risks to others. The same principle should apply to corporations. Violate environmental protection laws or workplace safety laws? Commit financial or tax fraud? Bribe doctors and public officials? Publicly undermine science? Sorry, no partnership.

Denying partnership benefits might not leverage reform in any single case, but tougher standards would create pressure for reform where none now exists. If universities collectively refused to deal with criminal corporations, the pressure for change would be enormous. The costs of business as usual—the costs of legal defense and fines when laws are broken—would have to be adjusted upward to include the costs of forgoing partnerships with universities. Unfortunately, in an era of declining public support for public universities, it is probably unrealistic to expect principle and hopes of uncertain progress toward corporate reform to carry much weight. If Hamlet were recast today as a vice chancellor, he might say that it is not conscience but neoliberal austerity that makes cowards of us all.    

At the end of my lecture on corporate partnerships with universities, one student said, in a familiar tone of resignation, “But we’re stuck, aren’t we? I mean, we depend on corporations. And like you said, universities do, too.” It was a point that always comes up, sooner or later. I responded, as I usually do, by encouraging students to question the idea that appreciating the value of corporations implies that we must accept whatever they do. Buying this idea, I say, is what leaves us stuck, not the desire to benefit from legal business activity.

There is no denying, I admit, that we depend on corporations for goods and services we can’t easily live without. But we also depend on government to do necessary things, and we don’t think governments, or the people in them, should be free to ignore the law. We expect units of government and governmental agencies to act lawfully and not damage the common good. Why should we settle for less from business organizations? Being helpful in some respects shouldn’t grant license to seek private profit in ways that impose undue costs on others.

I suggest to students that even if we accept a profit-driven economy, we are right, when the profit motive causes harm, to use democratic government, including its constituent entities, such as public universities, to rectify the situation. In recent years, students’ awareness of the urgent need to address climate change—combined with awareness of how energy corporations have created ignorance and blocked policy action—has given this argument greater force. It’s cause for optimism that members of a younger generation, more than those who have preceded them into university administration, are showing signs of developing the moral fortitude that will be necessary to denormalize corporate crime.     

Faculty in the medical and social sciences know that institutional review boards (IRBs) can be sticklers when it comes to protecting human research subjects (I once had an IRB reject a graduate student’s research protocol because the student hadn’t specified what she would say in thank-you notes to her interviewees). But whatever their problems, IRBs help eager researchers stay within ethical lines. We need equivalent entities—partnership review boards—to apply analogously high standards to corporate partnerships. The inadequacy of existing procedures and standards for vetting corporate partners is undeniable, given that they are no bar to partnering with repeat criminal offenders. That’s a failure and a shame. If universities want to maintain public trust, if they want to reduce the societal harms caused by corporate crime, if they want to be able to say with a straight face that truth matters, they must choose their partners more wisely.   

Michael Schwalbe is professor emeritus of sociology at North Carolina State University. His email address is [email protected].