Christian Ethics and For-Profit Prisons: Fiduciary Duties
(Eds. note: this is the second part in a series we are doing on Christian ethics and for-profit prison.)
The past few decades have spawned the growth of what some call the “prison-industrial” complex. The term (which is usually used pejoratively) is used to explain the explosion in incarceration rates in the United States to almost unfathomable numbers, despite the fact that the United States is a relatively safe and stable society. The theory postulates that the increase in incarceration rates has very little to do with what would traditionally be considered criminal behavior, and much more to do with the criminalization of behavior that is neither inherently nor traditionally punishable, such as poverty, immigration, drug addiction etc. The explanation centers around corporations that depend on higher incarceration rates (bond/food/construction/security companies that provide services to prisons) and the lobbying companies that serve their interests, most of whom contract with state-run prisons. But the term perhaps most aptly describes prisons that are entirely operated by for-profit prisons.
To get a basic understanding of for-profit prisons, you should probably read the first post in our series that described some of the basic facts surrounding the issue. But essentially, for-profit prisons stand for the proposition that private corporations can more efficiently operate prisons than the government, and will thus save taxpayer money. They generate revenue by contracting with state governments (and thus are paid by taxpayers) and propose that they can go further with those dollars than the state could if they applied that money directly to their own prisons. And in one sense, they are right – for-profit prisons generate billions of dollars in profits every year.
Of course, a (probably true) argument can be made that the profit generated for shareholders and investors does not actually signify a delivery on the promise to save money for taxpayers. While the terms of the contract may be less than the money it would take for a state to directly operate a prison of similar size, there are hidden costs. Empirical evidence suggests that private prisons generally don’t do as good of a job at security, and escaped inmates have cost states millions of dollars since 2012 alone. Additionally, private prisons employ less people in the community than state-operated prisons. Furthermore, private prisons often contract for a guaranteed amount of inmates at a given time, and arguably, the mandate necessitates incarceration of individuals undeserving of prison, thereby depriving states of those who would otherwise themselves be taxpayers, resulting in diminished tax revenue. The point, in other words, is that providing equity to shareholders is simply not the same thing as saving money for taxpayers.
For-profit prisons have generated not only theoretical debate, but also old-fashioned scandals. In New York (and other places), investigators uncovered a “kids-for-cash” scandal, where for-profit juvenile detention facilities were paying judges to send kids to their facilities; hearings lasted two minutes and the facilities were guaranteed a certain amount of inmates per day. Employees have been overworked (sometimes working 24-36 hours shifts) and denied overtime pay, food costs have been cut to the point of forced borderline starvation, human resources have been inadequate (convicted felons have been hired and employees have avoided termination even after proof of sexual assault), and the list goes on.
As a Christian, defending the concept of for-profit prisons requires reckoning with the unethical and immoral treatment of inmates and employees. Assuming for a second that we agree that inmates and employees should be treated ethically and thus dismissing the decidedly un-Christians argument that convicts can be treated inhumanely, the argument would necessarily depend on the premise that the decision-makers can either be reformed or replaced. I would contend, though, that such an assumption is uninformed and fundamentally untrue.
At the risk of reducing complex accounting formulas to something that we mere mortals can understand, the profits of these corporations come from the revenue generated minus the costs of operation. The revenue is basically fixed, and then is supplemented by shareholder/creditor investment. The state provides the revenue, and for-profit prisons have little negotiating room. To exist, for-profit prisons can only demand revenue that is less than what it would cost for a state to directly operate a prison; there is a ceiling, in other words, on the amount of revenue they can generate. (I am ignoring, for a second, the fact that an increase in inmates would allow an increase in revenue, and the problems that such a system presents; we will address that issue in a later post, but the basic premise is unchanged – for-profit prisons can only demand a certain amount of revenue-per-inmate, and it has to be less than the cost-per-inmate for direct operation). It stands to reason, then, that the profit generated by a private prison depends on its ability to cut costs.
Thus the problems mentioned earlier; employees are forced to work insane hours and are denied overtime because that’s a way to avoid hiring more employees and thus costs are controlled. Less food is provided to inmates because less food means less costs. Employees who are so terrible at their job that they hire convicted felons or sexually abuse inmates are kept because people who are better at their job would demand a higher salary, and so on and so forth. The problem is that because there is a ceiling on revenue, the profit margins for prisons exist on a thin (blue) line.
That leads us to our ultimate problem. Directors and managers of corporations (i.e. the people responsible for running a company) legally owe an enforceable fiduciary duty of care to the corporation and impliedly to shareholders. That fiduciary duty is tied in a basically direct way to the maximization of profit (if you want the legal sources, statutes and case law for this truism, let me know). In other words, corporations cannot exist if they do not generate profits, both because they would lose shareholder investment and because managers and directors cannot breach fiduciary duties of care. Generating profits (and thus justifying their existence) requires for-profit prisons to cut costs. Cutting costs necessarily and inevitably has deleterious consequences on inmates and employees. The practical effect of those deleterious consequences, from a Christian perspective, is unavoidably unethical and unacceptable.
We started this series by talking about fiduciary duties for a specific purpose. Over the coming weeks, we are going to be talking about issues such as race, immigration, the school-to-prison pipeline, labor practices, and more. It would be understandable if the response to our critiques was to argue that to the extent that the problems we point out actually exist, we can solve them by making for-profit prisons better, not necessarily by requiring their elimination altogether. But this post points out that such an argument is untenable. If we can’t convince you that the problems tied to for-profit prisons exist at all, then you shouldn’t be bothered. But if we can convince you that the problems exist, there is only one solution. If the problems exist, the system is fundamentally flawed. As Christians, we can think that there aren’t problems with for-profit prisons, or we can think that there are. But if we think that there are, a Christian ethical paradigm prevents us from thinking that they can be solved. We can continue to believe that they can exist as-is, or we can advocate for their elimination. What we cannot do is argue that they can be improved.
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