THE CORVAIR, THE PINTO AND CORPORATE BEHAVIOR: IMPLICATIONS FOR REGULATORY REFORM

Top corporate management responds to what is socially desirable when the costs and economic benefits provide the incentive to do so. Even when changing directions to match what is thought to be socially desirable would produce long-term profit maximization, some firms may stay with what is socially undesirable for what is perceived as a greater short-term profit maximization. Halpern suggests that such short-term profit decisions made by General Motors with the Corvair, and by Ford with the Pinto, backfired. A key problem is seen as the time lag between corporate misdeeds and the final judgment of courts or the government.