CORPORATIONS cannot seem to avoid misconduct. Ford Motor recently announced a criminal probe of its emissions and fuel economy testing, federal investigators are examining Goldman Sachs’ involvement in a large-scale fraud in Malaysia, and Facebook’s legal woes with user privacy have been well documented over the past year.

The question is whether large penalties imposed on companies deter them from future bad behavior. The answer appears to be “no.”

Take Wells Fargo, for instance. For years, the bank created fake accounts for customers to inflate cross-selling of its products. That resulted in a $185-million penalty from regulators in 2016. That year it was also hit with a $1.2-billion penalty for improper mortgage lending practices. Then early last year, the Federal Reserve, the bank’s primary regulator, ruled that the bank could not expand its balance sheet, crimping its ability to grow. But the penalties imposed have had minimal effect on a bank that had earned over $22 billion in 2018.

Goldman paid a $550-million penalty in 2010 for misleading investors in a collateralized debt obligation tied to subprime loans. But in recent years the firm has become the focus of a criminal investigation for its role in helping to sell bonds on behalf of 1Malaysia Development Berhad, or 1MDB, that turned out to be a multibillion-dollar fraud. A partner at the firm, Tim Leissner, pleaded guilty to charges of conspiracy to commit money laundering and conspiracy to violate the Foreign Corrupt Practices Act. His former deputy, Roger Ng, is also accused of helping a Malaysian businessman, Jho Low, loot 1MDB of billions of dollars to finance a lavish lifestyle.

Prosecutors are pushing for Goldman to plead guilty to charges related to its involvement with 1MDB. The company has continued to blame “rogue” employees for its problems. Even if the firm does plead guilty, the impact on its operations should be minimal.

How much Goldman may pay in a settlement is anyone’s guess, but a figure between $2 billion and $3 billion would roughly equate to the loss suffered by the Malaysian government from the 1MDB fraud. In 2018, Goldman earned $10.4 billion, so the payment, while unwelcome, is unlikely to have too much of an impact on the firm.

Importantly, the Securities and Exchange Commission, if past cases are any guide, is likely to grant Goldman a waiver from the “bad actor” rules, which would make it more difficult to access the capital markets.

Facebook disclosed in its most recent quarterly report that it created a $3-billion reserve to resolve an investigation by the Federal Trade Commission that the company may have violated a 2011 privacy consent decree with the agency. The company also said that “it is reasonably possible that we may incur a substantial loss in some of the other cases, actions or inquiries” that it is facing over its privacy practices.

Even after creating the reserve, Facebook’s net income was $2.4 billion last quarter, so any future payments are unlikely to have a significant effect on its future profits.

“A fine in the low billions of dollars would amount to a slap on the wrist for Facebook,” Representative David Cicilline, Democrat of Rhode Island, said at the time.

Indeed, news of the potential penalty does not seem to have caused investors much consternation. Facebook’s shares rose on the day of the announcement as the company reported stronger revenue and usage.

Late last month Ford disclosed in its quarterly filing a criminal investigation into its emissions certification process. The company also noted that “we cannot provide assurance that it will not have a material adverse effect on us.” That is a nice way of saying it does not know the size of the penalty it might face from the federal government and different states. Despite that bad news, Ford’s stock price finished the day up 10% after announcing robust sales and earnings.

All that suggests companies have little to worry about from government investigations and penalties that may be assessed. Senator Elizabeth Warren, Democrat of Massachusetts, is pushing to change that. She introduced a bill that would allow prosecutors to pursue charges against executives for negligently permitting or failing to prevent a criminal violation by the company. Whether this proposal will gain any traction in Congress is an open question, but it would certainly get the attention of chief executives if they discover problems inside the company.

But the Justice department under President Trump has favored deferred and non-prosecution agreements rather than guilty pleas. The penalties imposed have been relatively small over the past two years, compared with those seen at the end of the Obama administration.

That raises the question of whether the friendlier climate in Washington will engender greater compliance, or foster the view that a violation will result in only an expensive speeding ticket. — The New York Times