Information is the Key to Enforcement: A New Case Study

A new and really fascinating case study about environmental mass tort litigation against Du Pont was posted recently by the NBER.  You can find the piece here.  It demonstrates how a company came to ignore the injuries that its product (in this case a toxin called C8) and how it can be that this decision was value maximizing for shareholders.

The bottom line answer is that the company's ability to hide information and delay payment of any penalties, combined with the relatively low exposure in tort and regulatory penalties, made it sensible because it knew it would not have to internalize the full costs of its conduct.  It demonstrates that information and secrecy is at the core of the effectiveness (or ineffectiveness) of regulation and litigation.