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What Is the Best Way to Hold Private Prisons to Account?

Although some universities are divesting as much as $10 million in holdings from private prisons, this is a drop in the bucket for a $5 billion industry.

December 13, 2017

Cross-posted from Newsweek

In the past year, three major cities have launched divestment campaigns from the private prison industry, following on the heels of a slew of major universities breaking ties with companies that profit from over incarceration.

Just a few weeks ago, for instance, the Philadelphia Board of Pensions and Retirement voted to withdraw its $1.2 million in investments the GEO Group, CoreCivic, and G4S, which all own and operate prisons.

In June, New York City made headlines as the first large public pension system to fully divest its portfolio from these companies, citing concerns about health and safety violations plus alleged human rights abuses.

And in April, Portland’s city council voted to end all new investments in corporate securities, including those with the private prison industry.

Columbia became the first private college in the nation in 2015 to divest from private prisons. Shortly thereafter, the University of California became the first public education system to divest its holdings in the industry when it announced it would sell its $25 million stake in GEO Group, G4S, and CoreCivic.

A domino effect ensued, with divestment campaigns popping up at Harvard, Swarthmore, Yale, Northwestern, Princeton, and City University of New York.

These campaigns are critical to raising awareness of the problems with the private prison industry among some of Wall Street’s largest hedge funds and powerful Boards of Trustees.

But the political reality is that these private prisons aren’t going away anytime soon, so ultimately engaging policymakers is the most effective way to change the industry’s incentives, transparency, and accountability to the public.

First, a bit of background. Today’s two largest private prison corporations, CoreCivic and Geo Group, earned a combined $4.3 billion in revenue in 2016, with $382 million in profits.

For decades, student activists have protested their schools’ investments, from the tobacco industry to today’s campaigns against fossil fuels. Although some universities are divesting as much as $10 million in holdings from private prisons, this is a drop in the bucket for a $5 billion industry.

For research on my new book, Inside Private Prisons: An American Dilemma in the Age of Mass Incarceration, I interviewed students at multiple universities about the divestment campaigns they were involved in. The students felt passionately that their universities were complicit in creating and sustaining mass incarceration by mere virtue of any investment ties to companies that profit off of people behind bars.

One student told me she didn’t want her university to sponsor the captivity of humans who could be innocent, some of whom are mothers who eventually get deported.

William MacAskill, an Oxford University professor who recently wrote about divestment campaigns and CEO compensation, argues that while some of these companies earned the dubious title “sin stocks,” they often produce better returns than their ethical alternatives.  “As soon as an ethical investor sells a share, a neutral or unethical investor will buy it,” McAskill wrote.

Ultimately, to make an impact on these corporations’ bottom lines, it would require the heft of huge money management funds such as the Vanguard Group, the country’s second-largest management firm, to renounce its interests in these corporations. Today, the Vanguard group owns roughly 12 percent of GEO Group stocks and 9 percent of CoreCivic.

In the end, divestment campaigns likely will not harm private prison revenue, as another investor will swoop in and purchase the shares—especially if they are a sound financial investment.

For-profit prison corporations have been the subject of considerable criticism over the last four decades. One of the chief criticisms of the industry is its lack of transparency.

For example, what are the prisons’ staffing levels, escape statistics, healthcare records and solitary confinement statistics?

While government prisons are required to comply with requests for information under public records laws at the state level or the Freedom of Information Act at the federal level, private prisons usually are not.

It is time that we reform the private prison industry. After all, if these corporations are making a profit from housing people behind bars, shouldn’t they be asked to improve their transparency, accountability, and the way people in their care are treated?

We can’t simply cast aside the men and women who languish behind bars until they are released. We owe them a duty and responsibility to constantly monitor their conditions and beyond that, we owe them the promise that we will push the envelope as far as we can to incentivize prison operators to provide better programming and outcomes.

Contracts have the power to make wholesale changes in how we conduct the business of providing care and services to those in private prisons and private detention centers.

Government needs to ensure that contract terms are tightly written and provide enforceable standards to improve staffing, medical and mental health care, nutrition, sanitation, education, and recreation.

Government should require the for-profit-sector to reduce recidivism rates  —and beat the government’s lousy 75 percent rate, which means about ¾ of those who leave prison return within three years.

And penalties for violation of these contracts must be sufficient to make compliance more profitable than non-compliance. At the end of the day, private entities that perform public functions should be subject to the same transparency, accountability, and oversight that public entities are.

One undergraduate student at Columbia told me that she and others there “wanted to send the message that it didn’t matter how these companies reform themselves, that private prisons are still wrong,” that engaging with these companies  sets "us down a trajectory that would suggest that these companies could be fixed in some way and made better and then they would be okay.”

The reality is that these divestment campaigns only move the needle so far.

Students and constituents should engage policymakers to reform private prison contracts, arguably the most effective way to improve their practices. It is ultimately pressure on policymakers that will change the industry’s incentives, transparency, and accountability requirements.