Talking Privatization with a Convert

Recently, Diane McClure, a former co-founder and CEO of a private-prison firm, discussed the industry with Public Employee magazine. She left the business two years ago after a bitter disagreement with the managers of the company.

McClure has been an executive in the corrections field for almost three decades. She joined Corrections Corporation of America in the early 1980s and subsequently worked for three of its rivals, the third being the company she founded.

Following are excerpts from the interview.

You have said, "Public prisons should have the public — not private companies — as their masters." Why have you come to feel that way?

I came to realize that, in any private enterprise, the final objective, whether stated or not, is to create increased value for the shareholders. That's a particular problem when it comes to public safety, because the public should be the sole beneficiary. So there are serious issues when bottom-line considerations compete with correctional services. And when you look at the private-company data on those services, you find many breaches — of contract and of the public trust.

What has made prisons so attractive to business people seeking profits?

Partly it's that "Inmates have no lobbyists," that is, no or few people who can effectively stand up for them. But basically, it's because, at least in the years when this was a "sexy" industry, you could produce a good return without a lot of corner cutting. Trouble was, as more companies entered the business, the pressure for low [contract] bids grew, and [profit] margins got smaller and smaller.

Are privatization and profit inherently bad in corrections?

There's nothing wrong with the profit motive in itself. It's the way the motive is directed that can be the problem. In a government-contract system, when the payment for the services rendered is not sufficient to provide a fair return to investors, services will almost always end up being compromised in favor of shareholder value.

In terms of expansion and profits, what's your prediction for the industry?

I don't know that the go-go years will ever return. For that to happen, governments will have to recognize that they can't award contracts on the basis of the lowest bid, and companies will have to learn that quick profits are not the way to long-term viability.

What are the most effective steps unions like AFSCME can take to effectively combat prison privatization?

For one thing, unions could study what the private sector has done more cheaply than government yet done successfully. For another, they could do a better job of monitoring private companies' operations and pushing for higher fines for breaches of contract. They could do better in public relations, too.

(To read the entire interview, go to the AFSCME web site and view the July/August 2002 edition of the Public Employee magazine.)