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I'm always skeptical when Congress legislates process. They are almost always better off sticking to outcomes. In this case, hold the execs responsible for co
by dhimes 17y ago
I'm always skeptical when Congress legislates process. They are almost always better off sticking to outcomes. In this case, hold the execs responsible for company fraud, but let them figure out how to make sure their company stays legal.
- bdonlan 17y agoThe problem is when the execs start feeling like they will never be caught - or worse, when they start tricking themselves into thinking that what they're doing isn't fraud. Sure, they'll be caught eventually and punished, but the damage is done.
- rbanffy 17y agoMake all the top level execs liable. That way, one will watch the other and the odds of all of them entering deliberate fraud (or tricking themselves into it) is reduced. It was also suggested on this thread that a carrot-and-stick (fines for the less compliant, tax reduction for the more compliant) would be pretty clever.
- numair 17y agoA proposal only an insurance company could love.
- litewulf 17y agoOr, it would just mean that all the top level execs would work to protect each other.
- lallysingh 17y agoOr blackmail one another.
- rbanffy 17y agoAnd then all you need is one failing to pay to bring down the whole castle of cards.
- uuilly 17y agoYou will never legislate away corruption no matter how high the penalty or how onerous the regulations. The goal is to achieve an acceptable level of corruption with minimal interference on the good guys. It actually reminds me of the questions that DRM raises.
- joe_the_user 17y agoThe only hammer I could imagine. Board of directors members would be liable to minority share holders if they allow chief executives to collect sufficiently high compensation that it diminishes the company's profits + punitive damages if it involves conflict of interest. There, you have a mechanism for private individuals to suing companies and directory for siphoning profits away from the business and essentially force officers and directors to think long terms. I don't know if this would work but it seems better than any scheme I've heard.
- cabalamat 17y agoOr make the execs and shareholders responsible, e.g. by ruling that limited liability doesn't apply when companies commit crimes.
- cwan 17y agoI'm sure one of the many lawyers who lurk can elaborate but I'm pretty sure that limited liability doesn't shield managers who commit criminal acts.
- cabalamat 17y agoIt doesn't. It does shield shareholders. Sharesholders control what a company does, by choosing its directors, so if they are made responsible for a company's misdeeds, they'll have an incentive to police it.
- elai 17y agoSo if I buy a few stocks in microsoft as a %0.00001 stock holder and microsoft get's another anti-trust charge I should be held liable too?
- cabalamat 17y agoObviously if you only hold a piffling number of shares, you have little control over the company. So it'd make sens to restrict this to major and/or controlling shareholders.
- dkokelley 17y agoMaking the shareholders legally liable is a bad idea. To start, it defeats one of the primary purposes of incorporating (more companies would remain as private entities, and enjoy lower taxes and fewer reporting obligations). In order to justify shareholder liability, more individual control by the shareholders would be necessary. Think of what the decision process would be like if America were a pure democracy. If voters were responsible for what their elected officials did (think corruption by our officials), then we would demand more control over their actions - Why have them if we make all the decisions anyways? The same is true for corporations. Shareholders elect board members, who in turn elect managers who run the company. The execs are responsible if they commit fraud via the company. I think that making the board of directors as responsible as the management is a good idea, since it requires the board to police the company, instead of turn a blind eye to the management team's fraud when it's producing positive returns. The individual shareholders though, should not be liable for the actions of an often distant management.
- andylei 17y agothat sounds nice, but in this case, it's precisely the process that's important. the goal of the act isn't necessarily to decrease fraud, it's to increase transparency. you have to fill out more (and better audited) paperwork so that your investors know what you're doing. you can't pass a law that says, "companies have to be transparent"; that would be nonsensical.