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>>The shareholders would still be richer and don't have to fear punishment This is actually an interesting thought. What if they did have to fear punishment? P

>>The shareholders would still be richer and don't have to fear punishment This is actually an interesting thought. What if they did have to fear punishment? Perhaps in the form of having a percentage of the settlement/regulatory fees passed to them via their brokerage accounts. A mechanism like this would mean that potentially shady/unethical corporate behavior would be reflected much more strongly in the stock price, since holding onto those stocks would carry risks beyond just the stock price temporarily going down during lawsuits. It would also put immense pressure on corporations to not do shady shit.

rahimnathwani 10y ago
Do you mean in amounts that could exceed the value of their shares? If so, then you're talking about changing a fundamental of corporations: limited liability. If you're not, then I don't see any difference in impact whether the corporation pays or the stockholders pay.
- akiselev 10y ago
  Limited liability doesn't protect you from the value of a stock being wiped out. Lehman Brothers was a limited liability corporation but anyone holding their stock during the bankruptcy was still stuck with worthless stock or debt that they couldn't recover in the proceedings. The current fine mechanisms are inadequate and can't properly realign incentives against breaking laws that carry civil penalties, especially in a case as blatant as VW's cheating. Perhaps increase fees/taxes on "toxic" shares in companies that have broken significant laws with intent or maybe force these companies to settle by issuing diluting stock that goes to agencies responsible for cleaning up the mess. Or even tax revenue instead of profit on these toxic shares which would create a huge incentive, especially for executives and large stock holders. The point is to tweak and realign incentives, it doesn't have to be passing on extreme financial liability to shareholders. Most investors can't take a huge hit on their portfolio like a company with tens or hundreds of billions of dollars of revenue can.
  - jlmorton 10y ago
    This is precisely what the fine is doing. Fifteen billion dollars of the market capitalization was wiped out, directly impacting shareholders. The stock has lost about 40% of its value since news of scandal broke. You can argue it should be worse, but we don't need some special new mechanism. The fine can be anywhere from $1 to the the market capitalization+1 and the effects would then range from a slap on the wrist to bankruptcy and the loss of all equity in the company for shareholders.
foobar1962 10y ago
>>>>The shareholders would still be richer and don't have to fear punishment >>This is actually an interesting thought. What if they did have to fear punishment? What about people who may have invested in a fund that bought shares? Should the fund managers fear punishment? Should the people that bought into the fund be punished? This is where the "punishment for those who benefit" gets complicated. It's hard to work out the people that should NOT be punished.

rahimnathwani 10y ago

Do you mean in amounts that could exceed the value of their shares? If so, then you're talking about changing a fundamental of corporations: limited liability. If you're not, then I don't see any difference in impact whether the corporation pays or the stockholders pay.

akiselev 10y ago
Limited liability doesn't protect you from the value of a stock being wiped out. Lehman Brothers was a limited liability corporation but anyone holding their stock during the bankruptcy was still stuck with worthless stock or debt that they couldn't recover in the proceedings. The current fine mechanisms are inadequate and can't properly realign incentives against breaking laws that carry civil penalties, especially in a case as blatant as VW's cheating. Perhaps increase fees/taxes on "toxic" shares in companies that have broken significant laws with intent or maybe force these companies to settle by issuing diluting stock that goes to agencies responsible for cleaning up the mess. Or even tax revenue instead of profit on these toxic shares which would create a huge incentive, especially for executives and large stock holders. The point is to tweak and realign incentives, it doesn't have to be passing on extreme financial liability to shareholders. Most investors can't take a huge hit on their portfolio like a company with tens or hundreds of billions of dollars of revenue can.
- jlmorton 10y ago
  This is precisely what the fine is doing. Fifteen billion dollars of the market capitalization was wiped out, directly impacting shareholders. The stock has lost about 40% of its value since news of scandal broke. You can argue it should be worse, but we don't need some special new mechanism. The fine can be anywhere from $1 to the the market capitalization+1 and the effects would then range from a slap on the wrist to bankruptcy and the loss of all equity in the company for shareholders.

foobar1962 10y ago

>>>>The shareholders would still be richer and don't have to fear punishment >>This is actually an interesting thought. What if they did have to fear punishment? What about people who may have invested in a fund that bought shares? Should the fund managers fear punishment? Should the people that bought into the fund be punished? This is where the "punishment for those who benefit" gets complicated. It's hard to work out the people that should NOT be punished.