6 ms·

Even higher-ups are replaceable. Gov'ts need to really catch the shareholders, they own the misbehaving company, and they push them so hard for profits that the

by cies 9y ago

Even higher-ups are replaceable. Gov'ts need to really catch the shareholders, they own the misbehaving company, and they push them so hard for profits that the workers/managers are lured into cheating the system.

throwaway613834 9y ago
> Even higher-ups are replaceable. Gov'ts need to really catch the shareholders, they own the misbehaving company, and they push them so hard for profits that the workers/managers are lured into cheating the system. OK, I was with everyone saying higher-ups need to be held accountable, but now you're spewing utter nonsense. It's not like the shareholders knew what was going on. What are they going to be "held accountable" for? For being lied to by a cheating company? It's almost like going after taxpayers because they subsidized a criminal's public transportation.
- throwawayjava 9y ago
  Also, lots of shareholders did lose big? Take a look at VOW 2014 - 2018. The price is basically just now recovering.
  - empthought 9y ago
    Not really a loss unless they had to sell in that timeframe. Earnings and dividends are a more appropriate metric for impact to shareholders.
    - beagle3 9y ago
      No, that's not really how that works. They have had a loss, which they may or may not have felt (e.g. if they had to sell, they most certainly did; If those shares were collateral, which is extremely common, they most certainly did). And then there was a gain, which they only had if they did not have to sell. There's also the issue of opportunity cost. Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands.
      - throwaway613834 9y ago
        > Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands. Why? The other way seems to make sense to me.
        beagle3 9y ago
        It only makes sense if you have complete information about every market participant, their plans, liabilities, obligation, etc. If I had VW stock that I had to sell in between to pay my down payment, i most definitely have lost, regardless of it going up later. If I used my VW stock as collateral for something else, I would have had much less collateral to pledge. Assuming a “buy and hold” universal is not a reasonable assumption. Assuming anyone might need to liquidate at any minute is not necessarily more reasonable, but it is more consistent with reality
      - empthought 9y ago
        > Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands. “When the price of a stock can be influenced by a "herd" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.” “Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.” — Warren Buffett
        beagle3 9y ago
        It would be great to recite that as response when you get a margin call. But your broker is still going to seize your collateral based on its price, not value.
        empthought 9y ago
    - jimnotgym 9y ago
      The more excepted model is that capital gains (and losses) are equivalent to dividends[0]. So yes it was a loss. [0]https://en.m.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theorem https://en.m.wikipedia.org/wiki/Modigliani%E2%80%93Miller_th...
      - empthought 9y ago
        If they didn’t sell any stock, there was no capital gain or loss.
- psergeant 9y ago
  The board are responsible to shareholders; most shareholders are simply too small to have any effect though. I wonder if diluting the shares is in any way a reasonable or feasible solution. You could put the newly created shares in Trust for the country’s pension system or something.
rubyn00bie 9y ago
WAT?! And how would that work? Most shareholders with enough voting rights to matter are organizations themselves. This would essentially cease any attempt due to the absurd and never-ending complexity holding people accountable. --- "Corp X needs to be accountable!" "It's shareholders must pay!" [looks up shareholders] "Corp Y is a shareholder of X" ... "Corp Y needs to be accountable!" "It's shareholders must pay" [looks up shareholders] "Corp Z is a shareholder of Y" ... "Corp Z needs to be accountable!" -- The separation of ownership and management is what got us in this problem to begin with. Pointing the finger back at ownership when it's a corporation with thousands, or maybe even millions, of shareholders is stepping backwards in time and approach. Owners don't make the decisions, managers who effectively have no boss make decisions and they're the ones who should pay.
- seanmcdirmid 9y ago
  Also, isn’t the biggest VW shareholder Bavaria?
  - pacificmint 9y ago
    Its the state of Niedersachen (Lower Saxony), not Bavaria. And they are not the largest shareholder, they hold about 20%. Qatar holds 17% and Porsche a tad over 50%.
    - otempomores 9y ago
      Not all of these shares have a vote
fma 9y ago
If you have mutual funds, index funds... You are likely a shareholders of a misbehaving company. So... Are you ready for jail time?
lostapathy 9y ago
Sharehlders get punished when the stock drops. Or are you suggesting we lock up anybody who owns a few shares?
jjeaff 9y ago
That's what the fines are for. That is essentially money out of shareholders pockets.
mikestew 9y ago
Yeah, when Tesla hypothetically defrauds customers and governments, my 1000 shares is going to carry a lot of weight at that shareholders meeting. Oh, did you mean mutual funds and the like? Like the one your 401K might hold? How hard did you think about this before posting?
- jimnotgym 9y ago
  Well at least your Tesla shares are safe from this particular scandal!
sitkack 9y ago
I really enjoy the string of responses your comment has elicited. People really like only being liable for the amount of money they put into something. Regardless if the downsides of their actions end up costing more than the inputs.
- jacquesm 9y ago
  Individual shareholders are not capable of meaningfully directing company action unless they act in aggregate and even then it would be very hard for individual stockholders to make this happen because of the low frequency with which shareholder meetings are held. Stockholders - especially those that originally bought company stock when it was issued - assume liability already, if the company goes under their stock is worthless, if the company is fined their dividends drop. To make them liable beyond that for something they themselves do not control in a way that would enable you to assign blame is excessive.
  - sitkack 9y ago
    People would make more responsible choices if they were liable for the effect of their actions and not just what the corp could get away with. > their dividends drop Corporations are rarely fined even 100% of their profits from illegal actions. If the punishment is simply going to be temporary drop in returns, and that maximum damage inflicted upon a corporation and investor is dissolution, that dissolution should be wielded with a casual frequency. Corporations are benefiting from breaking the law. They get caught, and they still benefit. Many of these arguments center around 1) a drop in returns is punishment enough 2) it would be difficult. Both are simplistic pat answers that defend the corporation as a one-way valve for wealth that disintermediates the criminal from the crime. How is it that I am responsible for all of my actions, except when my action is a pooled investment? The ultimate question is can money only harm up to its denominal value?
paxy 9y ago
So if I have a 401k with some money in a broad index fund which includes VW, I should be in jail?
gregw134 9y ago
The United States used to hold stockholders accountable back in the late 19th century, when there were many more fraudulent and poorly run industrial and railroad companies. As a result, shareholders were so afraid of liability they gave their voting power to "voting trusts" run by bankers, notably JP Morgan. The banks ended up having seats on the boards of the majority of companies in an industry and would use their position to stop companies from competing with each other (after all, competition lowers the profits of all companies in an industry, which makes it less likely they will be able to repay the debt they owe to banks). The result was we ended up with monopolies in nearly everything, from meatpacking to barbed wire to railroads... In other words, not only would punishing shareholders be unfair and stifle investment, it might have other unintended consequences that would hurt the economy.
- mcny 9y ago
  What about the CEO and the board?
- Retric 9y ago
  It still does via Fines which directly hurt shareholders. The real problem is the fines rarely add up to a significant percent of a companies liquid assets let alone value. Thus, when the penalty is vastly lower than the direct gains, it just promotes bad behavior. Really, you need to spread the pain across every level from grunt to CEO to shareholder. With relative culpability based on influence on and benefit from such behaviors.
- mjevans 9y ago
  The limit to shareholders should be monetary (civil liability?) It should be limited to the most recent (five?) years of profit at a maximum; but determined by the valued magnitude of the profits obtained by the infringement (multiplied by something, maybe 3-5?, for punitive effect). Each stock should have that share of debt added to it; zero interest over time, full remainder due upon sale, and reduced by future dividends. The actual debt needn't be tracked per stock; it is sufficient to differentiate between affected and not. Criminal liability belongs with those actively participating or criminally negligent in their oversight.
- 9y ago
seanmcdirmid 9y ago
So I could go to jail for holding an index fund?
flexie 9y ago
Apart from the Porsche family that would be all 8 million citizens in the state of Lower Saxony and the 2.5 million in Qatar? Why stop at the shareholders? Some shares are owned by pension funds. Surely those greedy savers would fit in your giant prison too.
adambyrtek 9y ago
Like pension funds and passive ETFs that are shareholders of most if not all public companies?

by cies 9y ago

throwaway613834 9y ago

> Even higher-ups are replaceable. Gov'ts need to really catch the shareholders, they own the misbehaving company, and they push them so hard for profits that the workers/managers are lured into cheating the system. OK, I was with everyone saying higher-ups need to be held accountable, but now you're spewing utter nonsense. It's not like the shareholders knew what was going on. What are they going to be "held accountable" for? For being lied to by a cheating company? It's almost like going after taxpayers because they subsidized a criminal's public transportation.

throwawayjava 9y ago
Also, lots of shareholders did lose big? Take a look at VOW 2014 - 2018. The price is basically just now recovering.
- empthought 9y ago
  Not really a loss unless they had to sell in that timeframe. Earnings and dividends are a more appropriate metric for impact to shareholders.
  - beagle3 9y ago
    No, that's not really how that works. They have had a loss, which they may or may not have felt (e.g. if they had to sell, they most certainly did; If those shares were collateral, which is extremely common, they most certainly did). And then there was a gain, which they only had if they did not have to sell. There's also the issue of opportunity cost. Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands.
    - throwaway613834 9y ago
      > Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands. Why? The other way seems to make sense to me.
      - beagle3 9y ago
        It only makes sense if you have complete information about every market participant, their plans, liabilities, obligation, etc. If I had VW stock that I had to sell in between to pay my down payment, i most definitely have lost, regardless of it going up later. If I used my VW stock as collateral for something else, I would have had much less collateral to pledge. Assuming a “buy and hold” universal is not a reasonable assumption. Assuming anyone might need to liquidate at any minute is not necessarily more reasonable, but it is more consistent with reality
    - empthought 9y ago
      > Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands. “When the price of a stock can be influenced by a "herd" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.” “Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.” — Warren Buffett
      - beagle3 9y ago
        It would be great to recite that as response when you get a margin call. But your broker is still going to seize your collateral based on its price, not value.
        empthought 9y ago
  - jimnotgym 9y ago
    The more excepted model is that capital gains (and losses) are equivalent to dividends[0]. So yes it was a loss. [0]https://en.m.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theorem https://en.m.wikipedia.org/wiki/Modigliani%E2%80%93Miller_th...
    - empthought 9y ago
      If they didn’t sell any stock, there was no capital gain or loss.
psergeant 9y ago
The board are responsible to shareholders; most shareholders are simply too small to have any effect though. I wonder if diluting the shares is in any way a reasonable or feasible solution. You could put the newly created shares in Trust for the country’s pension system or something.

rubyn00bie 9y ago

WAT?! And how would that work? Most shareholders with enough voting rights to matter are organizations themselves. This would essentially cease any attempt due to the absurd and never-ending complexity holding people accountable. --- "Corp X needs to be accountable!" "It's shareholders must pay!" [looks up shareholders] "Corp Y is a shareholder of X" ... "Corp Y needs to be accountable!" "It's shareholders must pay" [looks up shareholders] "Corp Z is a shareholder of Y" ... "Corp Z needs to be accountable!" -- The separation of ownership and management is what got us in this problem to begin with. Pointing the finger back at ownership when it's a corporation with thousands, or maybe even millions, of shareholders is stepping backwards in time and approach. Owners don't make the decisions, managers who effectively have no boss make decisions and they're the ones who should pay.

seanmcdirmid 9y ago
Also, isn’t the biggest VW shareholder Bavaria?
- pacificmint 9y ago
  Its the state of Niedersachen (Lower Saxony), not Bavaria. And they are not the largest shareholder, they hold about 20%. Qatar holds 17% and Porsche a tad over 50%.
  - otempomores 9y ago
    Not all of these shares have a vote

fma 9y ago

If you have mutual funds, index funds... You are likely a shareholders of a misbehaving company. So... Are you ready for jail time?

lostapathy 9y ago

Sharehlders get punished when the stock drops. Or are you suggesting we lock up anybody who owns a few shares?

jjeaff 9y ago

That's what the fines are for. That is essentially money out of shareholders pockets.

mikestew 9y ago

Yeah, when Tesla hypothetically defrauds customers and governments, my 1000 shares is going to carry a lot of weight at that shareholders meeting. Oh, did you mean mutual funds and the like? Like the one your 401K might hold? How hard did you think about this before posting?

jimnotgym 9y ago
Well at least your Tesla shares are safe from this particular scandal!

sitkack 9y ago

I really enjoy the string of responses your comment has elicited. People really like only being liable for the amount of money they put into something. Regardless if the downsides of their actions end up costing more than the inputs.

jacquesm 9y ago
Individual shareholders are not capable of meaningfully directing company action unless they act in aggregate and even then it would be very hard for individual stockholders to make this happen because of the low frequency with which shareholder meetings are held. Stockholders - especially those that originally bought company stock when it was issued - assume liability already, if the company goes under their stock is worthless, if the company is fined their dividends drop. To make them liable beyond that for something they themselves do not control in a way that would enable you to assign blame is excessive.
- sitkack 9y ago
  People would make more responsible choices if they were liable for the effect of their actions and not just what the corp could get away with. > their dividends drop Corporations are rarely fined even 100% of their profits from illegal actions. If the punishment is simply going to be temporary drop in returns, and that maximum damage inflicted upon a corporation and investor is dissolution, that dissolution should be wielded with a casual frequency. Corporations are benefiting from breaking the law. They get caught, and they still benefit. Many of these arguments center around 1) a drop in returns is punishment enough 2) it would be difficult. Both are simplistic pat answers that defend the corporation as a one-way valve for wealth that disintermediates the criminal from the crime. How is it that I am responsible for all of my actions, except when my action is a pooled investment? The ultimate question is can money only harm up to its denominal value?

paxy 9y ago

So if I have a 401k with some money in a broad index fund which includes VW, I should be in jail?

gregw134 9y ago

The United States used to hold stockholders accountable back in the late 19th century, when there were many more fraudulent and poorly run industrial and railroad companies. As a result, shareholders were so afraid of liability they gave their voting power to "voting trusts" run by bankers, notably JP Morgan. The banks ended up having seats on the boards of the majority of companies in an industry and would use their position to stop companies from competing with each other (after all, competition lowers the profits of all companies in an industry, which makes it less likely they will be able to repay the debt they owe to banks). The result was we ended up with monopolies in nearly everything, from meatpacking to barbed wire to railroads... In other words, not only would punishing shareholders be unfair and stifle investment, it might have other unintended consequences that would hurt the economy.

mcny 9y ago
What about the CEO and the board?
Retric 9y ago
It still does via Fines which directly hurt shareholders. The real problem is the fines rarely add up to a significant percent of a companies liquid assets let alone value. Thus, when the penalty is vastly lower than the direct gains, it just promotes bad behavior. Really, you need to spread the pain across every level from grunt to CEO to shareholder. With relative culpability based on influence on and benefit from such behaviors.
mjevans 9y ago
The limit to shareholders should be monetary (civil liability?) It should be limited to the most recent (five?) years of profit at a maximum; but determined by the valued magnitude of the profits obtained by the infringement (multiplied by something, maybe 3-5?, for punitive effect). Each stock should have that share of debt added to it; zero interest over time, full remainder due upon sale, and reduced by future dividends. The actual debt needn't be tracked per stock; it is sufficient to differentiate between affected and not. Criminal liability belongs with those actively participating or criminally negligent in their oversight.
9y ago

seanmcdirmid 9y ago

So I could go to jail for holding an index fund?

flexie 9y ago

Apart from the Porsche family that would be all 8 million citizens in the state of Lower Saxony and the 2.5 million in Qatar? Why stop at the shareholders? Some shares are owned by pension funds. Surely those greedy savers would fit in your giant prison too.

adambyrtek 9y ago

Like pension funds and passive ETFs that are shareholders of most if not all public companies?