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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 railro
by 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 agoWhat about the CEO and the board?
- Retric 9y agoIt 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 agoThe 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.
- sah2ed 9y agoAny book(s) you could recommend to read more about this bit of history and the resulting monopolies? Thanks.
- gregw134 9y agoYeah definitely read The Robber Barons. It covers all the major tycoons of the 19th century and their financial shenanigans. A surprisingly exciting read, full of wicked deeds. To tell one story from the book, there was a battle over a railroad where thugs hired by opposing companies got on trains at different stains and advanced towards each other. The trains collided and the soldiers jumped off and fought with clubs. The only other book I've read about the era is The House of Morgan, which covers the history of JP Morgan bank. It's highly recommended as well. It tells a convincing tale as bankers as the good guys (gentlemen bankers), who funded Thomas Edison, the transatlantic cable, Charles Lindbergh's transatlantic flight, and who raised the funds and managed the purchases necessary to win WWI. If anyone else has finance books to recommend I'd love to hear them.
- GrumpyNl 9y agoIf you partially own a company you are responsible for that part.