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It's a fantastic idea. Shareholders, who the Board of Directors claim to be beholden to, would lose everything. The company would get liquidated to the highest
by jennyyang 6y ago
It's a fantastic idea.
Shareholders, who the Board of Directors claim to be beholden to, would lose everything. The company would get liquidated to the highest buyer. Shareholders would be incentivized to not support crimes or strategies that would lead to corporate execution and Board members would be legally bound and liable if that happened.
It doesn't support industrial concentration. All the company needs to do to avoid executation is to not commit the most egregious crimes. Is that really such a hard ask? No, it isn't.
- JumpCrisscross 6y ago> The company would get liquidated to the highest buyer Who do you think gets the liquidation proceeds? If not the shareholders, one, that’s expropriation, which rule-of-law countries try to avoid. And two, that’s easier achieved with a fine. For businesses requiring a license, suspending licenses could kill a business. Otherwise, “death penalty” is, at best, an expensive way to levy a fine and, at worst and most likely, inchoate.
- kyboren 6y agoOK, shareholders might get some proceeds after secured and unsecured creditors, but as I am sure you're aware, share prices are generally a multiple of book value. With a corporate death penalty, the net present value of the expected future earnings of the company is 0. A fine can be paid and the organization simply continues. But the point of the corporate death penalty is that the organization ceases to operate; executives and board members lose their plum positions in ignominy; shareholders lose enormous value; and the rotten people and incentive structures in the organization are scattered into the wind.