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> . When private companies screw up, who gets left with the bill? The share holders (which often includes the leadership). Their shares drop relatively quickly

> . When private companies screw up, who gets left with the bill? The share holders (which often includes the leadership). Their shares drop relatively quickly to close zero. I think, however, that this is not enough. Share holders of a company should be liable as individuals for the damages the company causes in case the company cannot pay. This would strongly encourage share holders to pressure the CEO (which is also usually a share holder) to run the company in a sustainable way. Also if the CEO does "gross mismanagement", share holders should be able to sue them as individuals, but from the point of customers, share holders should pay. The only reason "stonks can only go down to zero" is because we have put in rules in the system to make it that way. When a company fills for bankrupcy, the risk for share holders is limited (to their original investment). If we change the rules and make share holders accountable, then stonks will definetly be able to go way below zero and share holders will need to foot a bill here, potentionally leaving them all bankrupt. Once that happens, then customers might still be left in debt. IMO at that point employees of the company should start footing the bill. Many employees look away at wrong business practices because there is nothing in for them in trying to push for change and doing the right thing. If everyone involved with the company would be personally liable, most companies would be run very differently.

lordnacho 6y ago
I get what you're saying, but limited liability has been a thing for quite a while now. It would be hard to find a few billion dollars to make a new car plant if you could lose more than you put in. But also there are already "piercing the veil" laws where you actually are liable for your business if you commit fraud. Perhaps it's worth a rethink, as it's been a while since the 1800s when capital was scarce.
meepmorp 6y ago
Do we prosecute the janitors, too? What about the admin staff? I'm fine with burning HR at the stake, but some fairer minded folks might point out their general lack of involvement in business decisions that affect the public, as a reason to spare them. The kindest thing I could think to call your idea is naive and poorly conceived.
- dkersten 6y ago
  Do the janitors and admin staff hold shares? Ie do they benefit from the companies profits and do they have power over the board and executive teams? If not the shareholders, someone in control of the company should be held accountable to avoid a "company in trouble? oh well, just shut it down, debt go poof, start again elsewhere, pocket the profits" situation or a situation where the company does something like damaging the environment. Too often do companies also get gutted to avoid paying out in lawsuits. There should always be people to go after. Probably it should be the board and executive team, rather than "I bought a single share" people. Ideally someone with skin in the game (so either being a shareholder, or maybe high salaries are sufficient too).
  - ericmay 6y ago
    Do they benefit from wages paid by the company? Why do you draw the line at shares???
    - x86_64Ubuntu 6y ago
      Because shares are ownership.
      - ericmay 6y ago
        Why does that matter? The workers are still profiting off of the company's bad actions.
  - deleted 6y ago
    [deleted]
  - hntrader 6y ago
    Shareholders already do get a penalty. The company gets fined which impacts future profitability and the stock price, thereby impacting shareholders. Also, most often the shareholders of large companies have no knowledge of illegal behaviour because the responsible stakeholders/executives inside the org are hiding that information. Enron is an example. What we need is more executive accountability. For example jail sentences to the HSBC execs that knowingly facilitated money laundering for the Sinaloa Cartel. Instead what we got was a mere fine which mostly impacted the shareholders.
ericmay 6y ago
So who is paying who? Am I just transferring money from my 401k to someone else’s and then they transfer it back since we both own shares in index funds? Going to $0.00 is plenty of incentive for shareholders to demand accountability. It makes no sense to me to somehow go even lower than that. And why would shareholders be specifically punished but not creditors? If there is some liability claim how are shareholders not just equally responsible as everyone else including creditors? If Joe down the street buys a share of Enron he’s going to get sued? If Jane who works as the company nurse owns stock is she now getting sued? How does she with her 10 shares effectively make management “less fraudulent”? What leverage? C’mon. When a company goes bust or bad things happen, shareholders everywhere lose their investment. That’s a big enough deal as it is. > If everyone involved with the company would be personally liable... Liable for what? Are creditors suing shareholders for losses? I guess banks won’t hold shares of companies because then they’d just be suing themselves. If a company “does damages” and the government failed to regulate the company properly can we sue the government too? What about suppliers? Why draw the line at shares? Maybe everyone who was ever paid by the company should be held liable? What you’re proposing here could use some work. You’re trying to create a system of infinite liability that just doesn’t make much sense.
- volta83 6y ago
  > And why would shareholders be specifically punished but not creditors? If there is some liability claim how are shareholders not just equally responsible as everyone else including creditors? FWIW I also believe that creditors should take more responsibility on the credit they give. We saw in the financial bubble of 2008 that there are many incentives for creditors to provide credit to persons and companies that _they know_ won't be able to pay. > Am I just transferring money from my 401k to someone else’s and then they transfer it back since we both own shares in index funds? Putting your 401k into stocks and index funds is a choice you make. Nobody forces you to do that, and you, e.g., put them in bonds instead for lower returns and lower risks, or if you are willing to take more risks, there are Index funds and ETF for pretty much any criteria you can imagine. I personally think that using a 401k with index funds on stock is a great choice given how the market has grown the last 100 years, but many countries actually don't have 401ks (e.g. most of Europe doesn't have them) and they do jut fine. > What you’re proposing here could use some work. That's a really positive and kind way to put it, thanks. It was just a thought. The system of "a company is only liable with its assets" is what we have had for a very long time. There are many scams that exploit this, and a continuous stream of gross negliglence or malice that shows up every now and then when those at fault are able to just walk away and do it again.
confidantlake 6y ago
I have non voting shares in 500+ companies due to index funds. I really don't think making me personally financially liable makes sense.
- yohannparis 6y ago
  So you are effectively gambling on a speculative value of the company and not investing in it.
- volta83 6y ago
  I get what you are saying, but you are the one that chooses which index fund to use. Sure, one could limit this to voting rights, but most big Index funds have voting right on many companies because they own collectively many shares. One could also limit this to "outside 401k / pension programs", etc. But if you have a say in what a company does (or can sue them for damages as an investor), you also have a responsibility for what that company is doing. I don't know what the right solution to this problem is, but in many companies, the shareholders tell the CEO what to do and have no liability. This encourages them to optimize for maximum profits, making smaller "Company sized" damages part of the operating expenses, but without regard for huge damages like in this case. Which isn't fair either, since it means the damages to these people won't be payed by those who profited from them.

lordnacho 6y ago

I get what you're saying, but limited liability has been a thing for quite a while now. It would be hard to find a few billion dollars to make a new car plant if you could lose more than you put in. But also there are already "piercing the veil" laws where you actually are liable for your business if you commit fraud. Perhaps it's worth a rethink, as it's been a while since the 1800s when capital was scarce.

meepmorp 6y ago

Do we prosecute the janitors, too? What about the admin staff? I'm fine with burning HR at the stake, but some fairer minded folks might point out their general lack of involvement in business decisions that affect the public, as a reason to spare them. The kindest thing I could think to call your idea is naive and poorly conceived.

dkersten 6y ago
Do the janitors and admin staff hold shares? Ie do they benefit from the companies profits and do they have power over the board and executive teams? If not the shareholders, someone in control of the company should be held accountable to avoid a "company in trouble? oh well, just shut it down, debt go poof, start again elsewhere, pocket the profits" situation or a situation where the company does something like damaging the environment. Too often do companies also get gutted to avoid paying out in lawsuits. There should always be people to go after. Probably it should be the board and executive team, rather than "I bought a single share" people. Ideally someone with skin in the game (so either being a shareholder, or maybe high salaries are sufficient too).
- ericmay 6y ago
  Do they benefit from wages paid by the company? Why do you draw the line at shares???
  - x86_64Ubuntu 6y ago
    Because shares are ownership.
    - ericmay 6y ago
      Why does that matter? The workers are still profiting off of the company's bad actions.
- deleted 6y ago
  [deleted]
- hntrader 6y ago
  Shareholders already do get a penalty. The company gets fined which impacts future profitability and the stock price, thereby impacting shareholders. Also, most often the shareholders of large companies have no knowledge of illegal behaviour because the responsible stakeholders/executives inside the org are hiding that information. Enron is an example. What we need is more executive accountability. For example jail sentences to the HSBC execs that knowingly facilitated money laundering for the Sinaloa Cartel. Instead what we got was a mere fine which mostly impacted the shareholders.

ericmay 6y ago

So who is paying who? Am I just transferring money from my 401k to someone else’s and then they transfer it back since we both own shares in index funds? Going to $0.00 is plenty of incentive for shareholders to demand accountability. It makes no sense to me to somehow go even lower than that. And why would shareholders be specifically punished but not creditors? If there is some liability claim how are shareholders not just equally responsible as everyone else including creditors? If Joe down the street buys a share of Enron he’s going to get sued? If Jane who works as the company nurse owns stock is she now getting sued? How does she with her 10 shares effectively make management “less fraudulent”? What leverage? C’mon. When a company goes bust or bad things happen, shareholders everywhere lose their investment. That’s a big enough deal as it is. > If everyone involved with the company would be personally liable... Liable for what? Are creditors suing shareholders for losses? I guess banks won’t hold shares of companies because then they’d just be suing themselves. If a company “does damages” and the government failed to regulate the company properly can we sue the government too? What about suppliers? Why draw the line at shares? Maybe everyone who was ever paid by the company should be held liable? What you’re proposing here could use some work. You’re trying to create a system of infinite liability that just doesn’t make much sense.

volta83 6y ago
> And why would shareholders be specifically punished but not creditors? If there is some liability claim how are shareholders not just equally responsible as everyone else including creditors? FWIW I also believe that creditors should take more responsibility on the credit they give. We saw in the financial bubble of 2008 that there are many incentives for creditors to provide credit to persons and companies that _they know_ won't be able to pay. > Am I just transferring money from my 401k to someone else’s and then they transfer it back since we both own shares in index funds? Putting your 401k into stocks and index funds is a choice you make. Nobody forces you to do that, and you, e.g., put them in bonds instead for lower returns and lower risks, or if you are willing to take more risks, there are Index funds and ETF for pretty much any criteria you can imagine. I personally think that using a 401k with index funds on stock is a great choice given how the market has grown the last 100 years, but many countries actually don't have 401ks (e.g. most of Europe doesn't have them) and they do jut fine. > What you’re proposing here could use some work. That's a really positive and kind way to put it, thanks. It was just a thought. The system of "a company is only liable with its assets" is what we have had for a very long time. There are many scams that exploit this, and a continuous stream of gross negliglence or malice that shows up every now and then when those at fault are able to just walk away and do it again.

confidantlake 6y ago

I have non voting shares in 500+ companies due to index funds. I really don't think making me personally financially liable makes sense.

yohannparis 6y ago
So you are effectively gambling on a speculative value of the company and not investing in it.
volta83 6y ago
I get what you are saying, but you are the one that chooses which index fund to use. Sure, one could limit this to voting rights, but most big Index funds have voting right on many companies because they own collectively many shares. One could also limit this to "outside 401k / pension programs", etc. But if you have a say in what a company does (or can sue them for damages as an investor), you also have a responsibility for what that company is doing. I don't know what the right solution to this problem is, but in many companies, the shareholders tell the CEO what to do and have no liability. This encourages them to optimize for maximum profits, making smaller "Company sized" damages part of the operating expenses, but without regard for huge damages like in this case. Which isn't fair either, since it means the damages to these people won't be payed by those who profited from them.