4 ms·

A question not a statement, but are punitive damages set to a level where they should be felt by the guilty party? If you don't set it in the billions, Charte

A question not a statement, but are punitive damages set to a level where they should be felt by the guilty party? If you don't set it in the billions, Charter wouldn't even notice it. Their yearly profits are in the billions. $7 billion is very possibly less than the profit made between the murder of the woman (2019) and the verdict (now).

hnburnsy 4y ago
Just like taxes, companies don't pay or feel them, they either reduce expenses (example by paying their employees less) or increase revenue (example increase prices to consumers). In the end, consumers and employees are the ones suffering the punitive damages.
- ryandrake 4y ago
  > paying their employees less If they could profitably pay employees less, why wouldn’t they just do that and not wait for a judgment? > increase prices to consumers Same: If they could just do that any time, why wouldn’t they, if it would result in more profit? Why wait for a big expense like a judgment?
  - jrsj 4y ago
    Waiting for it to happen isn’t necessary for it to be priced in. In many cases companies probably anticipate these costs like any other. If you do something that risks a fine it’s because you think the reward is worth it. In cases where there is a fine, the goal is the same as any other expense: to pass costs onto either consumers or employees in order to protect shareholders. In cases where a penalty is surprising and/or severe, they might not be able to fully pass on costs to those people, profitability suffers, and the shareholders pay via investment losses or at least reduced gains. Corporate leadership could get forced out if they piss off shareholders too much, otherwise the only cost for them to pay is reduced pay from equity based compensation or performance bonuses…and only if the fines are in excess of the gains made by breaking the law in the first place.
    - ryandrake 4y ago
      That’s what I don’t understand about passing on costs to customers: The idea that a company can just pass additional costs on to the customer implies that the market is willing to bear that passed-on cost. But if the market is already willing to bear it, why wouldn’t the company just charge more today, regardless of whether they have additional costs?
- DaveExeter 4y ago
  No, your analysis is completely wrong. Many people make the same mistake, so don't feel bad.
- jsmith45 4y ago
  The goal isn't for the company per se to care. The goal is for the leadership of the company to care, since such large fines hurt the profitability, may lead to them forfeiting certain bonus compensation tied to maintaining certain profitability levels. It also can negatively impact the stock price, which means leaderships stock options are worth less, etc. The idea being that once it becomes clear to the leadership that allowing such things to continue will hurt them personally, they will put a bunch of effort into making sure the company does not do whatever caused the enormous fines again in the future. I don't think this is an especially efficient way of accomplishing this. Holding company leadership directly accountable, and having the courts deny the leadership some or all of their compensation, or in especially egregious cases, removing them from controlling the company entirely would be a more direct way of ensuring the companies make good faith efforts to comply with the law (or avoid torts, as the case may be). But we don't generally go that way.
  - jrsj 4y ago
    Biggest problem I see with the current system is that it’s only a deterrent if the fines are large enough. If they are too small they have the opposite effect and actually encourage criminal behavior because the reward will be worth the risk statistically. On the other hand, defaulting to go after corporate leadership directly does create an opportunity for shareholders to mostly get away with things they supported behind the scenes. Very complicated issue overall and I haven’t really decided anything on it yet other than “we can probably do better”.
    - Ekaros 4y ago
      Maybe it should be possible to fine the holders of stock directly. Not the company, but the stock and option holders.

hnburnsy 4y ago

Just like taxes, companies don't pay or feel them, they either reduce expenses (example by paying their employees less) or increase revenue (example increase prices to consumers). In the end, consumers and employees are the ones suffering the punitive damages.

ryandrake 4y ago
> paying their employees less If they could profitably pay employees less, why wouldn’t they just do that and not wait for a judgment? > increase prices to consumers Same: If they could just do that any time, why wouldn’t they, if it would result in more profit? Why wait for a big expense like a judgment?
- jrsj 4y ago
  Waiting for it to happen isn’t necessary for it to be priced in. In many cases companies probably anticipate these costs like any other. If you do something that risks a fine it’s because you think the reward is worth it. In cases where there is a fine, the goal is the same as any other expense: to pass costs onto either consumers or employees in order to protect shareholders. In cases where a penalty is surprising and/or severe, they might not be able to fully pass on costs to those people, profitability suffers, and the shareholders pay via investment losses or at least reduced gains. Corporate leadership could get forced out if they piss off shareholders too much, otherwise the only cost for them to pay is reduced pay from equity based compensation or performance bonuses…and only if the fines are in excess of the gains made by breaking the law in the first place.
  - ryandrake 4y ago
    That’s what I don’t understand about passing on costs to customers: The idea that a company can just pass additional costs on to the customer implies that the market is willing to bear that passed-on cost. But if the market is already willing to bear it, why wouldn’t the company just charge more today, regardless of whether they have additional costs?
DaveExeter 4y ago
No, your analysis is completely wrong. Many people make the same mistake, so don't feel bad.
jsmith45 4y ago
The goal isn't for the company per se to care. The goal is for the leadership of the company to care, since such large fines hurt the profitability, may lead to them forfeiting certain bonus compensation tied to maintaining certain profitability levels. It also can negatively impact the stock price, which means leaderships stock options are worth less, etc. The idea being that once it becomes clear to the leadership that allowing such things to continue will hurt them personally, they will put a bunch of effort into making sure the company does not do whatever caused the enormous fines again in the future. I don't think this is an especially efficient way of accomplishing this. Holding company leadership directly accountable, and having the courts deny the leadership some or all of their compensation, or in especially egregious cases, removing them from controlling the company entirely would be a more direct way of ensuring the companies make good faith efforts to comply with the law (or avoid torts, as the case may be). But we don't generally go that way.
- jrsj 4y ago
  Biggest problem I see with the current system is that it’s only a deterrent if the fines are large enough. If they are too small they have the opposite effect and actually encourage criminal behavior because the reward will be worth the risk statistically. On the other hand, defaulting to go after corporate leadership directly does create an opportunity for shareholders to mostly get away with things they supported behind the scenes. Very complicated issue overall and I haven’t really decided anything on it yet other than “we can probably do better”.
  - Ekaros 4y ago
    Maybe it should be possible to fine the holders of stock directly. Not the company, but the stock and option holders.