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One way of holding corporations accountable is by lifting the limitation of liability as a penalty for extreme misconduct. Liability limitation is kind of the m

One way of holding corporations accountable is by lifting the limitation of liability as a penalty for extreme misconduct. Liability limitation is kind of the mother of all entitlements.

fmajid 1y ago
This exists and is called "piercing the corporate veil", but it is only applied in circumstances of extreme and blatant criminality by the corporation, at least in the US. https://en.wikipedia.org/wiki/Piercing_the_corporate_veil https://en.wikipedia.org/wiki/Piercing_the_corporate_veil
- bluefirebrand 1y ago
  I think what OP is saying is that the corporate veil should not exist at all Executives should be held accountable for making decisions or approving company direction that break laws I know there's a lot of complexity here with how businesses operate But it is really messed up that individuals can enrich themselves an incredible amount by directing companies to break laws, and often suffer zero consequences for that because the corporate veil is such a strong mechanism
  - gruez 1y ago
    >Executives should be held accountable for making decisions or approving company direction that break laws Isn't that already the case? If an executive ordered a hit on someone, that doesn't become magically legal because he was doing it on behalf of the company.
    - bluefirebrand 1y ago
      Ordering a hit is a pretty extreme example that probably would pierce the corporate veil But also the problem isn't that it becomes "magically legal",the problem is that the corporate veil means that if a company takes illegal actions then often only the company is held accountable, instead of the people responsible for directing the company to take illegal actions And it takes a high bar (like ordering a hit) to make the legal system try and hold individuals accountable for company actions I am arguing that is absurd. I think individuals inside companies take advantage of this often to get away with illegal shit to enrich themselves at the company's expense
      - fmajid 1y ago
        Not as far-fetched as you'd think: https://en.wikipedia.org/wiki/EBay_stalking_scandal https://en.wikipedia.org/wiki/EBay_stalking_scandal Note that while minions went to jail, the CEO came out of this scot-free.
        gruez 1y ago
        >Note that while minions went to jail, the CEO came out of this scot-free. Because it was determined that the minions committed the crime and that the CEO didn't know about it? >The CEO Wenig's messages were deemed "inappropriate" by eBay, but eBay's internal investigation concluded that the CEO did not know about the stalking and harassment activities.
        nkrisc 1y ago
        > but eBay's internal investigation concluded that the CEO did not know about the stalking and harassment activities. I can't imagine them concluding otherwise.
        gruez 1y ago
        I'm not arguing he's been proven innocent, just that he hasn't been proven guilty. Therefore it shouldn't be outrageous that he got away "scott-free".
        rendaw 1y ago
        The argument in this thread is that he's responsible for the actions of his subordinates and therefore deserves some of the punishment, not that he's directly culpable in the crime and therefore should receive punishment. There have been many situations where corporate incentives or structures, plus the innate power imbalance, pressure low level employees to commit crimes that benefit the corporation and the fact that employers are not responsible for the actions of their employees when not directly ordered means that those structures aren't fixed.
    - crote 1y ago
      In practice it often looks more like the case of the Ford Pinto: the company knew that the design was flawed and could result in the fuel tank exploding in a fireball during a rear-end collision, but the $9 it would cost to fix the issue was considered too expensive. Convicting an executive for explicitly ordering a hit on a specific person? Fairly easy. Convicting an executive for letting several anonymous people die in order to increase profits? Virtually unheard of.
  - adrr 1y ago
    If an exec breaks the law, they can and should be prosecuted. Whats weird is filing criminal charges against a company, it’s not like the company can be incarcerated. There are ways to impose fines/injuctions via the civil court system.
    - BrenBarn 1y ago
      More and more I think part of the problem is the burden of proof. It's too easy for executives to hide behind plausible deniability. There needs to be a presumption of individual executive guilt if bad conduct by the company is found to have occurred. In other words, if it happens on your watch, you are guilty of it. Another way forward is that the presumption of innocence should be a sliding scale based on the amount a person has benefited. So if you made $100 million from the company, the bar is very low; you don't get to make $100 million unless everything is absolutely squeaky clean. If you were just an average joe taking home a $50k paycheck, you get much more benefit of doubt. So it's basically like making a lot of money off any endeavor is itself something that requires extra-good conduct; the default position is no one gets to make a lot of money at all.
      - adrr 1y ago
        If execs are willfully blind to criminal activity done by employees, they can and should prosecuted. Problem is they have too much clout and money that they won't get prosecuted.
  - nico 1y ago
    The corporate veil is meant to protect the shareholders, not the executive/employees In theory at least, usually the CEO is legally responsible for the actions of the corporation. And all employees are accountable for their own actions In practice we’ve seen that, at least big corporations, and their executives, get away with just paying fines and settling lawsuits
    - throwawaymaths 1y ago
      would be hilarious to sentence a company to, say, 4000 years in prison and divvy out punishment proportional to the ownership stake. like, this guy owning a few hundred shares on TD ameritrade must report to jail for 38 hours next week. bring a book.
      - smegger001 1y ago
        We would probably see much more law abiding companies as the next shareholder meeting would involve an entirely new board of directors (the previous still serving time) and all of the shareholders themselves having spent time in prison be it hours or days or weeks would not permit such behavior in future.
        opello 1y ago
        An entirely new section to the shareholder meeting agenda: criminal exposure. I wonder if we would also have mandatory market rate buy-back of securities for when a shareholder can't find a buyer but also no longer wants to bear the risk of the corporation's behavior? Similarly, mutual funds might refuse to hold securities that expose them to criminal punishment.
        SR2Z 1y ago
        Companies like Uber that work in regulated industries would find it nearly impossible to operate. Healthcare companies - like the ones that manufacturer pacemakers or implants - would find it basically impossible to raise money. Ditto for aerospace, construction, and tool companies. Why would investors want to get involved when they're one lawsuit away from going personally broke? Limited liability is a good idea and shareholders really shouldn't be held responsible for the actions of the C-suite.
  - analog31 1y ago
    To clarify, I agree with the post above yours. There should be a corporate veil, but it should be pierce-able in extreme cases. Maybe it's already that way, but doesn't seem to be employed all that often. My reason for the corporate veil is essentially a social theory, that society benefits from the higher level of investment that is made possible by letting people shelter their personal assets to a reasonable extent. It's essentially a government manipulation of the economy.
    - jmalicki 1y ago
      It's regularly pierced in many jurisdictions for failure to pay wages. This most often happens with small businesses.
- deleted 1y ago
  [deleted]
pqtyw 1y ago
Realistically though aren't most shareholders of major corporations either "silent" or other corporations? Major fines etc. should already impact them through lowering the value of their shares. Going after executives might be a lot more viable, though. Generally they have much more direct power than major shareholders (since "sell" is usually the only option they have)
- abdullahkhalids 1y ago
  The value of shares is presumably supposed to reflect the future earning potential of a company. Are fines ever imposed to an extent that they significantly impact that future earning potential? I wonder if someone has studied this formally and quantitatively.
  - jmalicki 1y ago
    Oops replied to the parent
- jmalicki 1y ago
  Piercing the veil is most relevant in bankruptcy where the share price is already 0 (and would be negative if not for limited liability)
throwaway48476 1y ago
Corporations should have to designate an individual who is legally responsible for the actions of the corporation.
- throwawaymaths 1y ago
  woukd be fun if "the degree to which liability is limited is proportional to the percent of income tax the corporation pays". if you pay zero tax, full liability, blammo!
- mattmanser 1y ago
  The entire point of incorporating as a company is to stop being personally liable.
  - worthless-trash 1y ago
    So dis-incorporate all companies.
  - crote 1y ago
    "Not being personally liable" was never intended to mean "you can do literally anything you want - provided you first say the magic phrase 'I am a company'". Limited liability makes a lot of sense in the context of protecting small business owners from being in debt until their death if anything goes wrong in their business - even if it wasn't through any fault of their own. It has been extended an awful lot since then.
- robocat 1y ago
  The cleaner. Maybe pay the cleaner a small stipend to be liable. Or create a new position "patsy" or "chief scapegoat" that employees can fight for.
- teeray 1y ago
  https://en.wikipedia.org/wiki/Whipping_boy https://en.wikipedia.org/wiki/Whipping_boy
- ronsor 1y ago
tomp 1y ago
Who are you gonna take money from, pensioners? Congrats, you've now just destroyed the stock market as an idea! A better idea that is both far less extreme as well as sorely needed, is simply... drumroll... charging employees (executives and others responsible) with criminal charges (and jail time)!
- analog31 1y ago
  Yes I agree with that too, or civil charges, since (as a shareholder), I might imagine that they willfully risked the value of my investment.
- crote 1y ago
  If shareholders could be held responsible, perhaps they would be more willing to sacrifice some profits to ensure the companies they invest in are following the law? It might kill high-frequency trading and other forms of parasitic "investment", but I don't see any reason why it would kill the kind of long-term investment pension funds usually do.
Veserv 1y ago
One of the main problems is that the apportionment of liability is lossy. It is fairly easy to determine that a collective, as a whole, is liable for some action. However, it is very hard to determine the culpability of any specific individual in the collective in isolation. The net result is that the collective is guilty, but then the liability just poofs out of existence when we attempt to prosecute the individuals separately. It would probably be better if we assessed the guilt of the collective, then assess the lossless distribution of that liability amongst the members. The liability and guilt is known; now it is just a question of who and what bears the responsibility. This is not a complete solution as a malicious corporation could argue that all of their evil is perpetrated by Joe the janitor, but it solves one of the problems of liability just disappearing if you make the situation complex enough, and boy howdy are lawyers good at doing that. The problem of making sure we apportion the responsibility in a fair and just manner will be left as a orthogonal problem that I will not attempt to address here.
- analog31 1y ago
  Perhaps a simple approach would be to fine each share by X dollars per share. The bigger the shareholder, the more their liability. With that said, and as I mentioned in a neighboring post, I don't take this matter lightly because I think there's a social justification for having well regulated corporations. I call it an entitlement, but I don't oppose entitlements.
  - ndsipa_pomu 1y ago
    That would penalise shareholders that have had little to no influence on the corporation's behaviour. Also, it's purely monetary which means that it's essentially not a punishment to the very wealthy. I think it's better to pursue prison time for the relevant decision makers (including past employees) for the most egregious crimes.
    - generativenoise 1y ago
      Your first statement is terrible logic when it comes to trying to create more globally correct system dynamics. It may seem more fair but it basically creates the lossy liability mentioned by another commenter. Especially since you are creating a one way ratchet where the share in upside disproportionately to the downside. Yes, maybe you want to include some scaling function so larger shareholders that should have more agency bear more liability. But then you are likely going to get games played to on paper to dilute shareholdings though shell companies. Unless big transparent voting blocks are directly needed for their purposes. The problem with your second statement is that is seems to be unclear who the relevant people actually are most of the time and we just end up with fall guys. Especially when it is the environment dominating individual agency where in effect you could swap all the people and get the same outcome most of the time.
amelius 1y ago
We can also hold them accountable through trademark law. 1st violation: add a warning symbol to your company logo, so consumers can see what kind of company they are dealing with 2nd violation: add a second warning symbol 3rd violation: lose the trademark

One way of holding corporations accountable is by lifting the limitation of liability as a penalty for extreme misconduct. Liability limitation is kind of the mother of all entitlements.

fmajid 1y ago

This exists and is called "piercing the corporate veil", but it is only applied in circumstances of extreme and blatant criminality by the corporation, at least in the US. https://en.wikipedia.org/wiki/Piercing_the_corporate_veil https://en.wikipedia.org/wiki/Piercing_the_corporate_veil

bluefirebrand 1y ago
I think what OP is saying is that the corporate veil should not exist at all Executives should be held accountable for making decisions or approving company direction that break laws I know there's a lot of complexity here with how businesses operate But it is really messed up that individuals can enrich themselves an incredible amount by directing companies to break laws, and often suffer zero consequences for that because the corporate veil is such a strong mechanism
- gruez 1y ago
  >Executives should be held accountable for making decisions or approving company direction that break laws Isn't that already the case? If an executive ordered a hit on someone, that doesn't become magically legal because he was doing it on behalf of the company.
  - bluefirebrand 1y ago
    Ordering a hit is a pretty extreme example that probably would pierce the corporate veil But also the problem isn't that it becomes "magically legal",the problem is that the corporate veil means that if a company takes illegal actions then often only the company is held accountable, instead of the people responsible for directing the company to take illegal actions And it takes a high bar (like ordering a hit) to make the legal system try and hold individuals accountable for company actions I am arguing that is absurd. I think individuals inside companies take advantage of this often to get away with illegal shit to enrich themselves at the company's expense
    - fmajid 1y ago
      Not as far-fetched as you'd think: https://en.wikipedia.org/wiki/EBay_stalking_scandal https://en.wikipedia.org/wiki/EBay_stalking_scandal Note that while minions went to jail, the CEO came out of this scot-free.
      - gruez 1y ago
        >Note that while minions went to jail, the CEO came out of this scot-free. Because it was determined that the minions committed the crime and that the CEO didn't know about it? >The CEO Wenig's messages were deemed "inappropriate" by eBay, but eBay's internal investigation concluded that the CEO did not know about the stalking and harassment activities.
        nkrisc 1y ago
        > but eBay's internal investigation concluded that the CEO did not know about the stalking and harassment activities. I can't imagine them concluding otherwise.
        gruez 1y ago
        I'm not arguing he's been proven innocent, just that he hasn't been proven guilty. Therefore it shouldn't be outrageous that he got away "scott-free".
        rendaw 1y ago
        The argument in this thread is that he's responsible for the actions of his subordinates and therefore deserves some of the punishment, not that he's directly culpable in the crime and therefore should receive punishment. There have been many situations where corporate incentives or structures, plus the innate power imbalance, pressure low level employees to commit crimes that benefit the corporation and the fact that employers are not responsible for the actions of their employees when not directly ordered means that those structures aren't fixed.
  - crote 1y ago
    In practice it often looks more like the case of the Ford Pinto: the company knew that the design was flawed and could result in the fuel tank exploding in a fireball during a rear-end collision, but the $9 it would cost to fix the issue was considered too expensive. Convicting an executive for explicitly ordering a hit on a specific person? Fairly easy. Convicting an executive for letting several anonymous people die in order to increase profits? Virtually unheard of.
- adrr 1y ago
  If an exec breaks the law, they can and should be prosecuted. Whats weird is filing criminal charges against a company, it’s not like the company can be incarcerated. There are ways to impose fines/injuctions via the civil court system.
  - BrenBarn 1y ago
    More and more I think part of the problem is the burden of proof. It's too easy for executives to hide behind plausible deniability. There needs to be a presumption of individual executive guilt if bad conduct by the company is found to have occurred. In other words, if it happens on your watch, you are guilty of it. Another way forward is that the presumption of innocence should be a sliding scale based on the amount a person has benefited. So if you made $100 million from the company, the bar is very low; you don't get to make $100 million unless everything is absolutely squeaky clean. If you were just an average joe taking home a $50k paycheck, you get much more benefit of doubt. So it's basically like making a lot of money off any endeavor is itself something that requires extra-good conduct; the default position is no one gets to make a lot of money at all.
    - adrr 1y ago
      If execs are willfully blind to criminal activity done by employees, they can and should prosecuted. Problem is they have too much clout and money that they won't get prosecuted.
- nico 1y ago
  The corporate veil is meant to protect the shareholders, not the executive/employees In theory at least, usually the CEO is legally responsible for the actions of the corporation. And all employees are accountable for their own actions In practice we’ve seen that, at least big corporations, and their executives, get away with just paying fines and settling lawsuits
  - throwawaymaths 1y ago
    would be hilarious to sentence a company to, say, 4000 years in prison and divvy out punishment proportional to the ownership stake. like, this guy owning a few hundred shares on TD ameritrade must report to jail for 38 hours next week. bring a book.
    - smegger001 1y ago
      We would probably see much more law abiding companies as the next shareholder meeting would involve an entirely new board of directors (the previous still serving time) and all of the shareholders themselves having spent time in prison be it hours or days or weeks would not permit such behavior in future.
      - opello 1y ago
        An entirely new section to the shareholder meeting agenda: criminal exposure. I wonder if we would also have mandatory market rate buy-back of securities for when a shareholder can't find a buyer but also no longer wants to bear the risk of the corporation's behavior? Similarly, mutual funds might refuse to hold securities that expose them to criminal punishment.
      - SR2Z 1y ago
        Companies like Uber that work in regulated industries would find it nearly impossible to operate. Healthcare companies - like the ones that manufacturer pacemakers or implants - would find it basically impossible to raise money. Ditto for aerospace, construction, and tool companies. Why would investors want to get involved when they're one lawsuit away from going personally broke? Limited liability is a good idea and shareholders really shouldn't be held responsible for the actions of the C-suite.
- analog31 1y ago
  To clarify, I agree with the post above yours. There should be a corporate veil, but it should be pierce-able in extreme cases. Maybe it's already that way, but doesn't seem to be employed all that often. My reason for the corporate veil is essentially a social theory, that society benefits from the higher level of investment that is made possible by letting people shelter their personal assets to a reasonable extent. It's essentially a government manipulation of the economy.
  - jmalicki 1y ago
    It's regularly pierced in many jurisdictions for failure to pay wages. This most often happens with small businesses.
deleted 1y ago
[deleted]

pqtyw 1y ago

Realistically though aren't most shareholders of major corporations either "silent" or other corporations? Major fines etc. should already impact them through lowering the value of their shares. Going after executives might be a lot more viable, though. Generally they have much more direct power than major shareholders (since "sell" is usually the only option they have)

abdullahkhalids 1y ago
The value of shares is presumably supposed to reflect the future earning potential of a company. Are fines ever imposed to an extent that they significantly impact that future earning potential? I wonder if someone has studied this formally and quantitatively.
- jmalicki 1y ago
  Oops replied to the parent
jmalicki 1y ago
Piercing the veil is most relevant in bankruptcy where the share price is already 0 (and would be negative if not for limited liability)

throwaway48476 1y ago

Corporations should have to designate an individual who is legally responsible for the actions of the corporation.

throwawaymaths 1y ago
woukd be fun if "the degree to which liability is limited is proportional to the percent of income tax the corporation pays". if you pay zero tax, full liability, blammo!
mattmanser 1y ago
The entire point of incorporating as a company is to stop being personally liable.
- worthless-trash 1y ago
  So dis-incorporate all companies.
- crote 1y ago
  "Not being personally liable" was never intended to mean "you can do literally anything you want - provided you first say the magic phrase 'I am a company'". Limited liability makes a lot of sense in the context of protecting small business owners from being in debt until their death if anything goes wrong in their business - even if it wasn't through any fault of their own. It has been extended an awful lot since then.
robocat 1y ago
The cleaner. Maybe pay the cleaner a small stipend to be liable. Or create a new position "patsy" or "chief scapegoat" that employees can fight for.
teeray 1y ago
https://en.wikipedia.org/wiki/Whipping_boy https://en.wikipedia.org/wiki/Whipping_boy
ronsor 1y ago

tomp 1y ago

Who are you gonna take money from, pensioners? Congrats, you've now just destroyed the stock market as an idea! A better idea that is both far less extreme as well as sorely needed, is simply... drumroll... charging employees (executives and others responsible) with criminal charges (and jail time)!

analog31 1y ago
Yes I agree with that too, or civil charges, since (as a shareholder), I might imagine that they willfully risked the value of my investment.
crote 1y ago
If shareholders could be held responsible, perhaps they would be more willing to sacrifice some profits to ensure the companies they invest in are following the law? It might kill high-frequency trading and other forms of parasitic "investment", but I don't see any reason why it would kill the kind of long-term investment pension funds usually do.

Veserv 1y ago

One of the main problems is that the apportionment of liability is lossy. It is fairly easy to determine that a collective, as a whole, is liable for some action. However, it is very hard to determine the culpability of any specific individual in the collective in isolation. The net result is that the collective is guilty, but then the liability just poofs out of existence when we attempt to prosecute the individuals separately. It would probably be better if we assessed the guilt of the collective, then assess the lossless distribution of that liability amongst the members. The liability and guilt is known; now it is just a question of who and what bears the responsibility. This is not a complete solution as a malicious corporation could argue that all of their evil is perpetrated by Joe the janitor, but it solves one of the problems of liability just disappearing if you make the situation complex enough, and boy howdy are lawyers good at doing that. The problem of making sure we apportion the responsibility in a fair and just manner will be left as a orthogonal problem that I will not attempt to address here.

analog31 1y ago
Perhaps a simple approach would be to fine each share by X dollars per share. The bigger the shareholder, the more their liability. With that said, and as I mentioned in a neighboring post, I don't take this matter lightly because I think there's a social justification for having well regulated corporations. I call it an entitlement, but I don't oppose entitlements.
- ndsipa_pomu 1y ago
  That would penalise shareholders that have had little to no influence on the corporation's behaviour. Also, it's purely monetary which means that it's essentially not a punishment to the very wealthy. I think it's better to pursue prison time for the relevant decision makers (including past employees) for the most egregious crimes.
  - generativenoise 1y ago
    Your first statement is terrible logic when it comes to trying to create more globally correct system dynamics. It may seem more fair but it basically creates the lossy liability mentioned by another commenter. Especially since you are creating a one way ratchet where the share in upside disproportionately to the downside. Yes, maybe you want to include some scaling function so larger shareholders that should have more agency bear more liability. But then you are likely going to get games played to on paper to dilute shareholdings though shell companies. Unless big transparent voting blocks are directly needed for their purposes. The problem with your second statement is that is seems to be unclear who the relevant people actually are most of the time and we just end up with fall guys. Especially when it is the environment dominating individual agency where in effect you could swap all the people and get the same outcome most of the time.

amelius 1y ago

We can also hold them accountable through trademark law. 1st violation: add a warning symbol to your company logo, so consumers can see what kind of company they are dealing with 2nd violation: add a second warning symbol 3rd violation: lose the trademark