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Seizing the company keeps the company running - likely. The “corporate death penalty” would be seizing it and selling off assets at such small pieces that it w

Seizing the company keeps the company running - likely. The “corporate death penalty” would be seizing it and selling off assets at such small pieces that it would be hard to reassemble the whole.

gruez 1y ago
What's the point in scattering the company into a bazillion pieces? Let's take the example of a company that would deserve the corporate death penalty the most, Purdue Pharma. What would the point in breaking it up? Is leaving it intact going to cause the next opioid epidemic or something?
- fmajid 1y ago
  Accountancy firm Arthur Andersen suffered a de facto corporate death penalty for rubber-stamping Enron's accounts.
- bombcar 1y ago
  The whole point of a CDP is to push some liability onto the limited liability shareholders. Basically, make it so there are crimes that the shareholders will themselves police the company, because they don’t want to risk losing it all. Part of a CDP would be NOT paying back bondholders, etc. it’s spreading the pain around so nobody will lend or support a company doing activities that open the door to CDP.
Aurornis 1y ago
That would destroy most of the value of the company. Typical companies operate with some debt load (financing, etc). That would have to be paid off with the proceeds of selling off their pieces. So in practice, even selling it off would produce zero or negative monetary return once debts were settled. You’d also be obliterating tens or hundreds of thousands of jobs overnight.
- two_handfuls 1y ago
  Arguably, if the company is so egregiously misbehaving that it deserves the "corporate death penalty" then its societal value is negative. That is, selling it off for a zero or negative monetary return as you say may still leave us better off.
- robocat 1y ago
  > So in practice, even selling it off would produce zero or negative monetary return once debts were settled In New Zealand that shouldn't happen, because directors are legally required to keep a company solvent. * cashflow solvency: pay company debts as they become due * balance sheet solvency: company assets exceed liabilities (including contingent liabilities). * directors might become personally liable if the company's solvency test is screwed up

gruez 1y ago

What's the point in scattering the company into a bazillion pieces? Let's take the example of a company that would deserve the corporate death penalty the most, Purdue Pharma. What would the point in breaking it up? Is leaving it intact going to cause the next opioid epidemic or something?

fmajid 1y ago
Accountancy firm Arthur Andersen suffered a de facto corporate death penalty for rubber-stamping Enron's accounts.
bombcar 1y ago
The whole point of a CDP is to push some liability onto the limited liability shareholders. Basically, make it so there are crimes that the shareholders will themselves police the company, because they don’t want to risk losing it all. Part of a CDP would be NOT paying back bondholders, etc. it’s spreading the pain around so nobody will lend or support a company doing activities that open the door to CDP.

Aurornis 1y ago

That would destroy most of the value of the company. Typical companies operate with some debt load (financing, etc). That would have to be paid off with the proceeds of selling off their pieces. So in practice, even selling it off would produce zero or negative monetary return once debts were settled. You’d also be obliterating tens or hundreds of thousands of jobs overnight.

two_handfuls 1y ago
Arguably, if the company is so egregiously misbehaving that it deserves the "corporate death penalty" then its societal value is negative. That is, selling it off for a zero or negative monetary return as you say may still leave us better off.
robocat 1y ago
> So in practice, even selling it off would produce zero or negative monetary return once debts were settled In New Zealand that shouldn't happen, because directors are legally required to keep a company solvent. * cashflow solvency: pay company debts as they become due * balance sheet solvency: company assets exceed liabilities (including contingent liabilities). * directors might become personally liable if the company's solvency test is screwed up