4 ms·
Corporate fines should all be percentages of profits.
by teeray 10mo ago
Corporate fines should all be percentages of profits.
- estearum 10mo agoPretty trivial to make profits "not exist" though if you planned to engage in fraud and wanted to de-risk it.
- esseph 10mo agoThey're a publicly traded company. If they drop profits substantially, I imagine shareholders etc would leave.
- estearum 10mo agoI'm pretty sure GP was suggesting a general enforcement framework, not talking about any particular company. Anyway no, shareholders care about much more than simple profits.
- esseph 10mo agoExplain, please. I ask because I've never invested in a company that wasn't very profitable. I'm trying to find out besides intense insider information why someone would. (I'm not VC clearly, just a retail investor.)
- estearum 10mo agoExplain how people care about more than just profitability? If they didn't, everyone would be invested in the single most profitable company on the market, which they're not. There are unprofitable companies people are perfectly willing to buy. Growth, absolute revenue, rates of rates of change are all relevant depending on what you care about.
- bruce511 10mo agoAll the above. Plus it is absurdly simple to manipulate profit up or down. For example, as an owner, I can be paid a bonus, or not. Crumbs, I can be paid a salary or not. If I want profits high, I simply take a low salary and no bonus. Or vice versa if I want profits low. But that's the tip of the iceberg. Buying an asset this year, depreciated over the next 5, means higher profit this year, and 4 years of lower profit. Marketing expenses this year, benefits next year, and so on. Drop the head count to juice profits for a couple years, raise head count to drop it, and do on. Profits are the easiest thing to manipulate and hence the worst metric for fines. Which is why you see Europe use Revenue (not profit) as the measure for some fines.
- estearum 10mo agoYep, not to mention what you can do with complex conglomerates. For example, one should take a look at the intra-company eliminations that the giant pay-viders do (e.g. UnitedHealthGroup, owner of insurer/payer UnitedHealth and healthcare provider Optum) Insurers are margin-capped, but wouldn't you know it once you own a PBM and the providers, you can make revenue, holdings, pricing power, and market share rise arbitrarily while never producing a profit beyond the cap.
- rsynnott 10mo agoThis is why GDPR fines, say, are a percentage of _revenue_. Harder to mess with without getting into outright fraud.
- estearum 10mo agoYeah agreed this seems more directionally correct.
- jeltz 10mo agoPercentage of global tärevwbue works. We know that from GDPR. But I would personally prefer prison sentences for the execs.
- StanislavPetrov 10mo agoRevenue, not profit.
- deleted 10mo ago[deleted]
- ant6n 10mo agoOr revenue?
- koolba 10mo agoIf movie contracts are any lesson, you always want to be on the gross. Too many ways to game the system otherwise.
- JumpCrisscross 10mo agoAnd that only works because the theatres aren’t controlled by the producers. Revenue recognition is its own field of ripe fuckery.
- drekipus 10mo agoGod yes