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The whole aftermath of this wage-fixing scandal was just a slap on the wrist. The amount they paid in fines and settlements was less than the amount of money t

by fsk 11y ago

The whole aftermath of this wage-fixing scandal was just a slap on the wrist. The amount they paid in fines and settlements was less than the amount of money they saved by suppressing wages.

fmela 11y ago
Exactly. The punishment needs to fit the crime. This frankly won't do much to stop companies from engaging in this kind of behavior in the future.
learnstats2 11y ago
This seems to me to be a problem with the existing justice system. Businesses which are caught doing something dodgy pay - at most - the amount they would have had to pay to obey the law. And the chance of being caught is not exactly high.
- fsk 11y ago
  When deciding whether to do the right thing or not, the formula is (amount you save from breaking the law) - (cost of getting caught) * (chance of getting caught)). If "cost of getting caught" is always less than "amount you save from breaking the law", then there's no reason to behave honestly. In fact, this causes the "market" to select against corporations run by honest people, because they're at a competitive disadvantage.
  - learnstats2 11y ago
    I mostly agree with your point, but not with the mathematics: Your formula gives you positive Expected Value but there are many situations that are +EV which you shouldn't choose to visit. Even if the penalty was more than you were saving (or if the penalty hit nominally responsible individuals), even if the chance were fairly low, that could act as a significant deterrant to unethical practices. Situation: "ooh should I talk to my actuary/lawyer/partner about this difficult unethical decision? Arg but that would leave a paper trail."
    - fsk 11y ago
      One example: Mark Zuckerberg cheating Eduardo Saverin out of his FaceBook shares. He realized that it was cheaper in the long-run to cheat him, because he knew that the eventual lawsuit settlement would be less than Eduardo Saverin would have gotten if he were treated fairly. Actually, if you talk about it with your lawyer, attorney-client privilege protects you. Just make sure you do it in person and aren't dumb enough to do it by E-Mail.
      - lern_too_spel 11y ago
        All legal advice communication with a lawyer is protected by attorney-client privilege, even emails. There is nothing stupid about emailing a lawyer.
  - DanAndersen 11y ago
    I wonder if, barbaric as it sounds, introducing more non-monetary punishments for corporate crimes would help with this. If CEOs of price-fixing companies were punished by public flogging or other pain-based punishments, something outside the normal money-based calculus... Though I suppose the chances of something like that would be even less than such folks seeing jail time, which would also be a non-financial punishment.
    - itistoday2 11y ago
      There's no reason for barbarism. If the situation needs to be fixed then a change needs to happen one way or another (someone else pointed out a settlement amount hasn't been decided yet). For this context a financial punishment is appropriate ("punishment should fit the crime"). And the existence of the formula above is actually helpful. It makes it simple to figure out exactly what the punishment amount should be, whereas flogging as a deterrent is a tad harder to measure, and as you point out, is barbaric.
    - YZF 11y ago
      The fix is to make individuals in the company, e.g. the directors, personally responsible. In many countries the legal framework is already in place for that. As long as the fines are only coming from the company the only one you're really punishing are the shareholders who really have no control over the company's day to day activities and these decisions. They have no visibility into this either. The CEO should be held responsible for any illegal activities the company undertakes under his direction as should the directors. Assuming they're aware of it. Otherwise the responsibility is probably at some lower level. This does not contradict the responsibility of the company as a legal entity which is a party to these contract. EDIT: A decision that may cost the company 100M in fines in 10 years and help the CEO make his bonus this year is a no brainer. This is not unlike deciding to do share buybacks when you hold stock options...
- smil 11y ago
  This is why we need to see a separation of state and capital in the 21st century, like we saw a separation of state and church in the 20th. The two-tier economic and legal system exists because state and capital are too closely linked, and find mutual benefit in their relationship. I.e. bank bailouts, the $1.4B subsidy and tax exemption of the new Tesla factory, etc.
heimatau 11y ago
Absolute power corrupts absolutely. I think the best way to solve this is three things; entrepreneurs building real businesses, unions in the established companies, and switching jobs periodically. As a collective culture, we've chosen the easy way and overtime it gets worse without these checks and balances within the corporate world.
- morgante 11y ago
  Unions are directly contrary to the freedom and flexibility of switching jobs. They tie your pay to how many years you've worked at a company, not how skilled you are. I'd rather have my wage fixed by a corporation than a union. At least corporations value skill.
  - Frondo 11y ago
    That's not true. Unions tie pay to whatever the unions decide to tie pay to. If you want your union to set a pay schedule based on lines of code, certificates earned, whatever, go for it: it's your union.
    - bjelkeman-again 11y ago
      Isn't that a bit like saying "if you want to change politics, go for it, it is your political parties". There is so much entrenched interests in most of these structures that it is really hard changing them. You could start a new one, but it is quite a lot of work.
      - Frondo 11y ago
        Yes, changing any preexisting system requires effort. It requires more than showing up one day and saying, "Here are my ideas, they are better than what you do, everyone do what I say now." That doesn't mean it's impossible, just that it requires skills and efforts that us technical types often aren't very good at--listening to people, understanding their motivations, and looking for common ground and compromises. Then acting on that persuasively, to get people to go along with your ideas. It's tough. Impossible? Absolutely not. It can be done.
lern_too_spel 11y ago
What aftermath? The settlement hasn't been approved yet. If you are a member of the class, you should send in your objections.

by fsk 11y ago

The whole aftermath of this wage-fixing scandal was just a slap on the wrist. The amount they paid in fines and settlements was less than the amount of money they saved by suppressing wages.

fmela 11y ago

Exactly. The punishment needs to fit the crime. This frankly won't do much to stop companies from engaging in this kind of behavior in the future.

learnstats2 11y ago

This seems to me to be a problem with the existing justice system. Businesses which are caught doing something dodgy pay - at most - the amount they would have had to pay to obey the law. And the chance of being caught is not exactly high.

fsk 11y ago
When deciding whether to do the right thing or not, the formula is (amount you save from breaking the law) - (cost of getting caught) * (chance of getting caught)). If "cost of getting caught" is always less than "amount you save from breaking the law", then there's no reason to behave honestly. In fact, this causes the "market" to select against corporations run by honest people, because they're at a competitive disadvantage.
- learnstats2 11y ago
  I mostly agree with your point, but not with the mathematics: Your formula gives you positive Expected Value but there are many situations that are +EV which you shouldn't choose to visit. Even if the penalty was more than you were saving (or if the penalty hit nominally responsible individuals), even if the chance were fairly low, that could act as a significant deterrant to unethical practices. Situation: "ooh should I talk to my actuary/lawyer/partner about this difficult unethical decision? Arg but that would leave a paper trail."
  - fsk 11y ago
    One example: Mark Zuckerberg cheating Eduardo Saverin out of his FaceBook shares. He realized that it was cheaper in the long-run to cheat him, because he knew that the eventual lawsuit settlement would be less than Eduardo Saverin would have gotten if he were treated fairly. Actually, if you talk about it with your lawyer, attorney-client privilege protects you. Just make sure you do it in person and aren't dumb enough to do it by E-Mail.
    - lern_too_spel 11y ago
      All legal advice communication with a lawyer is protected by attorney-client privilege, even emails. There is nothing stupid about emailing a lawyer.
- DanAndersen 11y ago
  I wonder if, barbaric as it sounds, introducing more non-monetary punishments for corporate crimes would help with this. If CEOs of price-fixing companies were punished by public flogging or other pain-based punishments, something outside the normal money-based calculus... Though I suppose the chances of something like that would be even less than such folks seeing jail time, which would also be a non-financial punishment.
  - itistoday2 11y ago
    There's no reason for barbarism. If the situation needs to be fixed then a change needs to happen one way or another (someone else pointed out a settlement amount hasn't been decided yet). For this context a financial punishment is appropriate ("punishment should fit the crime"). And the existence of the formula above is actually helpful. It makes it simple to figure out exactly what the punishment amount should be, whereas flogging as a deterrent is a tad harder to measure, and as you point out, is barbaric.
  - YZF 11y ago
    The fix is to make individuals in the company, e.g. the directors, personally responsible. In many countries the legal framework is already in place for that. As long as the fines are only coming from the company the only one you're really punishing are the shareholders who really have no control over the company's day to day activities and these decisions. They have no visibility into this either. The CEO should be held responsible for any illegal activities the company undertakes under his direction as should the directors. Assuming they're aware of it. Otherwise the responsibility is probably at some lower level. This does not contradict the responsibility of the company as a legal entity which is a party to these contract. EDIT: A decision that may cost the company 100M in fines in 10 years and help the CEO make his bonus this year is a no brainer. This is not unlike deciding to do share buybacks when you hold stock options...
smil 11y ago
This is why we need to see a separation of state and capital in the 21st century, like we saw a separation of state and church in the 20th. The two-tier economic and legal system exists because state and capital are too closely linked, and find mutual benefit in their relationship. I.e. bank bailouts, the $1.4B subsidy and tax exemption of the new Tesla factory, etc.

heimatau 11y ago

Absolute power corrupts absolutely. I think the best way to solve this is three things; entrepreneurs building real businesses, unions in the established companies, and switching jobs periodically. As a collective culture, we've chosen the easy way and overtime it gets worse without these checks and balances within the corporate world.

morgante 11y ago
Unions are directly contrary to the freedom and flexibility of switching jobs. They tie your pay to how many years you've worked at a company, not how skilled you are. I'd rather have my wage fixed by a corporation than a union. At least corporations value skill.
- Frondo 11y ago
  That's not true. Unions tie pay to whatever the unions decide to tie pay to. If you want your union to set a pay schedule based on lines of code, certificates earned, whatever, go for it: it's your union.
  - bjelkeman-again 11y ago
    Isn't that a bit like saying "if you want to change politics, go for it, it is your political parties". There is so much entrenched interests in most of these structures that it is really hard changing them. You could start a new one, but it is quite a lot of work.
    - Frondo 11y ago
      Yes, changing any preexisting system requires effort. It requires more than showing up one day and saying, "Here are my ideas, they are better than what you do, everyone do what I say now." That doesn't mean it's impossible, just that it requires skills and efforts that us technical types often aren't very good at--listening to people, understanding their motivations, and looking for common ground and compromises. Then acting on that persuasively, to get people to go along with your ideas. It's tough. Impossible? Absolutely not. It can be done.

lern_too_spel 11y ago

What aftermath? The settlement hasn't been approved yet. If you are a member of the class, you should send in your objections.