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.
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.
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.
So say someone has a large pension in a managed/general industry fund, and that fund has a significant shareholding of a company, should this person be punished effectively punished if a company they didn't necessarily even know they had shares in did something illegal?
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.
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.
> Your first statement is terrible logic when it comes to trying to create more globally correct system dynamics.
However, I don't think it would be correct to turn illegal behaviour (by the corporation) into a monetary punishment for non-illegal investing. That provides an incentive for execs to choose illegality as in the worst case that they are found out, the stock price would take a hit, but the decision makers would likely be unaffected in any meaningful sense.
Taken to the extreme, you could have a situation where a corporation's execs decide to start a new hit-person service (obviously somewhat hidden and only available to their biggest customers) and then if it gets discovered, no-one gets to spend time in prison for it.
Alternatively, in the instances where the corporation defrauds investors, the investors then get to be punished twice (c.f. Bernie Madoff).
I generally agree with the recent Germany decision to imprison the VW execs for the Dieselgate scandal (I haven't followed the details of that case however): https://news.ycombinator.com/item?id=44098091
That's equivalent to just fining the corporation itself, which we do all the time.
Frequent problems are that the fines are too small to function as deterrents, or that there's a principal-agent problem, where the directors don't act in the best interest of the shareholders.
I thought we paid the CxOs the big bucks for being responsible for the running of those large and complicated companies, and deciding their overarching strategy? If they get paid a big bonus when their decisions results in huge profits, surely they should also bear the repercussions when their strategy turns out to be "let's do crime"?
Make management personally responsible, and they will rapidly roll out measurements to ensure all their underlings are following the law.
I agree with you. This boggles my mind. In fact, I would also add that the first one to be responsible is the one who makes the most money in total compensation.
In Australia, if a company fails to nominate a speeding fine for a company car - either refusing or not maintaining records - then the fine is multiplied compared to that for an individual.
That sounds very easy to skirt around - just have a willing driver be assigned the fine by default along with a "bonus" awarded for each instance of fining.
That doesn't work due to "demerit points". You can only get caught speeding a handful of times a year before you lose your license, so a large company would need a lot of people to take the fall for you. And considering asking someone to take the blame is probably a crime, not exactly something you can openly recruit for.
Just forwarding it to the original driver would make far more sense.
In a financial sense you tend to get a directors guarantee to ensure that if a company cannot pay out a contract you get to go after the directors personal assets.
Its stupid to apportion blame to a whole company, or steve the janitor, but the company directors are right there and should be personally liable for criminal conduct on behalf of the company.
Partial government ownership of companies that break the law is the fair solution. It doesn't criminally impact the wrong person, but it does materially impact that people with the most power to change the company, the owners, by diluting their ownership.
> then assess the lossless distribution of that liability amongst the members
It's very possible that no person did anything wrong at all, but combined there was illegal behavior.
For example: Action A+B is illegal, and A by itself and B by itself are legal. A company did A+B, but the individual employees only did A, or only did B, and neither knew about the other.
> it is just a question of who and what bears the responsibility.
Are you implying you will make someone liable for doing nothing wrong? Simply because of his co-worker? Who would agree to work under such conditions?
> Are you implying you will make someone liable for doing nothing wrong?
This leaves out an important part of liability and the concept of trust as a whole - neglect. Simply doing nothing wrong is not the end-all be-all. If you did nothing wrong, it's possible you should have been aware of potential things that could have gone wrong, and prevented them.
If the company and procedures are such that illegal things can happen in tandem that's something that should have been caught, and prevented. This is why we have, for example, licensing for engineers.
A civil engineer does not only need to consider his part, his bridge. He must consider the conditions, the inspectors, the wind, the future. He may be wrong, and of course we require some slack. But still, that expectation is there.
If, hypothetically and arbitrarily, a CEO claims to not be responsible for some company's evil action, I can turn around and argue that by being CEO it is his job to assume that responsibility, and that his apparent ignorance of the situation is not a defense, but rather proof of his own neglectful conduct.
This is very much reminiscent of "rights amplification" and "synergy" in the capability security model, where historically one of the physical manifestations of this is that of the can + can opener which combine to reveal the contents of the can.
Personally I'm extremely curious to hear about legal examples of the same, if you can provide tangible ones!
>> Action A+B is illegal, and A by itself and B by itself are legal. A company did A+B, but the individual employees only did A, or only did B, and neither knew about the other.
That's a really interesting idea. Can you give some real live example of such situation that really happened?
If you know sb have disabilities, you must provide assistance.
If you give immunity for these, the lawyer will ensure the one in the act never know those information. OTOH, if we hold this to a person, someone can be hold accountable for some systemic communication failure
The liability is supposed to be borne by the board and the executive team. They're raking in all the upside. They deserve exposure to the downside to curtail their sociopathic tendencies.
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.
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
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.
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.
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.
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.
I read it. I just don't believe that companies, morally, should exist. Like, categorically. Sure, they have their upsides, there are positive consequences, but that's arguing that the ends justify the means.
Then I suppose you either believe that advanced technology falls out of the sky or should be created by government agencies. Both of those are harder to make accountable than companies.
The ends do sometimes justify the means. That's why we can require people to get vaccinated or be licensed to drive. It's insane to think otherwise; OBVIOUSLY we act this way and it's not controversial.
Going broke is not possible since lawsuit damages would be capped at the stock price value. And I'm not suggesting eliminating limited liability. Just, giving judges the authority to strip it (this is already a thing as the corporate veil can be peirced) with real shareholder consequences, instead of pussyfooting around.
And if you think that means shareholders will be on eggshells. Yeah great. Maybe we'll have fewer psychopaths as CEOs, or at the very least if you are a CEO that fucks up badly you will never fail up.
And even piercing the veil, or similar - oftentimes CxOs have contracts that guarantee the corporation will pay their legal bills and any damages awarded, directly or through insurance.
>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.
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.
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
This isn’t what piercing the corporate veil is. Piercing the corporate veil is when shareholders (not employees) are made liable for the corporation’s actions. It is not when an individual is charged with a crime personally when there are also charges against the corporation.
>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.
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.
>The argument in this thread is that he's responsible for the actions of his subordinates and therefore deserves some of the punishment
Even if the subordinates went rogue and he wasn't aware? Where do you draw the line? Should UPS's CEO be responsible if one of the delivery drivers crashed into a pedestrian?
It's a spectrum. If the CEO creates an environment that incentivizes unsafe driving practices among their delivery drivers, either directly or indirectly, then perhaps yes, they should shoulder some portion of the responsibility. It doesn't have to be only 100% or 0% responsibility. The amount can be modulated based on their own behavior or leadership of the company.
For example, if they consistently drove the company towards a culture of safety, and incentivized subordinates to prioritize safety and disincentivized unsafe practices, then perhaps they would share no responsibility for such an incident. They did what they were supposed to do.
If however they set ever more aggressive profit goals and other metrics, and incentivized those at all costs among their subordinates, and presided over a company culture that focused on profits above all else, then perhaps the should share some portion of the responsibility.
What is a leader without responsibility? If they reap the rewards of the successes of their subordinates, then they must also reap the outcomes of the failures of their subordinates. By any other logic, a CEO should only be paid commensurately with the tangible benefit they directly provide to the company with their own two hands.
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.
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.
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.
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)!
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.
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)
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.
In some jurisdictions, there's one (or more) corporate directors who are legally responsible for a subset of activities. In that case, there are "nominee director" services where you pay someone else to take that position.
The point is that if you require some one person to be legally liable, then you'll simply create a new industry of scapegoats to hire.
"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.
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!
I always find it interesting when legal opinions cite other countries’ precedents
It makes sense because it maximises the hit-rate of finding a relevant precedent, and kind of creates a global system of common law.
Countries with newer legal systems (like Canada) can bootstrap centuries of precedent this way. Nearly a third of Canadian Supreme Court judgements cite foreign precedent!
There is a continuity with British law as it existed before Independence. In a similar vein, Israeli law incorporates Ottomon law, and France applies some German law in Alsace-Lorraine (which was annexed by Germany 1870-1914), even really fundamental principles like the separation of Church and State which does not apply there.
But relatively few countries follow common law with its focus on precedents. In fact, civil law is a lot more common, and that one cares less about precedents. [0]
> The primary contrast between the two systems is the role of written decisions and precedent as a source of law (one of the defining features of common law legal systems). While Common law systems place great weight on precedent, civil law judges tend to give less weight to judicial precedent. For example, the Napoleonic Code expressly forbade French judges to pronounce general principles of law.
> In fact, civil law is a lot more common, and that one cares less about precedents.
For many civil law jurisdictions in Europe, I think the EU and the European Convention on Human Rights have changed this a lot in practice.
Dutch or French or German judges in theory don't have to pay as much attention to precedent as Irish judges do [0] but when it comes to the decisions of the EU court system (the European Court of Justice and the courts/tribunals beneath it) and the European Court of Human Rights, the civil law judges have to pay attention to precedent just as much as the common law judges do
[0] Mentioning Ireland as a pure common law jurisdiction which is still (unlike the UK) in the EU–Malta and Cyprus also follow common law, but both have hybrid systems which mix it with other legal traditions (primarily French-style civil law for Malta; Cyprus combines common law with Greek administrative law, which in turn is based on that of France, and its real estate law still retains Ottoman elements)
Existing owners (stockholders) lose the company entirely. The company gets sold to entirely new owners.
And while bankruptcy is usually due to mismanagement or bad luck, it can also certainly happen because a legal judgment or fine makes the corporation no longer viable.
But if you're asking for the company to be destroyed to the extent where every single contract is cancelled and every single person gets laid off, that's not generally desirable. We don't want people to lose their jobs, or customers to stop receiving what a company produces, whenever possible. There's a lot of value in a functioning corporation that you don't want to just disappear. Better to let new owners reuse it.
> > Could we institute a corporation death penalty?
> That's what bankruptcy is.
No bankruptcy is the invention of gentler death, or maybe euthanasia.
A death penalty would be about killing an otherwise "healthy" (aka "resourced") company due to a transgression. Maybe a death penalty is more like fines and penalties that might be impossible for a company to bear.
Generally the phrase "corporate death penalty" refers to revoking the charter, not bankruptcy. Which you argue is undesirable, but like, that is what the phrase normally refers to.
Sure, the technical term is "judicial dissolution".
But the main counterpoint is that there's literally no point to that. If you want to punish the owners, there's no difference between taking the value of their investment to zero, or going beyond that and destroying every contract and job. The owners don't care if a receptionist loses their job too, but the receptionist sure does. It becomes more than just a "death penalty" -- it becomes a "nuclear bomb" that takes out everyone.
So bankruptcy already accomplishes everything you'd want from a "corporate death penalty". The company is gone as far as the previous owners are concerned.
There is a point. If everyone in the company fear of losing their jobs, there would be a lot more internal resistance to illegal activities, a lot more whistle blowers.
Most people in a company won't even know about illegal activities at the top. So that wouldn't work.
And if there's illegal activity that ought to be punished at the employee level, then that's what criminal statutes and charges are for.
"Losing your job" is a punishment that is too much for innocent people who just work there, but far too little for anyone actually directly engaging in criminal activity.
That would just lead to shell games. You have to take the people who greenlit things in bad faith and put them in jail for life. Then you’d see actual changes and dare I say, even a whisper of benevolence.
There is always the 'excuse' they didn't know. Which cleary is a cop-out, doing some kind of analysis of effects and understanding them at the top IS one of their responsibilties.
And also actually put financial penalties on shareholders during period. Even if they are pension funds. They profited, they should also borne full cost of those profits.
"corporation death penalty" just sounds like the state seizing the company (dispossessing existing shareholders in the process), but worded more dramatically.
I’m all for imposing fines and restrictions in proportion to damage done. Officers of the company should be held legally liable for their roles in decision making.
However, I’m also amazed when these discussions generate calls for “corporate death penalty” powers being handed to the government and/or used for various transgressions. This entire discussion section is occurring under and article about the current administration abusing government powers for their own gain. How can people be so quick to call for even more levers for corrupt governments to use? “Nice company you got there. Would be a shame if it got the death penalty. On an unrelated note, my campaign fund could use another $100 million if you know anyone…”
Let’s leave the punishments as proportional to the damage/crime.
ugh, you're right. This is the problem with the spiral into fascism - people increasingly demand accountability, but that energy doesn't lead to actual in-system reform but rather just more differentish corruption, which then drives even more increased demands for accountability.
A similar dynamic is at play with Luigi. Someone finally pierced the corporate/legal abstractions of the healthcare cartel with some extrajudicial punishment on one of the more-visible cogs. We can all understand that, and it's downright cathartic...
But when Krasnov calls Bezos and tells him to discontinue publicizing how much Krasnov's new import taxes are costing everyone, Bezos knows how popularly hated his corporate ownership class is. If Krasnov ends him tomorrow most people won't be horrified, rather there will be throngs cheering it on - the rule of law no longer protects him. And so he has little choice but to lash himself to the fascist's power and comply.
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.
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?
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.
When we receive the death penalty, the state doesn't just physically seize our bodies. We die. We have neither assets nor any benefit of life. It can also have highly negative effects of others since it's a sudden, catastrophic loss.
For a corporation, that would be like its operations totally ceasing, all employees are fired, shares might go to zero value, and individual assets sold off (like a will). That "shares going to zero" part would be important for accountability.
>When we receive the death penalty, the state doesn't just physically seize our bodies. We die. We have neither assets nor any benefit of life. It can also have highly negative effects of others since it's a sudden, catastrophic loss.
Corporations aren't people though. For one, corporations are just groups of people, so it's hard to claim that it's irredeemable and must suffer the death penalty. If you take a corporation, replace its board, executives, and employees, is it even the same corporation?
>operations totally ceasing, all employees are fired, [...] and individual assets sold off (like a will).
What purpose does this serve?
>That "shares going to zero" part would be important for accountability.
That happens regardless of the "death penalty" though. The government dispossessing all shareholders has the same effect.
"Corporations aren't people though. For one, corporations are just groups of people"
I agree with you. The law disagrees by making them people under law. They can own assets, sue, and be sued. If they're people, I want them to have equal accountability, not just power. That includes severe punishment.
"What purpose does this serve?"
With people, the purpose of capital punishment is three fold: justice for victims of horrible crimes; remove an offender who might do it again; strong deterrent to others.
Let's say we had evidence of a chemical company lying about the safety of its products that killed people. Not a miscalculation but hiding evidence. It gets the death penalty with executives losing their money, all jobs are lost, and its products disappear permanently. Individuals involved are criminally charged, too. People also hear the next company that kills people to get rich will be treated the same.
You think the executives of the next company will do that? You think the employees, whose jobs are on the line, will be as likely to stay silent or more likely to blow the whistle? Do you think the shareholders will reward people who avoid or run headfirst into the corporate, death penalty?
I'm sure plenty of evil will happen. The death penalty would probably be rare for established businesses. It would probably be more fly by night operators. Yet, I bet that level of accountability would make us safer. When it didn't, the victims would get real justice.
So a corporation can do bad things like poison entire communities and get out of trouble by slipping the president some money? And that's how the framers intended this to work?
We sure have come a long way since "by the people, for the people". It's the capitalist version of buying indulgences (https://en.wikipedia.org/wiki/Indulgence). Sounds like it's time for 95 Theses II: Electric Boogaloo.
I saw a comment saying that western democracy is a direct evolution of the roman empire and even worse when it comes to committing genocide and slavery, since there's nobody directly responsible.
And the US is the latest iteration of the same imperialist bullshit mindset; or at least was until very recently, what happens from here is anyone's guess.
I think there's a more fundamental question, "what does it mean for a corporation to engage in criminal conduct?"
A corporation is just a group of people acting together, and it's pretty well established in international law that collective punishment isn't acceptable; and on the flip side, a corporation can neither "act" nor "think" independently, but rather does so via the humans involved. (Perhaps this would change with corporate-owned AI?)
In all the cases I've seen where a corporation is alleged to have engaged in criminal conduct, there was in fact a human -- or several humans -- who were broke the law. As far as I'm concerned, that's where the buck should stop; it seems that prosecutors tend to target corporations simply because it's easier than doing their job properly and pinning down who specifically bears responsibility.
Companies have policies… stuff like data retention policies, for example, could be set up in a way as to obfuscate criminal activity, but in a way not obvious to a reasonable good-faith individual working for the company. In that case, the company should be made to change.
I guess it would also be ok to go after C-levels or whoever sets the policy. But, it will be hard, I think. High-level guidance can create an incentive structure to break the law without actually saying “break the law.”
I basically agree but I think it would be really tricky to implement.
What about giving you bank employees performance numbers that can’t really be met with due diligence, and then not checking their work too much.
Similarly, it is evident that software companies are not able to produce defect-free software (so, somebody is setting up an incentive structure to push bugs into production). There must be some wrong incentive structures, but it is hard to say where they come from.
You're leaving off both the "limited liability" and "it's a person with legal rights" parts of a corporation.
If it's a person, then they might have to go after the corporation. Alternatively, each corporate crime might be a conspiracy charge.
With limited liability, it's unclear how much one can discourage the bad behavior if there's distance between the owners and the punishment.
I oppose both of these concept by default for criminal behavior. Power and accountability should always go hand in hand. Only people should be people, too.
Limited liability is the source of many ills. I'm fine with people pooling capital to create partnerships, but where things take an odd turn is the idea you can create a business enterprise that can incur massive debts, yet face no accountability for repaying the damage such an enterprise causes.
> a corporation can neither "act" nor "think" independently, but rather does so via the humans involved. (Perhaps this would change with corporate-owned AI?)
This is ignoring that levels of complexity creates new emergent behavior. If you're willing to believe that "AI" could make a corporation think independently, then how is a pile of paperwork running on a substrate of human wetware not the same dynamic?
> it seems that prosecutors tend to target corporations simply because it's easier than doing their job properly and pinning down who specifically bears responsibility
No, the problem is exactly the sorting through the emergent complexity of the corporation to correctly assign blame. The low-level person who did the actual illegal action is likely sympathetic and mostly judgement proof, and was likely incentivized to break the law by corporate policies. Meanwhile the corporate policies are phrased in terms of abstract metrics that aren't illegal per se, especially how they're written down.
Taking the fundamentalist view, that the individual would-be-fall-guy humans should take a hard line and refuse to break the law, doesn't solve the problem - it only increases the level of incentive required until someone is willing to do it. And focusing blame this way helps the higher up management escape accountability since they didn't actually break the law themselves.
One correct answer would be to charge all of the involved parties like the criminal conspiracy it is, but the capital-wielding upper classes escaping accountability is a dynamic as old as time.
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.
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.
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.
So say someone has a large pension in a managed/general industry fund, and that fund has a significant shareholding of a company, should this person be punished effectively punished if a company they didn't necessarily even know they had shares in did something illegal?
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.
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.
> Your first statement is terrible logic when it comes to trying to create more globally correct system dynamics.
However, I don't think it would be correct to turn illegal behaviour (by the corporation) into a monetary punishment for non-illegal investing. That provides an incentive for execs to choose illegality as in the worst case that they are found out, the stock price would take a hit, but the decision makers would likely be unaffected in any meaningful sense.
Taken to the extreme, you could have a situation where a corporation's execs decide to start a new hit-person service (obviously somewhat hidden and only available to their biggest customers) and then if it gets discovered, no-one gets to spend time in prison for it.
Alternatively, in the instances where the corporation defrauds investors, the investors then get to be punished twice (c.f. Bernie Madoff).
I generally agree with the recent Germany decision to imprison the VW execs for the Dieselgate scandal (I haven't followed the details of that case however): https://news.ycombinator.com/item?id=44098091
That's equivalent to just fining the corporation itself, which we do all the time.
Frequent problems are that the fines are too small to function as deterrents, or that there's a principal-agent problem, where the directors don't act in the best interest of the shareholders.
I thought we paid the CxOs the big bucks for being responsible for the running of those large and complicated companies, and deciding their overarching strategy? If they get paid a big bonus when their decisions results in huge profits, surely they should also bear the repercussions when their strategy turns out to be "let's do crime"?
Make management personally responsible, and they will rapidly roll out measurements to ensure all their underlings are following the law.
I agree with you. This boggles my mind. In fact, I would also add that the first one to be responsible is the one who makes the most money in total compensation.
In Australia, if a company fails to nominate a speeding fine for a company car - either refusing or not maintaining records - then the fine is multiplied compared to that for an individual.
That sounds very easy to skirt around - just have a willing driver be assigned the fine by default along with a "bonus" awarded for each instance of fining.
That doesn't work due to "demerit points". You can only get caught speeding a handful of times a year before you lose your license, so a large company would need a lot of people to take the fall for you. And considering asking someone to take the blame is probably a crime, not exactly something you can openly recruit for.
Just forwarding it to the original driver would make far more sense.
In a financial sense you tend to get a directors guarantee to ensure that if a company cannot pay out a contract you get to go after the directors personal assets.
Its stupid to apportion blame to a whole company, or steve the janitor, but the company directors are right there and should be personally liable for criminal conduct on behalf of the company.
Partial government ownership of companies that break the law is the fair solution. It doesn't criminally impact the wrong person, but it does materially impact that people with the most power to change the company, the owners, by diluting their ownership.
> then assess the lossless distribution of that liability amongst the members
It's very possible that no person did anything wrong at all, but combined there was illegal behavior.
For example: Action A+B is illegal, and A by itself and B by itself are legal. A company did A+B, but the individual employees only did A, or only did B, and neither knew about the other.
> it is just a question of who and what bears the responsibility.
Are you implying you will make someone liable for doing nothing wrong? Simply because of his co-worker? Who would agree to work under such conditions?
> Are you implying you will make someone liable for doing nothing wrong?
This leaves out an important part of liability and the concept of trust as a whole - neglect. Simply doing nothing wrong is not the end-all be-all. If you did nothing wrong, it's possible you should have been aware of potential things that could have gone wrong, and prevented them.
If the company and procedures are such that illegal things can happen in tandem that's something that should have been caught, and prevented. This is why we have, for example, licensing for engineers.
A civil engineer does not only need to consider his part, his bridge. He must consider the conditions, the inspectors, the wind, the future. He may be wrong, and of course we require some slack. But still, that expectation is there.
If, hypothetically and arbitrarily, a CEO claims to not be responsible for some company's evil action, I can turn around and argue that by being CEO it is his job to assume that responsibility, and that his apparent ignorance of the situation is not a defense, but rather proof of his own neglectful conduct.
Liability could fall to a third person. For instance, the compliance officer could have a specific obligation to assure that A+B does not happen.
This is very much reminiscent of "rights amplification" and "synergy" in the capability security model, where historically one of the physical manifestations of this is that of the can + can opener which combine to reveal the contents of the can.
Personally I'm extremely curious to hear about legal examples of the same, if you can provide tangible ones!
>> Action A+B is illegal, and A by itself and B by itself are legal. A company did A+B, but the individual employees only did A, or only did B, and neither knew about the other.
That's a really interesting idea. Can you give some real live example of such situation that really happened?
Many "if you know X, you cant do Y" kind.
If you know floor is wet, you cant let people in
If you know insider information, you cant trade.
If you know sb have disabilities, you must provide assistance.
If you give immunity for these, the lawyer will ensure the one in the act never know those information. OTOH, if we hold this to a person, someone can be hold accountable for some systemic communication failure
The liability is supposed to be borne by the board and the executive team. They're raking in all the upside. They deserve exposure to the downside to curtail their sociopathic tendencies.
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
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
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
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.
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.
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.
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.
Ok, but what's the downside?
You don't see a downside to freezing out investment in medical devices or other risky but useful technologies?
I know snarking is fun, but it's really annoying when it's clear you didn't read my comment before replying.
I read it. I just don't believe that companies, morally, should exist. Like, categorically. Sure, they have their upsides, there are positive consequences, but that's arguing that the ends justify the means.
Then I suppose you either believe that advanced technology falls out of the sky or should be created by government agencies. Both of those are harder to make accountable than companies.
The ends do sometimes justify the means. That's why we can require people to get vaccinated or be licensed to drive. It's insane to think otherwise; OBVIOUSLY we act this way and it's not controversial.
Going broke is not possible since lawsuit damages would be capped at the stock price value. And I'm not suggesting eliminating limited liability. Just, giving judges the authority to strip it (this is already a thing as the corporate veil can be peirced) with real shareholder consequences, instead of pussyfooting around.
And if you think that means shareholders will be on eggshells. Yeah great. Maybe we'll have fewer psychopaths as CEOs, or at the very least if you are a CEO that fucks up badly you will never fail up.
Nah, you would just find suddently nobody is willing to deal in equity and suddenly corporate bonds would absolutely explode.
And even piercing the veil, or similar - oftentimes CxOs have contracts that guarantee the corporation will pay their legal bills and any damages awarded, directly or through insurance.
>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.
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.
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
This isn’t what piercing the corporate veil is. Piercing the corporate veil is when shareholders (not employees) are made liable for the corporation’s actions. It is not when an individual is charged with a crime personally when there are also charges against the corporation.
Not as far-fetched as you'd think:
https://en.wikipedia.org/wiki/EBay_stalking_scandal
Note that while minions went to jail, the CEO came out of this scot-free.
>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.
> 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.
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".
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.
>The argument in this thread is that he's responsible for the actions of his subordinates and therefore deserves some of the punishment
Even if the subordinates went rogue and he wasn't aware? Where do you draw the line? Should UPS's CEO be responsible if one of the delivery drivers crashed into a pedestrian?
It's a spectrum. If the CEO creates an environment that incentivizes unsafe driving practices among their delivery drivers, either directly or indirectly, then perhaps yes, they should shoulder some portion of the responsibility. It doesn't have to be only 100% or 0% responsibility. The amount can be modulated based on their own behavior or leadership of the company.
For example, if they consistently drove the company towards a culture of safety, and incentivized subordinates to prioritize safety and disincentivized unsafe practices, then perhaps they would share no responsibility for such an incident. They did what they were supposed to do.
If however they set ever more aggressive profit goals and other metrics, and incentivized those at all costs among their subordinates, and presided over a company culture that focused on profits above all else, then perhaps the should share some portion of the responsibility.
What is a leader without responsibility? If they reap the rewards of the successes of their subordinates, then they must also reap the outcomes of the failures of their subordinates. By any other logic, a CEO should only be paid commensurately with the tangible benefit they directly provide to the company with their own two hands.
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.
It's regularly pierced in many jurisdictions for failure to pay wages. This most often happens with small businesses.
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.
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.
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)!
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.
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.
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
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)
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.
Oops replied to the parent
Piercing the veil is most relevant in bankruptcy where the share price is already 0 (and would be negative if not for limited liability)
Corporations should have to designate an individual who is legally responsible for the actions of the corporation.
In some jurisdictions, there's one (or more) corporate directors who are legally responsible for a subset of activities. In that case, there are "nominee director" services where you pay someone else to take that position.
The point is that if you require some one person to be legally liable, then you'll simply create a new industry of scapegoats to hire.
There are simple tests to determine effective directorship. Like can they move company funds.
Very much so. "Can they sign a binding contract for the corporation?", etc.
The entire point of incorporating as a company is to stop being personally liable.
"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.
So dis-incorporate all companies.
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.
https://en.wikipedia.org/wiki/Whipping_boy
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!
I always find it interesting when legal opinions cite other countries’ precedents
It makes sense because it maximises the hit-rate of finding a relevant precedent, and kind of creates a global system of common law.
Countries with newer legal systems (like Canada) can bootstrap centuries of precedent this way. Nearly a third of Canadian Supreme Court judgements cite foreign precedent!
There is a continuity with British law as it existed before Independence. In a similar vein, Israeli law incorporates Ottomon law, and France applies some German law in Alsace-Lorraine (which was annexed by Germany 1870-1914), even really fundamental principles like the separation of Church and State which does not apply there.
But relatively few countries follow common law with its focus on precedents. In fact, civil law is a lot more common, and that one cares less about precedents. [0]
> The primary contrast between the two systems is the role of written decisions and precedent as a source of law (one of the defining features of common law legal systems). While Common law systems place great weight on precedent, civil law judges tend to give less weight to judicial precedent. For example, the Napoleonic Code expressly forbade French judges to pronounce general principles of law.
[0] https://en.m.wikipedia.org/wiki/Common_law#/media/File%3AMap...
> In fact, civil law is a lot more common, and that one cares less about precedents.
For many civil law jurisdictions in Europe, I think the EU and the European Convention on Human Rights have changed this a lot in practice.
Dutch or French or German judges in theory don't have to pay as much attention to precedent as Irish judges do [0] but when it comes to the decisions of the EU court system (the European Court of Justice and the courts/tribunals beneath it) and the European Court of Human Rights, the civil law judges have to pay attention to precedent just as much as the common law judges do
[0] Mentioning Ireland as a pure common law jurisdiction which is still (unlike the UK) in the EU–Malta and Cyprus also follow common law, but both have hybrid systems which mix it with other legal traditions (primarily French-style civil law for Malta; Cyprus combines common law with Greek administrative law, which in turn is based on that of France, and its real estate law still retains Ottoman elements)
The opposite questions are more interesting. Can corporations truly be held accountable? Could we institute a corporation death penalty?
It's rarely used, but it does exist: https://en.wikipedia.org/wiki/Judicial_dissolution
> Could we institute a corporation death penalty?
That's what bankruptcy is.
Existing owners (stockholders) lose the company entirely. The company gets sold to entirely new owners.
And while bankruptcy is usually due to mismanagement or bad luck, it can also certainly happen because a legal judgment or fine makes the corporation no longer viable.
But if you're asking for the company to be destroyed to the extent where every single contract is cancelled and every single person gets laid off, that's not generally desirable. We don't want people to lose their jobs, or customers to stop receiving what a company produces, whenever possible. There's a lot of value in a functioning corporation that you don't want to just disappear. Better to let new owners reuse it.
> > Could we institute a corporation death penalty?
> That's what bankruptcy is.
No bankruptcy is the invention of gentler death, or maybe euthanasia.
A death penalty would be about killing an otherwise "healthy" (aka "resourced") company due to a transgression. Maybe a death penalty is more like fines and penalties that might be impossible for a company to bear.
Generally the phrase "corporate death penalty" refers to revoking the charter, not bankruptcy. Which you argue is undesirable, but like, that is what the phrase normally refers to.
Sure, the technical term is "judicial dissolution".
But the main counterpoint is that there's literally no point to that. If you want to punish the owners, there's no difference between taking the value of their investment to zero, or going beyond that and destroying every contract and job. The owners don't care if a receptionist loses their job too, but the receptionist sure does. It becomes more than just a "death penalty" -- it becomes a "nuclear bomb" that takes out everyone.
So bankruptcy already accomplishes everything you'd want from a "corporate death penalty". The company is gone as far as the previous owners are concerned.
There is a point. If everyone in the company fear of losing their jobs, there would be a lot more internal resistance to illegal activities, a lot more whistle blowers.
Most people in a company won't even know about illegal activities at the top. So that wouldn't work.
And if there's illegal activity that ought to be punished at the employee level, then that's what criminal statutes and charges are for.
"Losing your job" is a punishment that is too much for innocent people who just work there, but far too little for anyone actually directly engaging in criminal activity.
That's effectively the same as chapter 11 bankruptcy - a new corporation is formed and they buy all the assets and hire all the employees back.
That would just lead to shell games. You have to take the people who greenlit things in bad faith and put them in jail for life. Then you’d see actual changes and dare I say, even a whisper of benevolence.
Ex. is 3M - literally poisoned the earth with impossible to remove chemicals causing eternal damage to our civilization.
(PFAS)
3M knew exactly how bad it was too, back to the 70s
a corporate death sentence isn't enough, jail every board member who was involved
The only way this will stop is if we attack the people in charge at the time or financial penalties for their families.
There is always the 'excuse' they didn't know. Which cleary is a cop-out, doing some kind of analysis of effects and understanding them at the top IS one of their responsibilties.
Then make that excuse no longer valid
And also actually put financial penalties on shareholders during period. Even if they are pension funds. They profited, they should also borne full cost of those profits.
"corporation death penalty" just sounds like the state seizing the company (dispossessing existing shareholders in the process), but worded more dramatically.
I’m all for imposing fines and restrictions in proportion to damage done. Officers of the company should be held legally liable for their roles in decision making.
However, I’m also amazed when these discussions generate calls for “corporate death penalty” powers being handed to the government and/or used for various transgressions. This entire discussion section is occurring under and article about the current administration abusing government powers for their own gain. How can people be so quick to call for even more levers for corrupt governments to use? “Nice company you got there. Would be a shame if it got the death penalty. On an unrelated note, my campaign fund could use another $100 million if you know anyone…”
Let’s leave the punishments as proportional to the damage/crime.
Keeping certain powers away from "good" governments doesn't stop their successor "bad" governments from granting themselves those powers anyway.
ugh, you're right. This is the problem with the spiral into fascism - people increasingly demand accountability, but that energy doesn't lead to actual in-system reform but rather just more differentish corruption, which then drives even more increased demands for accountability.
A similar dynamic is at play with Luigi. Someone finally pierced the corporate/legal abstractions of the healthcare cartel with some extrajudicial punishment on one of the more-visible cogs. We can all understand that, and it's downright cathartic...
But when Krasnov calls Bezos and tells him to discontinue publicizing how much Krasnov's new import taxes are costing everyone, Bezos knows how popularly hated his corporate ownership class is. If Krasnov ends him tomorrow most people won't be horrified, rather there will be throngs cheering it on - the rule of law no longer protects him. And so he has little choice but to lash himself to the fascist's power and comply.
I wish I knew how to reverse the trend.
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.
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.
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.
> 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
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?
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.
Accountancy firm Arthur Andersen suffered a de facto corporate death penalty for rubber-stamping Enron's accounts.
When we receive the death penalty, the state doesn't just physically seize our bodies. We die. We have neither assets nor any benefit of life. It can also have highly negative effects of others since it's a sudden, catastrophic loss.
For a corporation, that would be like its operations totally ceasing, all employees are fired, shares might go to zero value, and individual assets sold off (like a will). That "shares going to zero" part would be important for accountability.
>When we receive the death penalty, the state doesn't just physically seize our bodies. We die. We have neither assets nor any benefit of life. It can also have highly negative effects of others since it's a sudden, catastrophic loss.
Corporations aren't people though. For one, corporations are just groups of people, so it's hard to claim that it's irredeemable and must suffer the death penalty. If you take a corporation, replace its board, executives, and employees, is it even the same corporation?
>operations totally ceasing, all employees are fired, [...] and individual assets sold off (like a will).
What purpose does this serve?
>That "shares going to zero" part would be important for accountability.
That happens regardless of the "death penalty" though. The government dispossessing all shareholders has the same effect.
"Corporations aren't people though. For one, corporations are just groups of people"
I agree with you. The law disagrees by making them people under law. They can own assets, sue, and be sued. If they're people, I want them to have equal accountability, not just power. That includes severe punishment.
"What purpose does this serve?"
With people, the purpose of capital punishment is three fold: justice for victims of horrible crimes; remove an offender who might do it again; strong deterrent to others.
Let's say we had evidence of a chemical company lying about the safety of its products that killed people. Not a miscalculation but hiding evidence. It gets the death penalty with executives losing their money, all jobs are lost, and its products disappear permanently. Individuals involved are criminally charged, too. People also hear the next company that kills people to get rich will be treated the same.
You think the executives of the next company will do that? You think the employees, whose jobs are on the line, will be as likely to stay silent or more likely to blow the whistle? Do you think the shareholders will reward people who avoid or run headfirst into the corporate, death penalty?
I'm sure plenty of evil will happen. The death penalty would probably be rare for established businesses. It would probably be more fly by night operators. Yet, I bet that level of accountability would make us safer. When it didn't, the victims would get real justice.
Generally "corporate death penalty" refers to this: https://en.wikipedia.org/wiki/Judicial_dissolution
So a corporation can do bad things like poison entire communities and get out of trouble by slipping the president some money? And that's how the framers intended this to work?
We sure have come a long way since "by the people, for the people". It's the capitalist version of buying indulgences (https://en.wikipedia.org/wiki/Indulgence). Sounds like it's time for 95 Theses II: Electric Boogaloo.
This does seem to capture a lot of current events and sentiment. Corporatocracy instead of democracy.
I saw a comment saying that western democracy is a direct evolution of the roman empire and even worse when it comes to committing genocide and slavery, since there's nobody directly responsible.
THE EMPIRE NEVER ENDED
And the US is the latest iteration of the same imperialist bullshit mindset; or at least was until very recently, what happens from here is anyone's guess.
Can a corporation be arrested? Jailed? Executed? About the only thing I see that can be done to a corporation is to be bankrupted.
I worry more about government officials engaging in illegal acts. "Qualified immunity", my ass.
A better question is "Do corporations really face any real penalties for criminal convictions"? (No, they don't.)
I think there's a more fundamental question, "what does it mean for a corporation to engage in criminal conduct?"
A corporation is just a group of people acting together, and it's pretty well established in international law that collective punishment isn't acceptable; and on the flip side, a corporation can neither "act" nor "think" independently, but rather does so via the humans involved. (Perhaps this would change with corporate-owned AI?)
In all the cases I've seen where a corporation is alleged to have engaged in criminal conduct, there was in fact a human -- or several humans -- who were broke the law. As far as I'm concerned, that's where the buck should stop; it seems that prosecutors tend to target corporations simply because it's easier than doing their job properly and pinning down who specifically bears responsibility.
Companies have policies… stuff like data retention policies, for example, could be set up in a way as to obfuscate criminal activity, but in a way not obvious to a reasonable good-faith individual working for the company. In that case, the company should be made to change.
I guess it would also be ok to go after C-levels or whoever sets the policy. But, it will be hard, I think. High-level guidance can create an incentive structure to break the law without actually saying “break the law.”
> High-level guidance can create an incentive structure to break the law without actually saying “break the law.”
The creation of such an incentive structure should itself be illegal.
I basically agree but I think it would be really tricky to implement.
What about giving you bank employees performance numbers that can’t really be met with due diligence, and then not checking their work too much.
Similarly, it is evident that software companies are not able to produce defect-free software (so, somebody is setting up an incentive structure to push bugs into production). There must be some wrong incentive structures, but it is hard to say where they come from.
You're leaving off both the "limited liability" and "it's a person with legal rights" parts of a corporation.
If it's a person, then they might have to go after the corporation. Alternatively, each corporate crime might be a conspiracy charge.
With limited liability, it's unclear how much one can discourage the bad behavior if there's distance between the owners and the punishment.
I oppose both of these concept by default for criminal behavior. Power and accountability should always go hand in hand. Only people should be people, too.
Limited liability is the source of many ills. I'm fine with people pooling capital to create partnerships, but where things take an odd turn is the idea you can create a business enterprise that can incur massive debts, yet face no accountability for repaying the damage such an enterprise causes.
> a corporation can neither "act" nor "think" independently, but rather does so via the humans involved. (Perhaps this would change with corporate-owned AI?)
This is ignoring that levels of complexity creates new emergent behavior. If you're willing to believe that "AI" could make a corporation think independently, then how is a pile of paperwork running on a substrate of human wetware not the same dynamic?
> it seems that prosecutors tend to target corporations simply because it's easier than doing their job properly and pinning down who specifically bears responsibility
No, the problem is exactly the sorting through the emergent complexity of the corporation to correctly assign blame. The low-level person who did the actual illegal action is likely sympathetic and mostly judgement proof, and was likely incentivized to break the law by corporate policies. Meanwhile the corporate policies are phrased in terms of abstract metrics that aren't illegal per se, especially how they're written down.
Taking the fundamentalist view, that the individual would-be-fall-guy humans should take a hard line and refuse to break the law, doesn't solve the problem - it only increases the level of incentive required until someone is willing to do it. And focusing blame this way helps the higher up management escape accountability since they didn't actually break the law themselves.
One correct answer would be to charge all of the involved parties like the criminal conspiracy it is, but the capital-wielding upper classes escaping accountability is a dynamic as old as time.
Yet, they have "free speech" it appears. There's even an idea to give AI agents "free speech", whatever that means.
AI: I am the company and the company is me. It's the shape of my existence.
Unfortunately, Betteridge's Law does not apply here.
It's rather discouraging to see the list.
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