I was really cynical once I saw that only a lower-level engineer had been charged and convicted of wrongdoing so far. Glad to see that someone higher-up is also being held responsible.
Also it was seen as a positive thing because it gave regular employees an excuse to say no when execs come asking to cheat.
James Liang was previously convicted. He was an engineer working at the VW test center in LA. His group was directly working to keep CARB and the EPA from discovering the defeat device. My understanding is he was really a mid level engineer.
My source for this information is a book about the scandal and also the history of the VW/Audi engineering culture called "Faster, Higher, Farther: The Volkswagen Scandal". Its well worth the read.
Mr. Schmidt had been a Volkswagen employee since 1997 and was named general manager of the company’s engineering and environmental office in Auburn Hills, Mich., in 2013
OK, I was with everyone saying higher-ups need to be held accountable, but now you're spewing utter nonsense. It's not like the shareholders knew what was going on. What are they going to be "held accountable" for? For being lied to by a cheating company? It's almost like going after taxpayers because they subsidized a criminal's public transportation.
They have had a loss, which they may or may not have felt (e.g. if they had to sell, they most certainly did; If those shares were collateral, which is extremely common, they most certainly did). And then there was a gain, which they only had if they did not have to sell.
There's also the issue of opportunity cost.
Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands.
Why? The other way seems to make sense to me.
If I had VW stock that I had to sell in between to pay my down payment, i most definitely have lost, regardless of it going up later. If I used my VW stock as collateral for something else, I would have had much less collateral to pledge.
Assuming a “buy and hold” universal is not a reasonable assumption.
Assuming anyone might need to liquidate at any minute is not necessarily more reasonable, but it is more consistent with reality
“When the price of a stock can be influenced by a "herd" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.”
“Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.” — Warren Buffett
Your premise of "the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands" is absurd on its face; one only need look back nine or ten years for confirmation of this. If what you say were true, Bear Stearns would still exist, and you would have to claim that those real estate hedge funds were at their "real value" both in 2006 and in 2007 even though the latter was pennies on the dollar. Is it any comfort to say, "well, that stock collapsed but I at least I bought it at its 'real value' that it had up until yesterday?"
Unless your point is that economics cannot possibly make any sense, I suppose.
Bear stearns had pledged 104% of their capital. They weren’t the only one in such a condition, and in this sense it is unfair, but the closing down was justified.
The law was changed from “mark to market” (the standard evaluation for decades) to “Mark to fantasy” specifically so that many bankruptcies would not need to be declared - but without a $700B injection at the time, many more would have happened.
You cannot have consistent book keeping if two entities can book the same item at the same time for materially different values at the same time. It is as simple as that.
And how would that work?
Most shareholders with enough voting rights to matter are organizations themselves. This would essentially cease any attempt due to the absurd and never-ending complexity holding people accountable.
--- "Corp X needs to be accountable!" "It's shareholders must pay!" [looks up shareholders] "Corp Y is a shareholder of X" ... "Corp Y needs to be accountable!" "It's shareholders must pay" [looks up shareholders] "Corp Z is a shareholder of Y" ... "Corp Z needs to be accountable!" --
The separation of ownership and management is what got us in this problem to begin with. Pointing the finger back at ownership when it's a corporation with thousands, or maybe even millions, of shareholders is stepping backwards in time and approach.
Owners don't make the decisions, managers who effectively have no boss make decisions and they're the ones who should pay.
And they are not the largest shareholder, they hold about 20%. Qatar holds 17% and Porsche a tad over 50%.
Or are you suggesting we lock up anybody who owns a few shares?
Stockholders - especially those that originally bought company stock when it was issued - assume liability already, if the company goes under their stock is worthless, if the company is fined their dividends drop.
To make them liable beyond that for something they themselves do not control in a way that would enable you to assign blame is excessive.
> their dividends drop
Corporations are rarely fined even 100% of their profits from illegal actions.
If the punishment is simply going to be temporary drop in returns, and that maximum damage inflicted upon a corporation and investor is dissolution, that dissolution should be wielded with a casual frequency. Corporations are benefiting from breaking the law. They get caught, and they still benefit.
Many of these arguments center around 1) a drop in returns is punishment enough 2) it would be difficult. Both are simplistic pat answers that defend the corporation as a one-way valve for wealth that disintermediates the criminal from the crime. How is it that I am responsible for all of my actions, except when my action is a pooled investment?
The ultimate question is can money only harm up to its denominal value?
In other words, not only would punishing shareholders be unfair and stifle investment, it might have other unintended consequences that would hurt the economy.
Really, you need to spread the pain across every level from grunt to CEO to shareholder. With relative culpability based on influence on and benefit from such behaviors.
It should be limited to the most recent (five?) years of profit at a maximum; but determined by the valued magnitude of the profits obtained by the infringement (multiplied by something, maybe 3-5?, for punitive effect).
Each stock should have that share of debt added to it; zero interest over time, full remainder due upon sale, and reduced by future dividends. The actual debt needn't be tracked per stock; it is sufficient to differentiate between affected and not.
Criminal liability belongs with those actively participating or criminally negligent in their oversight.
Thanks.
The only other book I've read about the era is The House of Morgan, which covers the history of JP Morgan bank. It's highly recommended as well. It tells a convincing tale as bankers as the good guys (gentlemen bankers), who funded Thomas Edison, the transatlantic cable, Charles Lindbergh's transatlantic flight, and who raised the funds and managed the purchases necessary to win WWI.
If anyone else has finance books to recommend I'd love to hear them.
Is it just a carry over from disliking wealthy privileged people in general? Someone please chime in.
When companies act against the interest of the societies in which they exist, it's at the direction of executives, managers, or other "higher level people." If they're caught, their punishments sometimes don't even negate their wrongdoing, let alone match up to crimes which are generally less harmful to the rest of the world. They get away with it, and when they don't, it's not that bad for them. The lack of justice is infuriating.
That's a big assumption, IMO. It's quite a huge assumption on how high it actually goes.
> and they nearly always get away with it.
Based on on your presumption of guilt?
I don't support presuming the guiltiness of top level executives that had no idea "because they should have known." Its reminiscent of a witch hunt.