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Comment by FranzFerdiNaN | Hacker News Reader

Good. More ceos should be arrested and jailed if companies ignore the law under their watch. Their “rogue engineer” excuse was laughable.

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Yet shareholders who pushed executives over the edge with inflated performance expectations get to keep all their gains, if they sold before scandal hit. There are no sanctions in the arsenal of rule of law that could ever touch them.

> There are no sanctions in the arsenal of rule of law that could ever touch them

Prosecutors can and do pierce the corporate veil [1]. Otherwise, losing money on their investment seems like fitting punishment for disinterested shareholders.

[1] https://en.wikipedia.org/wiki/Piercing_the_corporate_veil

I agree. Eventually, the market should figure out that excessive goals lead to bad actors reducing long term value. So losing money on investments is as good of a feedback mechanism as any I can think of.

Afaik such pressure doesn't come from shareholders, but from the manager's own desire to get success without taking the negative effects of the risks. Sometimes the shareholders even fight for more healthy practices, also knowing that unrealistic short term expectations might cost them their investment in the long run.

Ya, I'm a VW share holder.. I never asked them to cheat all I'm not sure why I should be punished anymore than the big hit to market cap this has caused them.

>>Yet shareholders who pushed executives over the edge with inflated performance expectations get to keep all their gains, if they sold before scandal hit.

No one pushed a super-educated and super rich CEO to do anything. His greed did. Shareholders that sold got lucky, those that didn't are paying the price with tens of billions in penalties.

Jail CEOs and a lot of problems will be solved.

Of course they get to keep their gains. Why wouldn't they? None of them broke the law.

So supporting an enterprise that behaved criminally has no economic impacts?

By the same logic, you would also jail the parents, teachers and employers of a murders, because they also "supported" the criminal.

If your 401k invested in VW - which is very likely - are you also supporting its criminal activity?

I'm not talking about jailing but if you economically invest in something that is unethical you should expect to lose money as an outcome (possibly the whole investment).

That is to say, if mutual funds (which your 401k likely comprises) stand to lose significantly to unethical behavior, then they will be a LOT more choosy about who to invest in.

Your argument to the extreme about jailing parents/teachers is missing my discussion point.

But how can shareholders know? Let's say I bought some shares of VW before this scandal. Unless I'm an automotive engineer and have access to test equipment and access to all models of the cars that have the fraudulent software on them, how can I possibly know that something unethical is going on? Even if I did meet all of those requirements, how would I be able to tell whether it was a bug vs. an intentional attempt to defraud the government? What if my government doesn't have those requirements? I don't see how it's even remotely possible for most shareholders to have this information.

The funds will require disclosure and risk-aversion behavior of their portfolio companies and in general not turn a blind eye to the possibility of unethical behavior.

It's not deterministic but it does create a positive feedback loop of ethics compliance.

It's entirely the CEO responsibility to handle the pressure, while taking good business decisions and following the law.

They are paid millions to do this and they are free to leave the company or switch career.

What pisses me off is that this "rogue engineer" excuse must sometimes succeed, otherwise they wouldn't do it. And being an engineer myself I can tell you that few engineers get the idea to do something like that by themselves without at least management approval. More often than not it's done under direct management command.

Even if management isn't directly demanding it, they've promoted an environment that incentivizes this sort of behavior. This could be as blatant and nefarious as setting impossible goals (and looking the other way when they're somehow achieved), or the more subtle and innocent situation where the boss is known as someone who reacts poorly to bad news.

Even if management does not incentivize cheating they are still responsible for it - that comes with the job.

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