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Comment by chollida1 | Hacker News Reader

I'm following this story more to see how countries answer the question of...

How do you punish a big firm that your country deeply depends on?

Canada is going through this now with a major construction company SNC Lavlin, that seems to be guilty of using bribes in Lybia.

The Canadian government seems to have interfered with their court case for what could be seen as "good intentions". If proven guilty SNC could n o longer bid on Canadian government contracts and this would hurt alot of large infrastructure projects in Canada, as well as the 8000+ jobs in Canada that had nothing to do with the bribes.

Germany is doing something some what with Deutsche Bank, a bank plagued by scandal and fines but one that is a critical part of the German financial infrastructure.

So how do you punish these banks and not hurt the 10,000+ workers who had no part in this while or harming your economy?

Seems like one answer is to go after the C-Suite executives.

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If the company is big enough, I’d suggest splitting the company (as if as the result of an anti-trust proceeding), taking the fragment of the resulting company that the govermnent depends on for services and nationalizing just that part; and then throwing the rest of the company—the part that the government now explicitly doesn’t depend on—to the wolves, by allowing the case against it to proceed.

Basically, rather than protecting the whole just because some part of it’s necessary for you, just pluck that part out and keep it for yourself.

This policy would greatly incentivize companies to behave.

The danger is that it would also greatly incentivise governments to misbehave though, right?

Perhaps we should look at the people rather than the companies or governments. Narrowing down the blame would prevent future executives (and rogue engineers /s) from being too comfortable under the cloak of "the company" when taking such initiatives.

Volkswagen didn't cheat on emissions tests, specific people knowingly lied and cheated to get to achieve their goals. And while the company should be allowed to pay back all damages in a fashion that does't cripple it entirely, those people responsible for the decisions should not be given this privilege. I'm sure there are equitable options in this regard. Of course none of them would ever apply to those people since surely they put all that money to "good use".

> The danger is that it would also greatly incentivise governments to misbehave though

Government having the power to choose how to apply the law will lead to misbehave and corruption as well.

The moral hazard though is that it would incentivize mismanaged companies to cash out on the taxpayer dime, leaving governments with poorly-performing assets.

A felony for mismanaging the company into nationalization?

I am with you until you got to the nationalizing part. I don't know if that would be long term best for the country.

You can always re-privatise it later. Doing it this way — especially if you make it clear to the shareholders that such misbehaviour has consequences for their bottom lines and the money they get from forced nationalisation isn’t supposed to be the pre-offence share price — makes it a deterrent for anyone who would otherwise say “we’re too big to fail” or “we want out portfolio to take unnecessary risks, because there is no downside for us”.

Since doing anything prior to being proven guilty in any way seems against the principles of justice we espouse in the west, perhaps waiting until proven guilty would be best.

But then, don't nationalize some of it, just nationalize all of it, but under specialized program for 2-5 years that replaces the board and some/all of the corporate officers with government bureaucrats to run the company short term and replace all the management deemed problematic while giving the replacements a few years to come up to speed in running the company, eventually turning the board back over to shareholders. Sort of a variation on some of the stuff I think was done during the financial crisis.

One thing they could do is to put all the people who knowingly facilitated the crime in jail(i.e top executives). I'm pretty sure that would be a better detterent than some huge fines.

I absolutely second this. But I don't think it will happen

Iunno, the employees must have gone through some serious mental gymnastics when they were building Gaddafi a “world class” prison in Libya.

With or without bribes, SNC hasn’t been a successful engineering company in a while: most of their net worth is in one highway they got a share of 20-25 years ago in a shitty deal by the Ontario government at the time.

But bankruptcy (protection) is the way to go.

Ie: zero out the shareholders (if necessary), and sell off the worthwhile chunks to someone else.

This. Bankruptcy for the entity so as to incentivize shareholders to select directors with proper mindsets, civil penalties for good heart/empty headed directors, and criminal penalties for the c-suite denizens to penalize intentional misbehavior.

directors have insurance for their civil penalties, so that cost is ultimately borne by someone else: the shareholders/creditors/employees.

Yes, you're right. The penalties and therefore the premiums would need to be massive to encourage the provider to properly vet and continuously monitor its insureds because we're unlikely to see a legislative solution.

You could also make the shareholders accountable. Seize a percentage of their ownership, for instance. That way, the company itself doesn’t suffer. Would be painful the first few times, because it would also hit pension funds and minority investors, but investors should quickly adapt.

This is also how bailouts should work to ensure that owners/leadership doesn’t gamble on a bailout.

This is what Maduro and Chavez before him did in Venezuela. It results in flight of all foreign investment out of the companies and is a terrible idea as a result.

This is just wrong. The main problem of Venezuela was the central bank policy and fixed exchange rate while printing money, and clientelism at all levels leading to sub efficient systems and unfair competition. Of course investor left when their dolars lost 60% of their real value when converted in bolivares.

So Oil firms didn't leave after their refineries were nationalized? They didn't break down because non-Exonn / Chevron employees left and the existing people didn't know how to fix them? Hmmmm:

https://en.wikipedia.org/wiki/History_of_the_Venezuelan_oil_...

Granted, the monetary policy certainly helped, but when you spend billions investing in a country to only have that money literally stolen from you, so much so that a court ordered PDVSA to pay Conoco $2 billion, all investment is going to leave the country.

A big enough fine has the same effect, doesnt it?

Not if it results in the company collapsing. You couldn't do this with the banks in the wake of the 2008 financial crisis, for instance. I'm not talking about expropriating the whole ownership of the company, I'm saying demand the fine is paid in shares of the company rather than dollars.

This type of punishment doesn't affect the operations of the company unless the owners do something stupid in response, which will be prevented by shareholder interest laws.

To add to the SNC case, they said that depending on the govs decision, that they would move headquarters to another country. It became a political and national interest issue. Do you simply nationalize a company that says that? Would the precedent be worth it?

A similar issue happens with c-suite, the average person seems eager to get 'unethical actors' jailed, however, the government has to consider the impact it creates in the long-run. For example:

1. Will businesses take less risk because of personal risk to c-suits?

2. Will this lead to stagnation in riskier projects?

3. Should a company headquartered in Canada follow the same letter of the law in other countries where bribe is a pre-requisite to business success?

4. Is a country willing to lose a powerhouse business for the sake of justice? What about the trickle down impact in the economy?

5. What is the moral cost of letting something like this go? Does it create a negative moral precedent?

6. Does imprisoning a c-suit for X create a precedent for imprisoning them for Y, Z and F?

7. Will there be lower quality c-suits because of the inherent risk of going to prison in that country?

Whether we like it or not, there are unintended consequences to decisions we sometimes feel are the moral one to take. It has always been a difficult issue to balance.

> 3. Should a company headquartered in Canada follow the same letter of the law in other countries where bribe is a pre-requisite to business success?

What if they contributed to getting someone locked up without cause and/or tortured or even disappeared in a country where that was commonplace (or if not commonplace, known to happen)? Even if it's the remote government doing it, if it was started at the behest of that company, is that okay?

If that's not okay, why are bribes? Where's the line drawn if there's a distinction? This one is actually pretty tricky in my eyes, because it's not inconceivable that this gets used to punish some companies for allowing more liberal local customs. What if your company doesn't hire a minority in a remote company because they are repressed and not allowed to work. If one of them approaches your company for a job, are you allowed to turn them down because the law of the region disallows them working, or do the laws in your base country regarding equality come into play and you need to consider them?

I think a lot of companies are dealing with a moral variation of this with China right now. Do you do business with China and honor their laws regarding information access, or do you refrain from doing business because of that. It's a very old question, is it better to stay involved with an organization you believe to be corrupt so you can enact change from the inside, or do you remove access your services or abilities to punish them for that corruption? It's made harder by the fact that a sizable portion of the population (in the west at least) seems to think that only one of those is correct, and doing the other helps perpetuate the problem. Unfortunately, they can't seem to decide which is which.

> 7. Will there be lower quality c-suits because of the inherent risk of going to prison in that country?

That seems like it would depend on how you judge quality. If quality doesn't consider willingness to bribe, or considers it a positive, then I'm sure quality would decrease. Otherwise, there's probably a lot of factors to consider.

These are all points that society has to think about, I am playing the devil's advocate to ensure people don't jump on their soap box without considering some of the real impacts it can have to you and your society in the long run simply because they are thinking from a single perspective. I will now respond to your comments:

If your business doesn't take part in it, someone else or another country will. They will then have more resources and revenue to potentially become leaders in that area and in the long run, purchase the company from your country or outbid them in most environments. Also, if you have skin in the game, you may have more power to change their actions and get these actors to follow some of the rules and beliefs your country has.

It is very tough to find where to draw the line, it is also true that lines are constantly moving depending on the beliefs of society and other nations.

Your third paragraph looks great and is on point.

You have made a good point regarding (7), I think it is worth adding that today we may talk about bribe, tomorrow there will be another unethical proponent and so on. At some point you may have so many laws and regulations (it already happens in some areas) that it becomes near impossible to take certain types of risks without breaching another law that even your lawyers are not aware of. For someone in management position, why would you take the next step in your career if it comes with 10x more risks to your life, including imprisonment?

For 1 and 2, if risk is the risk of being caught and punished for doing something illegal then this is the desired outcome. If you're talking about normal business risks I don't see how increased prosecution and punishment for illegal acts would affect that.

My points are not related to cases where the results are cut and dry. Besides, you may have done a lot of things that are considered illegal or borderline, however, they are not reinforced as strictly for a variety of reasons.

Think of it this way, you do business with 100 people from X country. Although you are aware that some of the gains are illicit (lets say 5%) and you have created expensive processes to limit the numbers that go through, since there is a fine to be paid. Unfortunately, some illicit money will still pass through the cracks, so the government of your country decides to imprison you for it. The next manager may be a lot more likely to simply not let any business from X country since the risks far outweigh the benefit.

Now what happens if you have the same case, but someone in the business finds an exploit and sells it to the 5% that couldn't get their illicit money across? Do you blame the c-suit and imprison them because they let something like that happen under their nose? Do you search for the culprit? What if there are circumstantial evidence, do you imprison them regardless?

My point is, a lot of deals are made in gray areas or under conditions that are harder to prosecute due to the amount of complexities that exist (regulatory, law, business,etc). Normal business risks does in fact get entangled with potential unexpected illegal acts a lot more often than people realize. It can be a simple environmental law that your lawyer didn't go over, or a piece of cybersecurity law that you haven't considered.

> Is a country willing to lose a powerhouse business for the sake of justice? What about the trickle down impact in the economy?

Every time I hear this question asked, I am stunned. I'm not really sure how to respond. The question, at it's root, comes from a place that puts government and corporation on equal footing, or worse, puts corporation above government. I'm a Centrist, relatively economically Libertarian, and pro-Capitalism, and the conclusion here is blatantly obvious to me, at least for Western countries.

We the people, are the government. We the people are not corporations, and corporations are not people. We as people have rights, corporations do not. Corporations have legal enshrinement of concepts which provide legal pathways to conduct business operations, but they do not have human rights. There is absolutely no reason why society should accept bad actors violating the rules and structures we've created which define our social mores and the things we believe you must do to be part of our society.

Once corporations violate those rules, they should be excised, just as any other entity would be. The trickle down impact to the economy of NOT punishing bad actors is that bad actors privatize profits and publicize losses, while we the people suffer the consequences.

I can imagine a world in which corporations supersede government and it's not a pretty image. It's one major concern of MNCs, but I see no legal or ethical means in which you could restrict the existence of MNCs. As a society though you absolutely have the right to say "No, you may not operate here. Your business has violated our rules and is no longer able to participate in our society."

I think you have raised some great moral points, now lets exemplify some of the real implications of applying justice to a company in this case:

LaLa corporation is a major employer and economic multiplier in Monty City. Now that LaLa corp is under intense legal pressure, it decides to move its headquarter from Monty city to another country that has more 'hospitable' legal environment. Monty city unfortunately loses a major provider to the people and the city/state revenue, leading to a spiral of cuts and losses to the area.

Question:

1. Do you think the people of Monty city would reconsider legal justice to ensure stability in their lives?

2. Is the moral imperative more important than economic stability in this case?

3. The legal environment in our globalized world varies a lot, how would you ensure that other nations follow your ethical perspective? Is that a breach in ethics itself? The war on drugs is a good example of reinforcement of a single entity towards all its globalized actors due to its economic and military projection. Would you feel as comfortable if another nation in the future, did the same to you?

The existence of MNCs are in part, an attempt of governments to gain more jobs, revenue, know-hows in the long run by creating economies of scale and being the leader in certain areas indirectly through private actors. The world of private and public are a lot more intertwined than we realize and there is a lot more transactions happening than we realize. Corporations don't just pay corporate taxes, there is a whole environment created around them that has to be valued. It is a matter of where to find the proper balance.

Are you, essentially, asking whether a capitalist society can afford justice ?

I am asking to what point is society willing to bend justice for it's long term goals. It has happened to all societies in history to some degree.

Nothing is black and white, we try to label as such to facilitate our internal processes.

I think ideally:

1. First, Monty City holds LaLa corp accountable to what society deems morally acceptable. LaLa corp doesn't generate profits out of thin air--the people of Monty City generate that wealth

2. Then, LaLa corp flees for the less regulated Carlo City

3. Finally, Moo Corp, a new organization that solves the same problem as LaLa corp, launches. Warned by seeing LaLa corp held accountable and driven out, they avoid the actions that would make Monty City eject them

In the real world there are people who are hurt in this process, but what's the alternative? Being held captive by LaLa forever? Is that better?

1. You are forgetting that with today's globalized society and its MNCs, sometimes 75%+ of the profit comes from elsewhere (whether a different country or city or state). A automobile factory won't be selling most of their cars to Monty city right? The labor and infrastructure can also be found elsewhere sometimes at a discount.

3. It can take decades to build an industry or/and expertise. The structure of the business itself can be hard to model. Besides, you have now lost a leader in the industry and will now try to catch-up.

That is one of the tricky aspects of this issue, how much hurt is society willing to take for X wrong that someone or a company did? Both society, the individual and businesses have to be smart about it and balance the risks/rewards.

If Monty City needs the services of LaLa Corp, then another Corp can be created to provide those services, possibly by former employees of LaLa Corp. There is clearly a profitable market already clearly identified, so it should be no issue getting private investment or debt financing to start New Corp.

Remember, the road to hell is paved with good intentions.

Holding the c-suite accountable is a start. Financial penalties don't seem to faze these companies.

If a company is a critical part of national infrastructure, regulate it like a utility.

PG&E is regulated as a utility but that didn't stop them from making short-sighted, unethical decisions which burned down a big chunk of California.

Sounds like these countries need better anti-trust laws that prevent companies from becoming so large and making countries co-dependent on them.

This usually happens because one company makes so much money from its near-monopoly that it starts extending into other markets. This is the #1 sign that anti-trust isn't working well. And then you get situation where X company "does everything."

> I'm following this story more to see how countries answer the question of...

I think the problem is governments not making any red line.

You can’t find any country without similar cases, but almost all the time the penalty is paying money. Which clearly doesn’t stop anyone to take the risk. Perhaps in some cases their profit is so unmeasurable that they don’t even call it a risk. (Many Oil contracts in the past with bribes involving corrupted governments in the middle-east)

Which is so unfair when you compare it to incomparably smaller cases that a normal citizen might face.

> So how do you punish these banks and not hurt the 10,000+ workers who had no part in this?

If the C-Suite or other senior managers make bad decisions they can put the business at risk. That's one of the inherent risks in working for a company. It's unfortunate that there might be collateral damage, but if you work for a corrupt company that gets shut down because it was corrupt I don't think you should expect to be bailed out. It's partially on employees to blow the whistle on bad behavior earlier or to leave those companies. It's also very possible that those corrupt companies grew to be so big because of corruption, so it would be weird to bail them out.

Nationalize their assets. It's the only way to be sure.

That can set bad precedents (e.g. Venezuela nationalizing oil industry) and goes against the free market economy countries are trying to propel

How is it any different than the IRS getting paid first when a company goes bankrupt?

The government is a creditor like any other when there’s a price to be paid.

Nationalize assets = usually means transferring the business to Gov

IRS getting paid first = liquidating a portion of the assets to pay a fine.the rest can still go to the next in line

It becomes a political tool to gain brownie points from your base and it disrupts other businesses by adding another level of risk.

> goes against the free market economy countries are trying to propel

This is confusing. Canada and other countries are not "trying to propel" a free market. And well they shouldn't be, free markets don't work! They cause significant increased pain in the future as externalities that the market didn't price in come to fruition and hurt everyone.

Costs will be much higher in the future to fix problems that we could solve at reasonable cost today, due to "free markets" running amok and causing problems.

Canada is not pursuing a "free market" and it shouldn't be. Important things like banking, and infrastructure, construction, etc should be heavily regulated and the government should have significant participation to protect the public.

As it stands today, corporations abuse the public's wallets buy polluting our air and water and then assuming we will pay the bill to fix it while our health is failing and our cities sinking.

Free markets are bad and we should not vie for them.

I simplified my response in the context of the nationalization of assets/companies, it doesn't mean there aren't government interests that require protection or regulation of the market economy.

Wiki definition: free market is a system in which the prices for goods and services are determined by the open market and by consumers.

If you purchased a car, cell phone even a house, chances are that parts and materials, if not the whole product/service, were made elsewhere and were determined in part by your purchasing habits.

A good portion of corporations are polluting in part for personal profits and in part because the government and people living in that country are willing to exchange X for Y (simplified e.g. a little more pollution for a certain number of jobs and revenue)

Fine the bank enough that stock holders give a damn.

And as you say actually punish executives with jail time.

i think an accountable civilization has to prevent this from occurring, once it occurs it just builds up to a boiling point and we get an opportunity to learn and do better in the next era

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