Hacker News Reader

Comment by MichaelApproved | Hacker News Reader

$1.2B appropriate? It’s hard for me to tell in this case because I don’t know the size of the market they colluded to capture.

Did Apple gain more than $1.2B in profits? Is this just a cost of doing business? There are so many cases when the fine is worth the expense, like advertising.

I would much rather see a corporation be banned from a sector for a period of time when they get caught, in addition to a fine.

Wells Fargo gets caught creating fake credit card accounts for customers? Wells Fargo can no longer sign up new credit card customers for 2 years.

Equafax leaked everyone’s social security numbers? You are banned from accepting new customers for 3 years.

The punishments I'm suggesting are off-the-cuff but some sort of corporate business practice penalty is more fitting than just a fine.

It also gives the company time to correct the problem before they continue to do business in that sector.

View on HN

The corporation has owners and operators. These fines rightfully hit the owners. I would suggest that fines also hit the operators.

If Tim Cook paid $200 million dollar fine or went to jail for 15 days for this, internal controls and compliance would be rock solid.

I think of the Madoff scandal. If Greg Katz[1], Saul Katz[2] and Fred Wilpon[3] had been jailed, we might avoid the next company that followed Sterling Equities lead in enable a huge fraud. These guys were next to the fraud for 20 years and skated with a fine. Just an example.

Punish individuals not just companies. James Surowiecki wrote about it in the New Yorkerin 2014, SEC chair Chair Jay Clayton has mentioned it in 2017, and Biden mentioned it last night in the debate.

[1] https://en.m.wikipedia.org/wiki/Participants_in_the_Madoff_i...

[2] https://en.m.wikipedia.org/wiki/Saul_Katz#Madoff_Ponzi_Schem...

[3] https://en.m.wikipedia.org/wiki/Fred_Wilpon#Madoff_investmen...

I, for one, would be immediately leaving my C-level position in a startup out of the fear that one of my colleagues is doing something terribly wrong behind my back. I - really - dont think that's the cas. But if there is the slightest chance that I might end up behind bars and get my life upside down because a judge thinks I am responsible as well, I will close the company and fire all employees - it's just not worth it.

That sounds reasonable to me, much better than what we have today. If you're not trusting your employees or practices to follow the law, you should either be improving that situation so you do trust them, or not operate a business.

Right now, working in a white-collar job, there is no fear of punishment, which is why we're seeing so many companies and executives skipping the law. Or they make a cost-profit equation, and figures out that the fine is worth the profits the crime would pay.

Edit: actually, the more I read and try to understand your point of view, the more I'm afraid of your position. You're already worried that your colleagues might be "doing something terribly wrong behind [your] back", but you're all fine with that, as long as you don't get punished? Isn't "I am responsible" one of the justification executives use for their high salary? The whole point of being the manager of others is to take responsibility over them. Sounds like you don't want that.

Mmmm... to offer a counterpoint. Unless you are putting spyware on every company computer and have cameras all about, there are likely some things your employees are doing that you don't know about (not necessarily illegal data breach, just, you can't track it all without invading their privacy quite a bit).

I think it might be better to put a 'without due dilligence' clause if something like this were to be the law.

One other thing... it's kinda hard for salespeople to do their job without a list of people to contact... there are some jobs where you implicitly have to trust people with data... those are sources of data leaks as well, and there's not much you can do other than to hire people you trust, I'm afraid :/

Just my two cents, hope your having a good day (and stay well)

I don’t think anybody is asking for executives to be responsible for every little act of wrongdoing. Most examples of corporate wrongdoing were widely known throughout the company and often caused by unrealistic expectations from above. I work in medical devices and I have seen it multiple times that leadership pushed unreasonable deadlines while ignoring warnings. I don’t think anything illegal has happened so far but I can easily see how somebody could take shortcuts just to relieve the pressure. So while the executives didn’t do anything wrong personally they created a climate that could cause illegal activity. This certainly happened at Wells Fargo and I bet a lot of other companies.

Many C level executives earn a literal fortune every year, with compensation packages in case of dismissal that would make anyone's eyes water. Accepting/demanding that but brushing off any risk and demanding to be considered immune from any repercussions even when it comes to major acts of mismanagement seems a bit unreasonable.

This isn't for any minor misstep from an employee. Rather for not putting in place enough safeguards to avoid that result. Or the CxO turned a blind eye to this happening although all the signs were there. Or worse, they directed it. Look at the captain of a ship to see what the responsibility could look like.

As for the "I'd rather close the company than risk going to jail", I don't think that would be the case even for current levels of compensation. A mistake driving a car could easily kill or land the driver in jail (and this happens all the time). And the benefits of driving a car are far lower than what some of the above mentioned C level execs can get from that position.

> A mistake driving a car could easily kill or land the driver in jail (and this happens all the time).

And nobody is dying from App Store policies. Violating a civil regulation is much different than violating criminal statutes.

Before you advocate punishing private company managers, consider holding government employees, managers, and politicians to the same standard. Every manager in government should be sure that the people who report to him or her are following the law, else, the manager gets fined and goes to jail.

I don't think anyone is saying this shouldn't be the case either.

Its also red herring, to be completely honest.

I would even argue that much of the corruption we see in politics is in large part because private companies can get away with so much with so little consequence in the first place.

In either case, I 100% agree with the assertion here.

That would be considered corruption and would be normally be persecuted as government employees are considered to have a duty of care to the public they serve.

At a minimum the executives should lose their net worth. We are always told that they do the risky work which means that they should also have downside risk. When you look at executives at Wells Fargo, Equifax and other companies it seems they have huge upside when nothing goes wrong, or smaller but still very big side upside when things go wrong under their watch.

That’s not how it works. Limited liability is the foundation of modern capitalism. Without that, the world would be very different and a lot worse.

Limited liability applies to the owners of the company. If the company goes bankrupt, the company goes bankrupt. The owners are not personally liable. It doesn’t have anything in particular to do with what punishment is appropriate for an individual who harms the public and the owner as agent of the owner and management of the company.

No golden parachutes if you or your underlings tank a public company. That will incentivize the required internal controls.

Your 2nd and 3rd sentences directly contradict your 1st sentence. Are you disagreeing with the OP or agreeing with him?!

The question is where the limits of liability and rewards are. I don’t think the sky high executive salaries that have developed over the last decades are the foundation of modern capitalism.

There's an enormous gap between undoing limited liability and egregious compensation. Many people agree that over-compensation is a problem, but undoing limited liability spells the end of anything like a market economy, and takes the US dramatically backward.

My parents just filed for bankruptcy because the Trump tariffs killed their import business. Should they also be homeless now? That's what comes of what you originally suggested.

Did your parents or their company do illegal things on a large scale?

As you've already been told, Limited Liability Corporations are part of the foundation of modern prosperity. That is a completely and totally separate issue from illegal activity, and your conflation of the two is incorrect.

Illegal activity is already punishable, and the fact that it generally isn't punished is not at all related to limited liability, but to political will[0][1].

It does nobody any good to lash out without understanding the issues.

[0] https://www.nytimes.com/2017/07/05/books/review/the-chickens... [1] https://www.npr.org/2017/07/30/535799735/corporate-bungling-...

I feel like people often forget that the law clearly holds people responsible for things that they did intentionally and willfully. Which is to say, being able to jail C-level executives would not allow you to be jailed because your employees did something without telling you. It would allow you to be jailed when you make a decision that gets people killed or causes some other significant harm.

Instead of fining the nebulous company that you are a part of, you would be held responsible for your choices.

> It would allow you to be jailed when you make a decision that gets people killed or causes some other significant harm.

This is incredibly nebulous. All decisions involve tradeoffs. One or two people die because of a decision to go with one car brake over the more expensive? If "increasing greenhouse gases" significant harm? Good luck ever trying to make anything - there will be a non stop line of people trying to sue the executives of any company they don't like.

Your colleagues, maybe not, but certainly you are culpable for your direct reports. And we are not talking about rogue employees here performing one-off acts such as absconding with private/privileged data, but rather an institution-wide mode of operation that is deliberate and determined by a favourable cost-profit analysis.

Yes, if you advocate that or even tacitly support it, you should definitely stand to lose your shirt. If that’s too much for you, gardening is always available as an occupation. Others will be happy to fill your shoes.

Ex: If you are the CEO of Juul, you definitely need to go to jail. I see Juul marketed to kids everywhere. Once science confirms that it’s just as harmful as cigarettes, I want all the C-levels in jail and their fortunes stripped. I don’t for one second believe that they thought such a product could not possibly be harmful. They are there to make a profit, end-user health be damned.

There’s no way that ecigs are as harmful as cigs, so you might be waiting a long time.

We are responsible for our own actions and not the actions of our children or siblings nor employees.

This might be surprising, but that is a relatively new concept. It was quite common in the ancient world to execute people for crimes their family or clan did.

I suggest being very careful overriding millennia of legal precedent and human rights laws because you're upset about something Apple did. Almost everytime pitchforks get drawn and torches lit it ends badly--regardless of which side of the pitchforks you're on.

> Your colleagues, maybe not, but certainly you are culpable for your direct reports.

Should we jail parents if their children commit crimes? If anything, a parent has more influence upon their child than a manager has upon a direct report.

No one is looking to jail people who did not break the law. If you knew one of your colleagues was doing something illegal and you let it slide or even participated, then by all means you should be held to account. If they did it without your knowledge or consent, then you'd be fine. This willingness to immediately threaten to hurt your employees financially at the mere suggestion of increased accountability for criminal actions is a great example of how a sense of entitlement and an addiction to the VC model has turned our economy into a fragile and easily corrupted mess.

> If Tim Cook paid $200 million dollar fine or went to jail for 15 days for this, internal controls and compliance would be rock solid.

If Tim Cook paid a $200 million dollar fine and went to jail for 15 days for this, he'd run the company from jail for 15 days and then get a $300 million dollar bonus the next year.

You can't get at this by punishing the executives if the consequences still benefit the shareholders, because otherwise all they'll do is increase executive compensation to offset the legal risks. There are plenty of people who would be willing to go to jail for years if there was a hundred million dollars in it for them.

It's the same reason calibrating the fines right is nearly impossible. Go under and it's no deterrent, go over and you're just bankrupting everybody and putting innocent people out of work.

The better solutions are the ones that repair the damage (or prevent it). Don't allow large companies to buy their competitors, or leverage a strong position in one market into a strong position in another, or enter into price fixing agreements etc. This is all basic antitrust stuff and the problem isn't that it doesn't work, it's that it isn't being enforced.

These are good points.

I agree the lapse in antitrust in the last 20 years has not helped the problem of corporate crime.

To address the offsetting compensation, perhaps harsher penalties. Some level of punishment exceeds the economic value of the crime, maybe that where it needs to be aimed? I agree calibration is hard. We’re currently at zero. I bet the number should be higher.

C-level pay would go through the roof if they also had to deal with potential jail time.

Isn't it already there? Right now the compensation for C-level vastly outstretches the actual requirements of the job or risks taken.

It would go way waaay higher. Especially for large corporations where there is probably always somebody at some level trying something shady. I could easily see it go 10x for the largest corporations. Trying to make C-level officers criminally responsible for others' behavior at the corporation would basically push the pay gap much wider.

Even for small companies, executive pay would at least double. And that isn't just going to come out of profits. The lower wage earners will take a hit too, especially if they have to be watched all the time.

And none of that "if you don't trust them then don't hire them" bs. Do you realize how difficult that would make finding a job? Your background would be gone through with a fine tooth comb.

I don't think supporters of this are thinking it through nearly enough. This would be the mother of all unintended consequences.

I would refer you to my other comment, here: https://news.ycombinator.com/item?id=22593932

Reminds me of when HSBC knowingly laundered money for drug dealers and terror organizations for years and was fined < 5% of its profits that year.

HSBC allegedly laundered 800 million (not revenue, not profit, but total amount allegedly laundered).

They were fined 1.9 billion. People really need to stop with the 'cost of doing business' BS

'Ultimately, the prosecutor’s office came to believe the case was “the tip of the iceberg” in terms of suspicious transactions conducted through HSBC, according to documents reviewed by Reuters and reported earlier this year.'

https://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-...

Punishments are based on what can be proved in court, not what prosecutors believe.

As it should be. But the "cost of doing business" theory can survive the fine being much bigger than the provable ill-gotten profits. It's just smaller then the overall ill-gotten profits.

In this case it actually wasn't though. The case was never tried. In the US the government can impose huge fines for AML violations directly, without ever having to prove their case. Combined with a culture of hyper-aggressive prosecutors and you don't really get justice in the traditional sense. Dig into the details and you'll see that HSBC's "crime" looks very different to how it's been publicly portrayed.

They sabotaged their own money laundering filters: they edited e.g. "Pablo Escobar" to "Pablo Escobar-", so that that activity wouldn't get flagged. What are your optics of that?

So the USG claims. But they claim many things; without a trial and a proper defence who knows the truth? A lot of the claims in that case were dubious, like the idea that every transaction connected to Mexico should have been treated as inherently suspicious. Why? Well, because the Treasury decided that would have been convenient for their case. What about the huge numbers of non-suspicious Mexican transactions? Irrelevant - HSBC should have institutionally "just known".

It sounds like in essence, what you are asking for is we rollback the invention of the juridical person.

I've read about this view a few times but cannot find any relevant reference at the moment.

"$1.2B appropriate? It’s hard for me to tell in this case because "

It's 'hard to tell' because we don't know what kind of evidence there is, and how assertive supposed behavior was, let alone if they broke the law.

There is more information on Tech Crunch and it really does not look damming.

$1.2B is probably MUCH less than the amount of money Apple made in this price fixing scheme, but it's hard to say without the exact numbers.

It's not clear to me that Apple made any money directly in the (alleged) price fixing scheme. All the items sold to consumers were ultimately manufactured by Apple, and I don't think it's disputed that Apple can set the prices it charges distributors (or the prices it charges consumers for items sold through the Apple Store itself).

What Apple is NOT allowed to do is tell distributors how much to charge THEIR customers. But that does not directly affect their bottom line; if anything, it's more of a long term effect of price stability or a certain structure of distributor networks.

> but it's hard to say without the exact numbers.

So you’re speculating with no evidence? Let’s avoid the pitchforks until we actually have the data.

How can you be sure that it’s much less?

Price fixing at the scale Apple operates. Apple made $267B in revenue (not profit) last year. This fine is 0.44% of that amount. Assuming this price fixing had gone on for multiple years, it would be shocking if they didn't make much more than 1.2T on it.

What percentage of Apple's revenue comes from France?

French courts are concerned with price fixing in France, and I'm not sure that price fixing in France amounted to $1.2B additional profit. It's not that large of a market.

Reply on news.ycombinator.com