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Comment by ryandrake | Hacker News Reader

Corporations (which are usually the payer of fines for bad behavior) don't fear prison because they can't be physically imprisoned. You can't put Exxon in jail. And, lawmakers deliberately make it so damn hard to pierce the corporate liability veil and hold shareholders or directors personally liable for the corporation's actions.

So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing.

"BigCo settled and paid an insignificant $20M out of their river of money" is not very satisfying to read. "Joe Bigshot, former SVP at BigCo, was sentenced to 5 years in jail, and had to sell two of his nine houses to pay the $20M fine" is much better.

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> You can't put Exxon in jail.

If a corporation is a legal person with inalienable rights (as the SCOTUS seems to have decided on), but is intangible and immortal at the same time, what can you do? Any of the below:

* freezing assets (=~ reclamation)

* seizing accounts (=~ civil forfeiture)

* suspend a business license (=~ locking them up)

* introduce a revenue cap (=~ prison labour)

* remove lobbyists (=~ losing voting rights)

* dissolve or nationalise the company (=~ death penalty)

This is by no means an exhaustive list.

> If a corporation is a legal person with inalienable rights (as the SCOTUS seems to have decided on)

Please stop repeating this nonsense. Corporate Personhood is a legal idea, and does not mean a "corporation is a legal person". Without corporate personhood, you wouldn't be able to sue a company for wrongdoing if the guilty employee quit, or even enforce basic contracts.

There are serious problems with corporations not being held liable, but the situation would be worse without Corporate Personhood, not better.

You can sue the government even though they aren't granted personhood.

Its harder to sue the government than you might think, see for example: https://en.wikipedia.org/wiki/Sovereign_immunity_in_the_Unit...

Regardless, the argument there isn't that you can't sue the government at all, but instead that the government is granted immunity for some subset of actions.

Going back to the original point, personhood is clearly not a requirement for being named in a suit. For more examples you can also see in rem cases, where the government sues property itself for civil forfeiture. 11 1/4 Dozen Packages of Articles Labeled in Part Mrs. Moffat's Shoo-Fly Powders for Drunkenness did not need personhood to be named in a lawsuit. https://en.wikipedia.org/wiki/United_States_v._11_1/4_Dozen_...

> but instead that the government is granted immunity for some subset of actions.

It's actually the opposite. You can only sue the government when they explicitly give you permission.

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

The whole point I'm making here is that you can sue an entity without personhood.

That's right. I just pointed out the one of the pieces of evidence you used is slightly wrong. Suing the government is a very special case.

See the "Exceptions and abrogation" section of your own citation. It is indeed a (albeit large) subset of actions to which they can apply sovereign immunity.

Yes. All I'm trying to say is it's opt-in, not opt out. I don't find this particularly interesting or important so this is the last comment I'll make here.

Except it's not opt-in for a certain subset of actions of the government. For instance they can't block a discrimination suit on sovereign immunity grounds.

Civil forfeiture where govt sues "property" to seize it so they don't have to have a trial for the person owning said property is a shady dark pattern that shouldn't be cited as an ethical approach at all. Just my opinion.

It's not being cited as an ethical approach, only that the court system clearly doesn't require something to have full personhood in order to be sued.

‘Granted personhood’ doesn’t mean anything. The relevant legal term is ‘legal personality’. Governments certainly have legal personality. If they didn’t they wouldn’t be able to enter into contracts, file lawsuits, or... really make any claim to exist in any meaningful way.

Is the government itself granted first amendment protections as an association of citizens?

Or is it thought of a fundamentally different sort of entity, that yes can enter some sorts of legal arrangements, but isn't granted all the rights of a citizen?

The details of that probably haven't been settled by supreme court rulings, but the basic principle is that when a corporate entity says something, what's actually happening is that a person in the company is saying this thing, on the behalf of other people in that company, on behalf of, etc until you get to the shareholders. It's people all the way down, and people have rights. The same could be said of the government.

Note I'm a British Citizen, but the same basic legal principles apply over here, and have done for hundreds of years. I know there's a widely held conspiracy theory that this is all new, but jurists and legal scholars have been discussing and applying these principles for a very long time.

I think the (now deeply ingrained) confusion stems from a misconception surrounding the Citizens United vs. FEC ruling, where the majority opinion in part cited campaign finance restrictions as a violation of First Amendment rights.

Since the Bill of Rights are protections of citizens rights, it has widely been misreported that this meant the SCOTUS ruling de jure recognized corporations to be citizens themselves.

This, of course, is not correct. The majority opinion in part says that "if the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech." The key phrase here being "associations of citizens", which the majority interpreted broadly to include corporations. This does not at all bestow personhood or citizenship upon corporations, legal or otherwise. It does afford corporations some protections as they are now legally recognized as "associations of citizens".

At the end of the day the corporation is still enjoying those rights. The majority chose to ignore the veil and freely pass along citizens rights the to association.

I agree, it was too broad an interpretation, since corporations already have a legal representation and are an economic entity, not a civil society association through which citizens relate to or exercise their political will.

You would sue guilty employees even if they quit and move to another company. I feel that would be much better for personal responsibility.

And the best part about this would be people cannot hide behind "I am just following orders."

Also, it would mean you usually would not recover anything since a corporation usually has deep pockets and your average employee is not even worth suing even if you could win.

True, but that may be a good thing. This may prevent people from suing for small infractions.

On other hand, let's say, if your average software developer knows that they can be sued into bankruptcy, then they will not release unfinished code and voice strong opposition to it. Thus shifting responsibility to middle managers. Now if middle managers know that they can be sued into bankruptcy, they will not override developers concerns and extend deadline and refuse to push unfinished product. Executives may try to override managers decisions but then responsibility shifts to them and they would not want to lose significant portion of their net worth. Board or managing-owners may try to override CEO, but then they will be responsible and they would not want to be personally sued and lose a portion of their personal wealth.

Yes this may not impact billionaire owners but that is a small number. Most companies will be more ethical and people will have a high degree of personal responsibility.

I think my issue with your hypothetical is that is assumed a company is already viable and in business. One of the primary advantages of a corporation or LLC is it’s limited liability. I.e., you can take a risk and if things don’t work out you can still personally recover. I suspect if we took the approach of your post, many, many fewer people would try their hand at starting a business because there are no limits to liability and much less capital to fund businesses if shareholders downside wasn’t capped.

I'm open to having misinterpreted the situation. How is corporate personhood not the same as a corporation being a legal person? I mean functionally, not semantically. If you would, help me understand why this is not a difference without distinction.

Please note I didn't pass any judgement on whether a corporate person is a useful construct or whether it should be abolished. I agree it serves a purpose and should continue to exist.

What I would argue is "limited liability" as it applies to and shields company owners shouldn't mean "free from consequences" for the corporation as an aggregate. If I'm reading your post correctly, we don't disagree there.

Order the company to operate out of a prison complex, under guard surveillance, with monitored phone calls, the works. Every employee must go there for his entire shift, no telecommuting.

They'll carve out exceptions for the ones responsible at the top. You'll just be penalizing the common wage earner who have to feed their families.

Even if they didn't make any exceptions, still, why should regular level employees get punished for something over which they've never held any responsibility whatsoever?

I think "never held any responsibility whatsoever" is going too far. There's one company I know that narrowly avoided the RICO act and paid out a huge amount in a lawsuit, and admitted to having behaved criminally, only to commit the same crime in the same way, in some cases, to the same persons. You're telling me, their employees had no idea, no impact, no responsibility?

This reminds me of 2006. The subprime bubble. In California, everyone had six magazines about real estate on their brand new coffee table. You'd go to someone's house, they'd talk about their house. And the houses around them. Anybody people admired, it was because she bought 4 years ago and sold 6 months ago, or better still, because she owned 2 houses and not merely 1. "Real estate agent" was one of the "careers" people rattled off as being respectable, along with doctors and firefighters (lawyers barely, engineers not at all). Everyone was afraid of being priced out of the market, and there was a constant cycle between selling your house at a huge profit, paying out the realtor's fees and taxes and costs of the fixer-upper-ing, and then the dread of having all this money but no house, and buying an expensive new house. With a lot of leverage, but somehow the Ferrari-driving hotshots at the mortgage refinancing found a way to get you a HELOC (home equity line of credit, possible because of the appreciation) so you could buy a hummer. And nobody did anything! Nobody could explain their job then, if what you did for a living made sense outside the bubble you were missing out. I couldn't understand how so many people could contribute to society through sales, retail banking, transactions, appraisers was another one. Unbelievable.

The middle class may not have benefitted like the upper class (as it was then called, now you'd say "the rich" or "the 1%"), but they were still avidly playing the game when the music stopped. And they ended up suffering much more for it, (some rich people suffered too), jobs became much more demanding, but they were in on it. It wasn't just Wall Street that kept repeating "real estate never goes down", it absolutely was Main Street too.

With that said, the regular employees probably have something to do with the dirty work the business engages in. Otherwise they'd be contractors or outsourced, like the janitors and moderators are.

And what actions should Joe Schmoe with a mortgage, two kids and their college funds, and a wife who was laid off and has no health insurance take against his employer. What do you consider a reasonable level of risk for him to undertake? How much should he be punished for continuing to feed and house his family while the CEO embezzles or otherwise abuses his power?

My point is this, why should we punish people who feel they (and in many cases truly) have no choice in whether criminal action was taken? If I held a gun to your head and said, "Just ignore that or I will take everything from you and plunge your life into chaos", what do you do? What is the responsible thing to do? For you? For your family? Your children? Society? The company? The government? For the most part, people working in these companies don't do so becaus they love to work, they do so because they have to to survive and to keep their families afloat.

Joe Schmoe executed the orders because he's terrified if he doesn't, there will be retaliation and his life and the lives of those he loves will be severely damaged. CEO person gave the orders because they know a fine is just the cost of doing business and they don't give a fuck who or what they hurt, what laws they break, what damage they do. Do you see the power imbalance here? Why should we not use "who had the power" as a determination for who to prosecute? Unless you provide protection from explicit retaliation and even the power dynamic some I don't see reason to prosecute Joe over CEO. Even then, there are other forms of retaliation that are harder to verify or see. Think about trying to get rid of bullying in a middle or high school.

I think this may create asymmetries between risk/reward for those (real) people making the decisions.

Think about it with a sports analogy. If I cheat and take performance enhancing drugs, there’s huge potential upside: I can drastically increase my salary. If the consequence was spread to the team rather than concentrated on the individual it encourages the individual to take that risk. Maybe the team would be forced out of the playoffs. So the team lost their (smallish) chance at a trophy but I get a (largish) chance to increase my salary. In rare cases maybe the individual becomes a pariah. Regardless, if the individual isn’t held disproportionately accountable it incentivizes bad behavior. I think there’s a reason leagues ban individuals for certain behavior.

If workers had to worry about the ethics of their employer getting the whole company in trouble, that would be a good thing in the sense of drying up the labor pool for dubiously run companies. On the other hand, the Justice Dept doesn't always land on the side of justice, so smaller companies could end up victims of abuse of the court system in the name of competitive advantage.

> smaller companies could end up victims of abuse of the court system in the name of competitive advantage.

The same already goes for things like IP and trademark, so that's a fair bet. Good point.

> I think this may create asymmetries between risk/reward for those (real) people making the decisions.

Those asymmetries wouldn't be new, because the corporation as a construct already shields the real people making the decisions, along with the jurisprudence of slaps on the wrist. Are companies held accountable for their "externalities" today, like mass foreclosures in real estate, exploitative labour conditions, poisoning the water supply, oil spills, climate change or destruction of habitats?

In keeping with the prison metaphor, would you work for an "ex-con" company? How about one on "probation" when you've got a family to support? Would you invest in one? As I see it, the potential for self-corrective behaviour is greater with my (admittedly, off-the-cuff) suggestions than the status quo.

I think we’re in agreement. The asymmetric risk I was speaking of is the status quo where individuals are not held accountable but rather the corporate “team” is via fines etc. It makes risky decisions more palatable to an executive officer because they have less downside skin in the game.

Doesn't it have a different effect, though?

Let's assume you have a company like Volkswagen and the corporate executives have decided they play the game of not getting informed about some really shady business practices which are helping the company to earn good money.

Would it make sense for Germany to punish Volkswagen by any of the means you mention, thus weakening the company in relation to foreign car makers, vs. to hold all (or the relevant) executives responsible, seize all their assets, prevent them from working in any administrative position ever again, limiting their income to a certain amount. Like really sanction them.

The company would continue to run, shareholders would be affected minimally, the problem would have been corrected. Of course this is a blue-eyed look at it, but seriously, you also can't do the comparison you are making. They just don't have the same effect.

> thus weakening the company in relation to foreign car makers

Now you are getting into too big to fail territory where applying the letter of the law affects the workers/citizens

Similar things would happen due to gross incompetence from workers causing and oil spill (Exxon-Valdez disaster)

Punish the shareholders, but let the company continue working. In the minimal case this is a tax on profits, in the maximal case this is a nationalization with no compensation.

> to hold all (or the relevant) executives responsible, seize all their assets, prevent them from working in any administrative position ever again, limiting their income to a certain amount. Like really sanction them.

All for it, if it actually happened anywhere in recent history. I'm not being facetious, but I'm not aware of any examples or am failing to recall them. Do you have any in mind?

> the problem would have been corrected.

I'm not so sure. Suppose the company made massive profits (or avoided capital expenditure, or limited losses) by cheating at something like emissions. Then, the C-level execs get fired, their assets get seized and they're barred from holding administrative functions again. Did the company not still gain massive profits? Do you think it wouldn't be able to find another set of fall guys, if it pays them enough? Wouldn't the company do it again, if the risk is offset to a bunch of figureheads? Your suggestion would only rule out bad behaviour by those same actors in the future. In a more charitable reading: it would lead to better outcomes than today's rules.

Meanwhile, the damage through emissions and particular matter has been done. According to the WHO (0), about 25 people died of particulate and ambient pollution per 100k people in Germany in 2016. That puts it at 2000 people country wide that year. Did Volkswagen kill anyone by doing this? If so, how many of those could have been avoided had they not cheated on their tests? What about the impact on climate change? How were these problems theoretically addressed by seizing C-level execs' assets without giving them jail time?

> Would it make sense for Germany to punish Volkswagen by any of the means you mention, thus weakening the company in relation to foreign car makers

Yes, because the infractions were socially destructive. After all, the German government's first responsibility is towards the greater good for its citizens. According to Volkswagen's website (1), 44% of their employees or 292,378 people work for them in Germany itself. Directly, of course. Applying a fairly generous, tenfold knock-on effect, less than 4% of the total population - 2% of the active population - works for or with them. According to CNN (2), it represented 2.7% of Germany's GDP.

Also, it would hurt and stimulate competition. Not being able to pay out dividends for a year due to revenue caps, not being able to sell products in Germany that year due to cheating at exchaust measurements, etc might change shareholder voting and investment behaviour. It would damage the brand's image, reduce its ability to attract employees, etc. Maybe market forces would then finally be able to correct bad behaviours. Today's "cost of doing business" slaps on the wrist simply don't seem to have any corrective effect whatsoever.

> you also can't do the comparison you are making.

I was being hyperbolic for effect. When staying within the confines of pragmatism, surely some kind of revision to corporate/criminal law (or its enforcement) is warranted. Most people don't get the death penalty, either, or go to jail. Hell, apparently some people don't even get speeding tickets! The same would probably go for corporate actors even if the consequences were steeper.

[0] https://www.who.int/data/gho/data/indicators/indicator-detai...

[1] https://annualreport2018.volkswagenag.com/group-management-r...

[2] https://money.cnn.com/2015/09/22/news/economy/volkswagen-ger...

Require all c-level execs and board members to sign affidavits proving they had zero knowledge of the illegal activity, any who were found to commit perjury later on will get 5x the original sentence that normally is given for the crime.

Anyone who provides proof of perjury on another member of the board/execs will receive leniency/clemency.

All felonies against corporations must hold at least one person in jail for a minimum of 3 years. Every c-level exec must serve a minimum of 1 year, with very few exceptions... (e.g. CTO started work one day before everything went to shit, literally had no knowledge)...

I also think cops who cover up for, or are "quiet" about other cops who've committed crimes, if it comes out they "knew" and didn't tell anyone should serve the same sentence.

People in authority need to have consequences, the only way to stop corruption is for corruption to be painful and very complicated so that only a "few" get away with it, the more people get away with it the more it happens.

>Joe Bigshot, former SVP at BigCo, was sentenced to 5 years in jail, and had to sell two of his nine houses to pay the $20M fine" is much better.

Well, they sort of do that in Russia. So the CEO/founder of almost any sketchy company is a homeless person that signed the paperwork in exchange for some free vodka. Didn't particularly solve the problem.

Corporate fines just need to be sufficient to make such "business" unprofitable. "BigCo fined for 5% of its market cap" would be quite a deterrent. Except, it won't be happening as long as the regulators are in bed with the big business they are supposed to regulate.

oh, regulators are playing the market both ways. congressmen and senators don't have any issue with trading options.

The second paragraph of the post you are replying to seems to anticipate this response:

"So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing."

In the post-Enron world, however, executives have learned how to use incentives to motivate their minions to break the law without being explicitly told to do so. On the one hand, this makes it difficult to prosecute those who bear most responsiblity; on the other hand, more effective prosecution might curtail the supply of minions who can be motivated to be compliantly criminal.

"Will no one rid me of this turbulent priest?"

Also "Working Towards the Führer" [1].

[1] https://en.wikipedia.org/wiki/Ian_Kershaw#%22Working_Towards...

So - stochastic dictatorial regime? (stolen from: stochastic terrorism).

> Well, they sort of do that in Russia. So the CEO/founder of almost any sketchy company is a homeless person that signed the paperwork in exchange for some free vodka. Didn't particularly solve the problem.

Can you find me a reference to this? I could believe it, but by default I'd be surprised if it were true at any real scale.

We refer to such person as "зиц-председатель" which means chairperson-to-be-jailed

> Corporate fines just need to be sufficient to make such "business" unprofitable.

This seems untenable because large businesses will then be forced to break individual business units into separate corporations to manage risk. At first glance this might seem fine, but you'd basically be creating huge drag on the economy bc large businesses benefit from economies of scale.

I’d also like to see more fines in the range of multiple years’ worth of revenue, but it wouldn’t change directors’ incentives since they still have limited downside exposure and therefore asymmetric payoffs. Even if a CEO runs a company into the ground they’ll probably still be rich since they only have levered exposure on the upside (through ISOs, etc.) and comparatively limited exposure on the downside.

There's no need to put Exxon in jail. Exxon is what the C-level executives make it. If they decide that Exxon is going to break the law (or permit it to happen), and are held personally responsible, that is all you would need to do to see a large change in behavior.

Shareholders are too far removed from personal responsibility, and holding them responsible beyond the financial risk they already carry would basically destroy the rationale for the existence of limited liability corporations.

Normalization imprisonment of boards of directors and executive officers of companies that break the law.

I tend to agree, but how do you deal with sketchy companies installing a sham board and executives?

Why try to stop it? Pretty sure a sufficiently enabled and incentivized prosecutor will be able to find the actual culprits. "Discovery" exists as a legal process after all.

Sham boards/executives only are issues if the prosecution itself is a sham, more concerned with the appearance of the thing than deterrence.

My interpretation of the GP was that if companies are guilty of wrongdoing, boards and executives should be imprisoned without any additional burden of proof required to establish individual culpability. This sounds somewhat appealing, as how can these people _not_ be responsible in some way?

Otherwise, no need to single out the board.

Yes, target the leaders responsible for criminal activities.

But perhaps the shareholders should bear responsibility as well.

Maybe if certain percentage of ownership can be proven, by any route. Let's say 1%. So you own 1% of company and it does some criminal. You will suffer 1% of penalty.

Yeah, personal responsibility is great and all; a vital piece of the puzzle. Someone will always be willing to be the fall guy for money, though. It doesn't seem to make logical sense, because what's the point of having millions and being locked up? but people aren't logical.

I do fear shifting too much responsibility to individuals will just absolve the people really pushing for this stuff, in favor of just finding employees to blame, and constantly making individuals fear for their jobs (and being blacklisted), or prison... but the ones responsible will have nothing to fear.

You may enjoy reading this press release, then.

https://www.justice.gov/archive/opa/pr/2008/September/08-at-...

Unfortunately, there aren't too many of those.

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

When a car runs over a pedestrian the car is not jailed, the driver is.

When a corporation runs over a town, why is the person or people "steering" the corporation not jailed?

I guess the corporate equivalent would be the forced shutdown of all company infrastructure for N months.

that just burns all the regular people working regular jobs at that org.

So fix the social safety net, too big to fail is not something we want to have, especially when it comes to actively harmful companies...

Jailing the people responsible seems like a way better option than putting potentially tens of thousands of people on welfare.

Managing the long term cost of reforming entire organizations is probably not worth it, better to destroy it AND jail the leaders.

Who not both? Just because it’s normal that low level workers are fired and get nothing doesn’t mean that’s how it has to be. Severance could be generous enough to make this work out.

Part of the punishment could be that the company still has to pay all salaries and hourly wages while it’s shut down.

With what earnings would they do this?

Their cash balance, debt, or equity raise. Or they go bankrupt. That would be part of the risk of doing something that got your company this punishment.

To be clear, I’m not advocating these shutdowns as a good idea, there are a lot of implications that I haven’t thought through.

Who is going to invest cash into a business that has to stop operating for N months, while maintaining everyone on payroll?

Why would anyone invest anything in this scenario? Most companies in the world operate without any investment whatsoever.

As we saw with the covid market crash, a lot of companies (like airlines) don't keep a lot of cash on hand. If they had 0 revenue for several months but still had operating costs, I am assuming they would need a loan

Perhaps one of the many professionals working in distressed debt or special situations? If you're not familiar, there are desks at Goldman, etc called "Special Situations" that focus on relatively niche investment opportunities. Investors just need the price to be right. Would likely be bad for the shareholders, but again, that's part of the punishment.

There could be a price that worked but I don't think there are many businesses that can go offline for several months and come back fine. I'm most familiar with the industry I work in, (O&G), where a day not operating is an incredible loss. Is shutting down the oil refineries and petrochemical complexes what is best for the country? I just struggle to see how this wouldn't just punish normal workers and furthermore just make the economy worse off as a whole

There would be economic damage, no doubt. And maybe to the level where it's politically impossible to enact this kind of thing. And maybe it's a stupid idea :-)

Banking? Raw materials? Shipping?

How do people think that all corporations/companies are discretionary?

I'm against the death penalty, but I would have no problem with seeing a corporation put to death in the worst situations.

Real consequences for the officers and a complete rejection of "we had no idea this was happening!"

> So, we need to both move more towards prison and start digging in to which actual people inside bad corporations were responsible for deciding to do wrongdoing.

And that's like turkeys voting for Christmas. In most Western countries, governments, political parties and businesses are so intertwined, your member of congress/senate/parliament is probably a businessman (Trump!), or is lobbied by businesses, or the party is funded by business.

That's not to say it won't happen, but it takes something fairly seismic to make governments act.

This is one reason why CEO pay has skyrocketed: hazard pay. Something goes wrong, even if the CEO had no idea about it, and who gets vilified and maybe even prosecuted? The CEO. Just saying...there are trade offs for everything.

Is that really a reason for skyrocketing pay though? Struggling to come up with any instances where this actually happened and such "hazard pay" was "justified."

It's an excuse but not a good reason. The reason is more that people on top of the income/wealth divide have the power to give themselves more power and keep growing the divide, and they're unafraid of the risks that come with the reward. Populist uprisings are a thing of the past in the info age. The little people are sufficiently surveiled and controlled by the network, by partisan propaganda that keeps them infighting, etc.

Hazard pay? Why this sounding like CEOs do deep sea diving, welding huge oil pipes while squid and sharks look at you in a tiny cage with a few thousand amps of arc.

Let's call it what it is, It's a golden parachute.

I'd postulate that taking responsibility and leading the effort to genuinely right the wrongs would earn the company way more godwill from the people and media than activating your trump card which in this case is a mountain of cash to land on after successfully escaping responsibility.

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