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Comment by njovin | Hacker News Reader

I look forward to the day that we punish corporations by removing their freedom (ability to operate) instead of fining them laughably small percentages of their yearly revenue for serious violations of laws and regulations.

In reality I understand that this would harm the employees and the public to an unacceptable degree so maybe some form of “jail time” whereby all profits go directly to non-executive employees and price discounts would be more effective. Depriving shareholders of dividends may lead investors to “vote with their wallets” and we’d see more of an actual free market instead of what we have today where economy-destroying decisions go effectively unpunished and in some cases are rewarded by bail outs.

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Confiscating profits wouldn't work, many companies are reinvesting their profits. Probably the best way would be to just make the fines hurt more, by using a fixed and non-negligible percentage of the monthly/yearly revenue, much like Finland does for traffic fines.

I can’t believe we as a society don’t adopt this idea more. Punishment should be a percentage of taxable income of that year. The impact should equally felt regardless of your current financial status. Extending this to a corporation would simply put them in back foot in a market.. which is indeed the punishment.

In the US, income based fines have questionable constitutional allowability. I fall on the "the seem constitutional" side, but some people apparently think it violates the 8th amendment.

Percentage of revenue seems like the least likely to be gamed metric.

This is also a problem since some businesses have very high nominal revenues and very low margins.

Two companies with $100M in revenue, one with 2% margin and one with 50% margin.

You’d fine then the same amount?

> You’d fine then the same amount?

Progressive fines on people are based on their income, not how much they have left in the bank at the end of the month.

Sure, but expenses don’t vary a much for people versus companies.

You don’t meet many people who make $1M in a year who have unavoidable expenses of $900k.

Even CNN disagrees with your take.

https://edition.cnn.com/factsfirst/politics/factcheck_e58c20...

Fauci was wrong. Simple as that. Better to just own up to it.

> I look forward to the day that we punish corporations by removing their freedom (ability to operate) instead of fining them laughably small percentages of their yearly revenue for serious violations of laws and regulations.

I agree, but like you mentioned, the externalities on innocent parties would be too great. Also a lot of companies do not issue dividends, so focusing on them would do no good in a lot of cases. I think a threefold strategy would need to be implemented:

1. Direct action against executives in the board (e.g. heavy fines amounting to a large fraction of their total compensation and/or jail).

2. Confiscation of dividends for a period of time.

3. Forced issuance of new shares to dilute existing shareholders, with sale proceeds going to the government.

One issue is that shares can be traded, so it's possible for a shareholder to benefit from some bad action, then avoid any punishment by selling the shares before the punishment is implemented. Maybe such people could be shared a per-share fine based on shares held at a particular date?

>Maybe such people could be shared a per-share fine based on shares held at a particular date?

I think it’s nearly impossible to expect most shareholders to understand the business underpinnings to this degree within the existing system. Think of pensioners with mutual funds, do you think most even understand all the businesses in those funds let alone the operations of those businesses?

To me, this is akin at employees being punished as well. Both benefit from the business operations but it’s hard to expect employees to have knowledge and be responsible for the decisions of the C-suite.

> I think it’s nearly impossible to expect most shareholders to understand the business underpinnings to this degree within the existing system. Think of pensioners with mutual funds, do you think most even understand all the businesses in those funds let alone the operations of those businesses?

That's true, but I don't think that matters. Those same shareholders both profit and lose based on all kinds of other factors they don't understand. Adding new ways to lose tied to illegal activity doesn't really fundamentally change anything.

Also, there's something important to note: pensioners with mutual funds have savvy proxies (fund managers) who should very will understand the business underpinnings to this degree, and vote their shares to avoid losses due to these kinds of fines.

>Adding new ways to lose tied to illegal activity doesn't really fundamentally change anything.

I think it does because it creates a adds a dimension to the loss that will disproportionately affect the assessment that of risk. For one, this added dimension has only a downside. Think of an auto insurance company who operates in no-fault States. Their behavior (and by extension, the policies they offer) is changed because the risk they incur is higher despite their customer being a good driver. (The analogy being a “good” company still gets punished in the form of less investment under the proposed rules because the risk to the investor is increased).

Second, while people are well attuned to think about risk, they are very bad at judging it. That’s why the fund managers are not generally capable of out performing the market for extended periods. They are either not as savvy as you assume or work under such constraints that they can’t use it to their advantage. Behavioral psychology/economics shows that people are disproportionately risk-adverse so if you think increased risk without an even higher commensurate increase in reward, they tend to avoid taking on any extra risk.

You are responsible for your property. If you own stock, you own part of a company so you are responsible for its actions. In the case of mutual funds, it's the funds' job to understand the businesses it invests in for you. There could be an exception for non-voting stock though.

Well this is just false. You are not at all responsible for a company’s actions just because you are a shareholder. HN is evidently quite out of its depth with these kinds of threads.

Why not? Don't shares represent ownership of a company? Aren't you responsible for your property?

Just to underscore what was previously stated, I think this philosophy would drastically change the paradigm. I’m guessing it would severely restrict the money flowing into stocks which would have repercussions in other areas like pensions etc. Point being, I don’t think it can just be layered onto the existing system without serious blowback.

As I wrote, there could be an exception for non-voting stock. At least temporarily.

But ultimately, it's supposed to change the paradigm. Because currently the economy is run by paperclip maximizers that no human is held responsible for. Which is not ideal.

Non voting shares are a minority already. Combine that with the fact that literally trillions of dollars would be aligned against such a idea, i fear it unfortunately relegates it to a thought experiment rather than a pragmatic policy proposal.

That applies to literally everything that goes against business interests. It's not an insurmountable hurdle.

The difference here is that you would be uniting all business interests. Normally they are a fractured group with competing interests. It would take a truly revolutionary movement to enact that kind of change. Not impossible, but also not no particularly likely.

> maybe some form of “jail time” whereby all profits go directly to non-executive employees

In theory this would give an incentive to some employees to mess up if they know they won't get caught.

Right, actually impairing a corporation leads to a monopoly and less competition which the state doesn’t want to be directly responsible for

This guides the trend in enforcement actions or lack thereof

There are some books on this

One of my more radical political views is I'm 100% behind a corporate death penalty, as well as direct personal criminal consequences for company principals that engage in fraud or similar.

The sad reality of the world is that once a business is past a threshold of power, it's nearly impossible to hold them accountable. Craven sociopaths know they can do what they do, and worst case, suffer some bad press while they move on to the next thing, banking 100's of millions the whole way.

Make those people truly terrified of the consequences of their actions and politics will be utterly transformed.

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