What do you suggest?
I don't have an answer but it seems difficult to penalise a corporation in any meaningful way.
I don't have an answer but it seems difficult to penalise a corporation in any meaningful way.
The legal frameworks exist. There is just no will to enforce laws if the crime is done on company time.
In corporations, nobody knows what the other employees really do, nobody know where the decisions are coming from and why. Employees and managers make stupid decisions under pressure. You can find who is responsible legally but you’ll never grab the people who profit from the wrong culture they established that incentivize bad behaviors and punish employees that are just here to do their job.
Sure you can: if you have accounting fraud the CFO is liable, and the only question is whether it’s for deliberate fraud or negligence but in either case the buck stops at the top. The reason why such charges are uncommon is because those people tend to be politically well-connected, not because it’s impossible to come up with a regulatory solution.
Lots of these aren't "person up top said to cheat" but usually "person up top has unreasonable requirements".
Can you really go after someone who was pig headed and expected the impossible because their subordinates cheated?
In contrast civil penalties are appropriate here, just need to adjust the amount to discourage the behavior.
The defense isn't "we had no idea about anything" it is "here is the mountain of evidence that we had that shows everything was fine".
In this case those above likely have similar evidence to the regulators. Passing tests.
The CFO is one example. Bery specific duties, responsibilities, and can pverride anyone on certain things.
We need more of this. Privacy, security officers woth specific duties. Same with anything such as safety.
Fire the board and the C-suite, wipe out all the shareholders and run an IPO, take the proceeds as a fine or restitution for those affected.
Or if you’re feeling particularly mean just deny the corporate entity’s rights (and parents) to do business at all, force the owners to run a fire sale for any value they can grab.
You penalize corporations with fines proportional to their total value, removing permissions to operate in certain ways, break them apart, or just legally dissolve them entirely.
The problem is all too often fines are like 30 seconds of revenue. Make it 50% of market cap forcing them to raise cash or pay the fine in stock.
You also end up punishing ordinary people who did nothing wrong.
A better punishment is putting the company under receivership whose goal is reforming the behavior of the company.
If you can identify the right people you can fire them, but it's not always possible: The manager pressures the employees to deliver better results, the employee cheats "a little", and doesn't tell the manager that that's how he got results.
In that scenario who is responsible? The manager will say "I didn't tell him to cheat, and I didn't know he did it", the employee will say "it's not my fault, the manager set such expectations that he forced me to cheat".
There's no clear answer, so instead focus on reforming the culture.
For FAANG this means fines need to be on the order of $100B for something significant.
You might have to do this once or twice but once the risk is real investors will put appropriate pressure on boards, and influential employees paid in stock will have personal motivation.
You are again punishing exactly the wrong people.
That's the usual reason given for not imposing a corporate death penalty.
The problem with that argument is that it makes it so nobody is ever responsible, competition must act the same or risk losing to the misbehaving competitors, and all you have to do to be above the law is have employees, investors, and misbehavior complicated enough to be difficult to understand who is responsible.
(It involves the execs crying at press conferences.)
The corporation won't suffer but the next people will have a disincentive to commit illegal acts.
I suppose if you just held the CEO ultimately responsible...
The current system isn't working, it's producing too much abuse.
My argument can be expanded to the fact that if a “rogue underling” did this without C-level input that leadership at the company is negligent at the least, or attempting to abstract responsibility and hide the issue behind deniability at the worst.
Addendum: I should have picked a better phrase to start with. I agree that the legal process is the correct way to proceed, but once a determination of culpability is made, hiding behind layers of leadership should not be the defacto norm.
My original point—-which was likely not worded well—is that the humans which make up “society” need to reach a point where they can recognize that corporations make and follow-through on decisions because they are supported by sign-off from our fellow humans, not because of an abstract corporate mechanism.
Thank you for the sidebar.
Gee, what do you call a jury decision, then? A non-collective decision?