Which I never understood. Normal people that get caught doing things like selling stolen goods have to pay a fine on top of all money they may have made from selling it. Why aren't companies treated the same?
It's more of a hostage negotiation. You want to hurt the company and it's owners, but if you sue too hard, you're likely to just hurt it's workers and it's customers.
It's why preventing companies from reaching _anything near_ monopoly size is so important for corporate jurisprudence. "Too big to fail" is just the tip of this insane iceberg we've allowed to grow into our economy.
The owners of big companies include lots of pension plans, index funds, etc. Hurting those owners, who didn't have any say in the bad decisions, is probably not what we want.
Jail for executives who approve or have knowledge of illegal activities sounds good to me.
Pension and hedge funds finding that their assets are at risk due to changes in perceptions around privacy are actually among the most effective market mechanisms for changing corporate behaviour. Far more so, it seems than the consumer/retail side of the market, where leverage is effectively nil.
Investors can effect leverage because they're not stuck with a monopolistic / oligopolistic market with a small number of vendor choices for a particular good. Investors have the entire market of stock corporations as potential investments, and can enter into or exit from those which pose attractive opportunities or undue risks with very few additional concerns.
Oftentimes these restrictions limit them to a subset of companies in a certain market to fill a specific niche in the name of diversification. Are they artificial limitations? Sure, but only in the sense that there is no regulation saying they cannot find a different company to invest in.
All that to say that things are not nearly as cut-and-dry as it may seem.
Is there any investment category in which an institutional really has only, say, 1--3 options? Because that is the relevant comparison.
I'm going to posit that investment markets are overall more competitive than consumption markets.
(They may have other issues, including some that, of all people, Matt Ridley's pointed out. I believe it's somewhere in this discussion with Johan Norberg and David Runciman, which I've listened to previously but not just now in referencing it: "The New Optimism" on Intelligence Squared, <https://www.intelligencesquared.com/events/the-new-optimism-...>. It's worth listening to on its own. I'll admit to being partial to Team Runciman myself, but Ridley's comment on asset markets has been bouncing around my noggin for a while.)
Ideally, the people responsible for managing the money on behalf of these institutions end up bearing most of the responsibility.
But then who would write the campaign contribution checks on which our government depends to survive?
I suspect one possible outcome is many people wouldn't want to take the risk to become an executive, and the percentage of executives who wouldn't mind taking risks of going to jail will increase, which is not a desirable outcome.
Jailing people with only knowledge isn't the right move compared to having a fully anonymous whistleblower program, with fine sharing. It sucks that there has to be zero transparency but you don't want some unfortunate schmuck doing the right thing and then getting blackballed for the rest of their career for it. But jailing the people with authority and accountability is completely doable-- if you didn't know that's on you because it's literally your job to know and that lands you 3rd degree $crime. If they can prove you knew that's 2nd degree, and if they can prove you ordered it or signed off on it then that's 1st degree.
But that's the problem. Crimes are profitable.
Suppose there are two insurance companies. One is following the law, the other one is bribing a mid-level employee of a car company to give them driver info and then using it to set rates and solicit policies. The CEO of the car company doesn't even know it's happening and the CEO of the insurance company does, but isn't telling anyone about it and it just looks like they have above-average margins on their policies.
As long as they don't get caught, the ones breaking the law are not only making money for themselves, they're the ones investors will choose to invest in when all they can see is the bottom line. The honest CEO of the other insurance company gets deposed because investors want someone who can get the same returns as the cheating one, so they cycle through executives until they get one that posts better numbers because they're cheating too.
Some of them will never get caught and come out ahead. The others expect that to happen, which is why they're willing to do it, and if they do get caught then they get replaced by someone else who thinks they won't get caught.
The underlying problem is the structure of the system. The owners want higher profits but are also a diffuse group without the capacity to pay detailed attention to how it happens, so you create evolutionary pressure to cheat. What you actually want is for companies to be operated by their owners because then the owners know what's happening inside the company and can distinguish between a company which is making more money because it's well-managed and one which is making more money because it's cheating and putting their investment at risk. But then we need to stop having megacorps with diffuse passive investors and instead have small and medium businesses which are operated by the owners.
I don't see how your example resolves as anything other than the mid-level employee is guilty of bribery, and CEO of the insurance company is guilty of 2nd degree $yet-to-be-derermined-crime-name. I don't expect a CEO to somehow know of literally any crime that occurs by any of their employees, just crime by policy.
Certainly not. For example, if a company is run by an above-average executive who can produce good results without cheating, they won't be replaced by someone who cheats. But that's no general solution because it's not possible for every executive to be above-average.
> For crimes that have a low chance of being caught the SOP is make the punishment disproportionately severe and weaponize the people likely to observe or carry out the crime.
Yeah, that's the War on Drugs strategy. It's aggressively broken and encourages the dangerous and socially destructive behaviors associated with organized crime.
> I don't see how your example resolves as anything other than the mid-level employee is guilty of bribery, and CEO of the insurance company is guilty of 2nd degree $yet-to-be-derermined-crime-name. I don't expect a CEO to somehow know of literally any crime that occurs by any of their employees, just crime by policy.
A CEO in a company that isn't the size of a country is going to be directly involved in the company's operations. That companies have grown so large that their owners and executives no longer have a handle on what's happening inside them is the problem.
Which is why we need the law to make crimes not profitable, or at least to attach enough personal risk to dissuade decision makers. It's how we got US corporations to stop dispensing bribes in foreign countries, to which exactly the same logic applies.
Then there are people with nothing to lose. Some mid-level manager who isn't very good at it, isn't making his numbers. If he plays by the rules, he's about to get canned and lose his house and his wife. If he cheats and gets caught, there's a 40% chance he goes to jail, but a 60% chance he not only makes a lot of money but gets promoted to the head of the company because his numbers are so good. There are going to be too many people willing to take the risk in that case. It's going to happen a lot of the time.
To fix this you need to attach a penalty to someone who both has something to lose and is in a position to detect the crime. But the someone with something to lose are the owners and when they're diffuse passive investors they're not in a position to detect the crime.
But exactly the same argument applies to paying bribes to foreign officials, and yet the FCPA at least cut that down. I'm not naïve enough to believe that it eliminated it, but surely it's made a difference.
> To fix this you need to attach a penalty to someone who both has something to lose and is in a position to detect the crime. But the someone with something to lose are the owners and when they're diffuse passive investors they're not in a position to detect the crime.
You clarified later you meant the stock owners, but there are also executives of the company. Somewhere up the chain of command will be someone who's reluctant to have their name attached publicly to the behavior, and the possibility of legal hazard will encourage them to regulate their reports appropriately. This is definitely a place not to let the perfect be the enemy of the good.
If they had any accountability they would find ways to put themselves in such a position.
I just don't see that twice-removed latent effect having worse consequences for society than the base problem. Not by a long shot.
As a kid, I grew up playing in a marsh that turned out to be the illegal, unmarked, non-access-controlled chemical waste dump for a large specialty chemical plant nearby that had operated there since the late 19th century. Those executives knew what they were doing was wrong— it was the 90s, not the 60s— but spent decades telling bald-faced lies to everyone involved, and when the writing was on the wall for regulatory action, they just dumped the company onto a shell company so the large international parent corporation wouldn't be in the news, and retired happily in huge mansions while the parent company dumped probably 2 years profits into the superfund project to remove the most dangerous stuff and cap/fence of the entire area. I could certainly never know for sure how much that exposure affected my cancer, but the chance of it being zero is pretty slim. Nobody even told me or anyone else around there— I only knew about it because I dug up some old EPA document scans. You're goddamned right they deserve to be in jail and not taking 4 month yacht trips. On a moral level, I think they deserve worse. It was not a sparsely populated area.
A) Reporting on serious topics takes a lot more effort than recycling news wire coverage and rehashing political argument trends on Twitter. That means having to collect more analytics data to sell, and charging more than a few dollars per month for subscriptions. Sheesh.
B) People find serious topics depressing: reporting on important things that might be uncomfortable or gross can only lead to lost clicks, subscriptions, and viewers.
C) Upper-management couldn't even try to replace such reporters with web-scraping LLMs. Think about the dozens of starving would-be prompt engineers who won't get hired to replace thousands of journalists. They have families to feed too, you know.
D) There's a good chance that someone in the C suite or someone they know will be put in a very uncomfortable situation because of this! Unacceptable.
What sort of dystopian business hellscape are you trying to lead us into?
Claim that $BAD_SIDE_EFFECT would be bad, even if it's better than the status quo.
Nice way to prevent change.
I mean... Shareholders are ultimately responsible for the company, they elect the board etc. If shareholders were impacted by this, maybe it would make more folks think twice about "passive investing"?
It is exactly what we want. Otherwise the only deciding factor for what to invest in is maximum profit and that just incentivizes companies to skirt the law as much as possible.
It's definitely not what we want in the short term, but thinking longer term, it's index funds and such that need to remove these actors from their portfolios if we really want to start reshaping the economy.
Life hack: make your activities so complex and distributed that it's impossible to tell who, exactly, is responsible for what. And then also just delete communications when you can.
Maybe then the inflated CEO salaries will make some form of sense for once, instead of the current system where there's 0 actual risk for them other than a golden parachute waiting for them at the end of the road after having fucked millions of people's lives irrevocably.
There will always be some bottom-feeding prosecutor willing to come up with absurd hypotheticals to ensure no one ever gets freed by this loophole.
Why do you think this? Executives have a fiduciary responsibility to their shareholders, so if these actions are more profitable, they are legally required to perform them. Moreover, the primary beneficiaries are the owners.
Indeed, if you harm the shareholders by reducing the price of shares, you are harming them in the most fair way possible: In proportion with their share of the responsibility.
Zero percent of this is correct, and even if they had a legal responsibility to make "as much money as possible", which they don't, that would definitely not force them to commit crimes
The "fiduciary responsibility" is NOT "to make every dollar possible", it is a "don't purposely hurt the company" rule.
Of course the duty does not extend to committing crimes. I was being a bit cynical. You are right that profit maximisation and fiduciary duty are distinct concepts. In practice, though, the owners are profit maximisers. Companies that do not profit maximise are less attractive to investors, attract less investment, and are outcompeted.
To advocates of the market system, this is a feature and not a bug. But its effect is that companies operate "optimally" within the bounds of the law - said differently, the line between legal and illegal conduct is generally skirted as closely as possible. And when, as other commenters have noted, punishments for breaking the law are on average less than the profits incurred by illegal activity, selection bias means you are left with lawbreakers in the long run.
You are right that this is not a (direct) consequence of the fiduciary duty of an executive. I stand by my main point, though, that this behaviour is a consequence of the owners' selection criteria, and they deserve to be punished for it.
I mean, people will put up with a lot, but eventually they'll realize that the market isn't magic and its continued failure to address our the economic and social conditions can be blamed on a specific enumerable class of person.
Pensions are a large part of public sector compensation.
No. What you'd really want if you really wanted to fix things is to hurt the top and mid-managers who decided to commit those offenses. Unfortunately it almost never happens.
No, they’re not.
Something tells me the concern is more about the current shareholders than either mentioned party.
I know it's a number that gets calculated on cybersecurity assessment sheets, but I've never seen it being in any way connected to reality. Best I can tell, the actual reputational damage is almost universally $0. Security breaches are non-actionable oopsies - unless your product is literally preventing such breaches[0], it's going to be seen as a random event that has no bearing on customers making their purchasing decisions. After all, it could've happened to anyone, and might just as well happen to any of the competitors, and it doesn't even impact any of the subjects directly.
--
[0] - And not even then - see e.g. CrowdStrike, who're busy turning the greatest security fuckup to date into a net positive event for them.
Changing cars is a heck of a lot easier than a corporation ripping out software that they likely have a 3-year contract on, and would require millions in services on top of just eating the cost of the contract itself.
My bank isn't a monopoly. They provide with terrible service. (Truely terrible). Trouble is all their competitors are just as bad.
GM gets no blow-back from this. Firstly because "nobody" cares. Second because "I bet you they're all doing it" and thirdly because in 20 minutes I'll be outraged about something else. By the time I buy my next car I can't remember who had this issue, plus all the other complaints about all the other manufacturers.
If I stopped buying from every company that has, or is, behaving badly, every company that had a security breach, or contributed to the wrong politician, or hired a racist, or whatever, I'd never spend a dime.
Hacking the cellular is not damage to them (you bought the car.)
But mostly, given that you have principles (which I applaud), tell me which brands you would consider. (I'm pretty sure I can Google a bad-news-day for them too.)
In so far as the sense that anecdotes are not data. To the extent that Tempest1981 is a representative sample, it is an observation of damage to the brand's reputation.
I believe this is total/car, not per year. They did it for pennies.
https://www.pcmag.com/news/senators-your-driving-data-may-ha...
If you are gonna sell me down the river, at least get a good price!
While both parties are funded by corporate interests, they still are far enough apart on policy and personality for the choice to have an impact.
Corporates are mostly caring about tax policy and industry regulation. They (mostly) have neutral stances on things like Healthcare, equality, racism, immigration, abortion and so on.
Once that pool is exhausted, then you ding the shareholders (via draining the company's own coffers).
Sure, this would give rise to some schemes of "how do I squirrel away my bonuses, in case they come after me tomorrow", but hubris & the unpredictability of this would still lead to some big, eye watering examples. Which would have the necessary deterrent effect.
And yes, this WOULD be justice. Those who did the wrong, and profited from it, SHOULD pay.
The simple solution to such games is the same as with other monetary fines for individuals: if you can't pay the fine, you go to jail.
One thing we really need to be careful to avoid whilst going down this proposed route, is to not mimic the failure mode of socialist/communist entities. I.e. Whereby performance is mandated (produce X amount of grain), along with constraints and other mandates that make the first or all mandates impossible to achieve at the same time, thereby guaranteeing failure and/or reporting shenanigans.
E.g. in our current world context. Mandating increases in hiring as a percentage, but then also giving a mandate that we can only add female/non-white employees; all while existing in a male/white dominated pool of applicants. We have to give reasonable and understandable growth / performance mandates, and not pie in the sky stuff that takes generations to fix but we want it done by next quarter.
They can pick one of three choices: Don't be evil. Pay more than they made. Go to jail for the same duration of time as having stolen Option 2's money, and not the scapegoats, people actually in charge.
i don't want electronics built into cars
i don't want data coming from my car
i don't need a phone to be built into my car
i don't need navigation to be built into my car
they need to stay in their lane
we need anti-enshittification laws
It really just smacks of greed and nothing else... selling cars has a long history of being a profitable business on its own. You don't need to steal your customers' data to turn it into another revenue stream, but it sure looks good on a financial report.
Its not only greed, its also a race to the bottom. If you're GM, you might prefer not doing that, but if your competition starts doing that, then you're at a competitive disadvantage, because they'll have more money to invest in engineers/production optimization, etc. So the logic then goes that you might as well do it first.
This is a case where you need government regulations to enforce mutual disarmament.
There are car people out there who would rather drive a fully analog car without any electronics such as ABS - though that typically means a hardcore sports car such as a Caterham.
Then the only viable solution is a horse. Ha!
https://www.snopes.com/fact-check/infrastructure-bill-track-...
Trying to pit automakers against each other on this topic and others is the misdirection. They want to distract you from wanting alternatives so that you don’t even need to have a spying car in the first place.
I’m suggesting that future growth can be handled better by providing alternatives to forced car ownership, and so if you don’t want your data collected by your car you can have an alternative.
There is no reasonable alternative. Public transport is unreasinable for most people when you look at suburban and rural areas for the bulk of places people live and work given how spread out everything is.
But you’re also missing the forest for the trees. There are easy wins in public transit that can reduce car usage but we refuse to fund them. Bike lanes and street cars in urban areas for example can reduce car usage (and reduce congestion for drivers) and allow us to do more with less. I’d prefer riding a bike a mile down the road to grab groceries (or just walking) but our infrastructure makes that impossible and so I have to drive a car, taking up a limited parking spot and slowing your driving down too.
Most Americans actually live in urban environments as well. We aren’t that spread out actually.
As in - you are asking people to sacrifice a 15 minute drive home for a 1.5 hour public transit commute with home in many cases.
Their life and their time is worth more than enough to get a car at that point.
There is also no "walking to the train or bus stop" for most people because they live spread out enough that there is no conceivable way public transit could work as a replacement for cars.
They call it park and ride. [1]
People who live in more remote areas or even not far away in the suburbs will park their car at the parking lot and hop on the bus as it heads toward areas like downtown where a lot of jobs are or to other large employment centers. Sometimes people just meet up at these locations and carpool too so you don’t have to take the bus.
They don’t have to stress about traffic, or pay for parking (parking lots are economic outflows so this is a nice side effect), and they can work or read or do any number of more productive and interesting things instead of pay attention and drive.
This is just one example where without even making any drastic changes we can reduce reliance on cars and leverage existing infrastructure better than we are today.
As cities like Columbus and other small/medium size cities modify zoning to allow for more dense development in urban corridors instead of additional vehicles on the road, turning your 15 minute commute into 45 minutes - 1 hour, we can reduce the impact of population increase on our highways and we can do so at much lower cost in all aspects with better transit (bikes, trams, bus, sidewalks).
Socializing auto-only infrastructure is not smart and it’s way too expensive not just in terms of taxpayer dollars but also in the mandatory costs of car ownership: insurance, loans with interest, data harvesting that you won’t have a say in, gas, wars to secure gas supplies, kids dying in car crashes instead of living good lives, new windshield wipers, oil changes, etc. - these are all costs we can reduce for more people. [2]
For those living in rural areas nothing really changes (frankly not much changes for suburban areas either). They’re already on the gubmint dole and receiving large road maintenance subsidies that their tax base can’t support. They’re more than welcome to spend an hour driving and paying for parking but that’s not an excuses to not build sidewalks and other basic necessities where most of us live.
[1] https://cota.com/static/2cfd967c94034d9508e7b4f8eb01fa3d/cot...
IE: People love the iPhone 13 mini — and it is immediately discontinued for low sales.