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Comment by __MatrixMan__ | Hacker News Reader

We need to start seizing IP into the public domain and sending shareholders to jail when their companies misbehave. I'm on the hook if my dog bites somebody, it should be no different if the role of my dog is played by a company.

Monetary risk is not a real enough risk.

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While I’m sympathetic to the sentiment, I don’t see how “sending shareholders to jail” could possibly work, given how many people own shares. It’s like your dog would be collectively owned by a million people. Maybe you mean the board?

A charitable reading of that would be shareholders who have enough sway to push corporate action. Boards, really.

To continue the analogy, if a dog is aggressive and hurts people it gets put down, why not put down the corporation?

Because the ripple effects are much larger. Lay off a few thousand people in most cities and you’re sinking all sorts of businesses that had nothing to do with the crime.

Putting down a corporation doesn't necessarily mean ending a productive operation. Employee or government takeover are options too.

Right, just transfer ownership to the employees and let them decide which leaders to keep around.

So it’s good for employees when the company does something criminal? That seems like misaligned incentives. If you and I can engineer a crime, we can seize all of the stock from shareholders?

I don’t think these solutions are well thought through.

I do think judicial dissolution is underused, but it should require a rather high bar of malfeasance. Significant penality for executives or the board seems like a more sensible first step in general.

"Shareholder" are not people who own a stock in robin hood.

It's large players with board positions who reap the benefits and turn a blind eye to blatant corruption.

> "Shareholder" are not people who own a stock in robin hood.

If you own even a fraction of a share of a business (say IBM), you are, by definition, a "shareholder" in that business. It does not matter if it is via the RobinHood app., or a JP Morgan Chase Premier Brokerage Account.

Yeah, this place is starting to sound like reddit. Unhinged SJW everywhere.

I own stocks in several companies, as most people on here probably do. There's nothing wrong about what they're saying, I'm a shareholder. If one of the companies I've invested in commits genocide I don't think it would be unfair for me to be punished in some way beyond the monetary loss of my investment.

Though I agree that monetary punishments to the company are much more effective than jail for some random shareholders. They just need to be large enough.

It's not about justice, it's about designing incentives to prevent future bad behavior.

If you have neither control nor information that is sufficient for betting that the investment won't harm people, don't invest.

The people on the board are rarely the largest shareholder. In the case of both Google and Facebook, the board doesn’t really have too much control at all since the founders hold the majority of voting power.

There is no room for million people in any jail system on the planet.

What should happen is to send the share price to zero or give to the government.

This was e.g. done with 2008 financial crisis for Fannie Mae and it had been paying dividends to the US citizens since then.

However there exists discussion whether this was a good thing in the end.

FYI, the US prison population is 1.2 million.

Obviously that's not the same as havingva million of currently empty capacity, but still.

Some of the largest shareholders include pension plans and every day peoples retirement accounts

Yes, I got voted to oblivion for stating this

https://news.ycombinator.com/item?id=42831013

But the board is just an elected representative of the shareholders. They don't necessarily own anything and they don't have day-to-day insights over the company, which is where the details of crimes lurk. They might not even have any direct financial interest in the company, and instead they're employed by an institution to represent their interests.

I figure the sentence would be something like:

> 5 years of jail time distributed across the top 20 shareholders proportional to their stake

Ideally a judge wouldn't hand out such a sentence if it involved punishing people who didn't have a controlling stake, but I don't think we should rule such things out. I can be held criminally liable for negligence when my dog does something that I wasn't even around for or aware of, there's no reason that shareholders couldn't also. If you don't have enough control to prevent your property from committing crimes, you should probably change that.

I don't know enough about where corporate structure norms stop and where the law starts to know if "the board" is something that is always going to be available for prosecution, which is why in general I mean the shareholders.

That would be like you sending the whole family to jail if one of them commits a crime. They are separate legal entities.

No, it would be like sending one or more family members to jail because of what their dog did. If the family can't agree on who is responsible for the dog's behavior on their own, it's not crazy to distribute the sentence to more than one family member.

Dog isn’t a legal entity.

Corporations can't be jailed, so if the sentence would otherwise be jail time, neither are they in any way that matters.

So should every one who owns stock in a company - including mutual funds go to jail?

Maybe? It should at least be debatable, not taboo, to consider. One's investment into a criminal enterprise could arguably be contributing to or encouraging that crime. Having this nearly-impenetrable corporate veil that shields decision-makers, footsoldiers, and funders (both institutional and retail investors) from consequences of their actions seems like the extreme end of a spectrum that should be explored. But when you even bring up that it's a spectrum, people clutch their pearls and trot out the "think of those poor retiree passive investors" line that shuts down thought and prevents even considering change.

> It should at least be debatable, not taboo, to consider

It's not taboo, it's stupid and unworkable. You're proposing sending half of America to jail if any Fortune 500 commits a crime. That's a get-out-of-jail-free card, not meaningful deterrence.

Massive. Fines. Everyone keeps trying to be creative about penalising corporations without levying massive fines. Just levy the fines. You don't need to lay anyone off, you're just wiping the shareholders (and management) of their wealth and transferring ownership to creditors.

The "corporate death penalty" was the greatest invention of the corporate lobbyist. It successfully derails conversations about massive fines, which are workable and scary, into ones about charter revocations and whatnot, which is not.

Agreed that massive fines (or, in my view preferably, massive stock dilutions) are better. However

> You're proposing sending half of America to jail if any Fortune 500 commits a crime. That's a get-out-of-jail-free card, not meaningful deterrence.

This is a poor argument.

If the law would be as such and be upheld, everyone would start making damm sure the companies they invest in are trying their hardest to adhere to the law. It would also work as a strong counterbalance to megacorps. Both which would be incredibly positive developments.

It's similar to rules in football. "Well if you start carding players for getting angry at the ref then half the team will get a yellow card every game!". Yes, the very first game this might happen. The second and third it sure won't.

> If the law would be as such and be upheld, everyone would start making damm sure the companies they invest in are trying their hardest to adhere to the law

So everyone in the US is going to do due diligence on all 500 companies in the S&P 500?

Also you act as if the majority of Americans care about the law or ethics? You do remember the election we just had don’t you? The support that the majority has for 1500 criminals who just got pardoned?

No, just Fidelity and Vanguard (and S&P themselves) have to do due diligence for this sort of thing. In reality though, if $100 billion fines were on the table for companies like uber, that diligence would be priced into the stock and it would be far more effective.

> just Fidelity and Vanguard (and S&P themselves) have to do due diligence

You're proposing bankrupting millions of Americans' retirements because Uber didn't follow local taxi rules?

> if $100 billion fines were on the table for companies like uber, that diligence would be priced into the stock and it would be far more effective

Yes. Again, we're re-inventing massive fines.

I don't think that scratches the itch. The point is to hold people personally responsible for what their money is doing. Mutual funds should be risky business because they obfuscate important details from the person who's making the decision--that's not a recipe for markets that work well.

> If the law would be as such and be upheld

It wouldn't be upheld. It couldn't be upheld. The first time somebody were stupid enough to try to uphold it, it would prompt a popular firestorm that would undo its effects. (I'm not even approaching the numerical impposibility of attempting to enforce something like that.)

The way I've been imagining it, the jailtime would be allocated among the top 5 or 10 shareholders according to their stake.

So you propose putting 40% of the population of the US who have money invested in the S&P 500 in jail?

I’m not proposing that at all. False dichotomy. Is it possible that there is a reasonable middle ground somewhere between “shield everyone involved in corporate wrongdoing” and “send every investor to jail?”

Your words were

> One's investment into a criminal enterprise could arguably be contributing to or encouraging that crime

Every shareholder is an “investor”. Well not really, when you buy a stock unless you buy at IPO or secondary offering, you are buying an ownership share from another holder.

So if you really want to go after “investors” you would have to find all of the investors who invested before the company went public and the ones who bought at IPO.

We also have to go after any bank who lent the company money since they were also “involved in the criminal enterprise”.

In the case of Amazon, you would definitely have to go after Bezo’s ex-wife since she is a major shareholder.

You're reading the post of the OP uncharitably (which is against the rules) and are deliberately misinterpreting their words into ridiculous extremes.

Please unlearn that.

How would you read it “charitably”? Be’s repeatedly said that all investors should be criminally on the hook for crimes committed by the companies they invest in.

The thing you are suggesting is jailing every adult American with a 401k when a corporation misbehaves.

You say that shouldn't be taboo, it should be debatable. Alright, I'm listening, tell me how that wouldbsolve more problems than it would create.

Nobody said every shareholder would go to jail, just that it should be more common that some of them do.

But supposing that you did propagate it to every shareholder... I think that creating an incentive to divest in companies that are likely to commit crimes, and to avoid financial instruments where you can't be sure just what it is your money is up to, would create a much healthier investment environment. There would be more homework done before deciding which companies ought to get the boost. As it is, there are no market forces working to prevent cases where investors are enabling activity that are harmful to the rest of us.

Those mutual and index funds where the investor is disconnected from whatever harms their money is doing are a hazard to us all. Investing should mean understanding what you're investing in. The whole system needs more types of risk, it's currently like a car with no steering wheel.

> Nobody said every shareholder would go to jail

You didn't, but the person I replied to did.

Two comments up was:

> So should every one who owns stock in a company - including mutual funds go to jail?

And the person I replied to says maybe so, let's consider it.

56% of US civilian workers have a IRA/401k or other work retirement plan. I say no, let's not consider jailing a majority of the country's working population.

yea sure let’s make taking risks even harder

we as a society are better off when people take risks

That's only true when they're risks associated with outcomes that people generally find favorable.

If the corresponding reward is that I pull off a successful crime, then we as a society are worse off for having funded the risk.

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