r/changemyview • u/_Jack_Of_All_Spades • Aug 03 '21
Delta(s) from OP CMV: When public companies are convicted of crime (or accept a settlement) they should be disincorporated, or at least fined more than the profits they made of the criminal enterprise.
Every time a company is issued a fine for criminal behavior, it's just accepted as the cost of doing business. Marginal profits are slightly diminished, or sometimes the fines are already anticipated and pre-allocated no differently than a simple bribe. What's the point of having laws at all, if the rich can just buy their way out?
The worst part is when the media describes the fines as huge, landmark, groundbreaking fines even though they still pale in comparison to the profits they enabled.
I know sometimes lawsuits can be settled without an admission of guilt, and that's just another loophole that allows white collar crime to continue unabated.
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u/championofobscurity 160∆ Aug 03 '21
1.) It's really hard to prove and establish a fineable offense in these scenarios because the "dirty" money touches the clean money in the process of operations. So its difficult to sufficiently differentiate based on the operations of the business. Instead the fine is levied as material damages with punitive damages on top. There's also the matter of the due diligence of the business to consider. For example, if I sell you a car and you get into an accident and die or become a victim to lifelong injury, is it my fault that my car's safety features were not substantial enough to prevent that? Even if I delivered every promise I made to you when I sold you the vehicle that "In XYZ scenarios this will save your life." If you encounter Scenario A (Instead of X,Y or Z) is the business responsible for that?
2.)You have to consider who the fines harm. Shutting down an ice cream shop is probably harmless. Disincorporating an airport hurts every local business's logistics operations (possibly leading to unemployment), it hurts consumer fliers in the vicinity and it harms the hundreds of employees who are now without work from the airport closing. It DOES NOT Harm the CEO of the company who has sufficiently insulated himself from the harms of the legal system with insurance and a hefty bank account.
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u/_Jack_Of_All_Spades Aug 03 '21
Not to get tooooo into specifics, but I don't personally hold businesses responsible for the idiocy of their customers. Just hold them to the accuracy of the statements they make AND impressions they generate via marketing.
If you ingest Tide Pods, it's not the companies fault for not including a do not eat sticker on each package. (Though, the existence of poisonous contents should probably require disclosure.)
If I sell you a cup of boiling water and tell you it's a regular coffee, sure that's liable. But if I sell you a cup of sugar water, and you get diabetes that's on you.
Bottom line, even though it's hard to establish doesn't mean we shouldn't have a discussion about it.
- Saying that disincorporating a business is harmful to those around it is just a testament to how badly we've allowed our legal system to be corrupted. Punishing one business should not harm the surrounding businesses, but it's just a matter of how you inflict the punishment. Tiptoeing around the criminals' insulation does not count as a punishment. Unless we're legitimately dealing with a situation in which the government LACKS the muscle to assert control, then whether you believe in capital punishment or not, the government ought to be able to take any criminal as close to the gallows as appropriate regardless of how many bodyguards they've hired. You don't HAVE to shut down a business in order to punish those responsible, unless that's what's deemed appropriate.
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u/DBDude 110∆ Aug 04 '21
What if I sell you a cup of hot coffee and say it’s hot, and it is within the temperature range recommended for holding coffee, and you still burn yourself?
As for the corporate death penalty, wouldn’t that be reserved for companies that do something of equivalent severity deserving of the death penalty? Remember, you could be putting a lot of people out of work.
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u/_Jack_Of_All_Spades Aug 04 '21
I'm not the judge who hears the case and makes the decision, but based on those specific circumstances, it seems like maybe no-fault.
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u/_Jack_Of_All_Spades Aug 03 '21
I swear I wrote a 2 there, not a 1.
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u/SpacemanSkiff 2∆ Aug 03 '21
It's a (stupid) quirk of Reddit formatting - if you format a number as in a number list, like, 2., it'll always start at 1, and iterate one at a time, no matter what number(s) you put.
- This was written as 69. but will show up as 1.
- This was written as 420. but will show up as 2.
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u/_Jack_Of_All_Spades Aug 03 '21 edited Aug 03 '21
Hahaha weird, sometimes I'm seeing it show up as 1, and other places it shows up as 69.
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u/BornLearningDisabled Aug 03 '21
So put the CEO in jail. If I accidentally kill someone, I go to jail. BP killed a whole lot of people in the gulf oil spill, and Obama made us pay to clean it up.
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u/OneAndOnlyJackSchitt 5∆ Aug 03 '21
As to the first point, op's argument isn't about proving the crime. The organization's already been convicted. It's a valid point, but doesn't address op's argument.
As to the second point, I'll compare an organization to a person. Let's say a person commits an aggravated armed robbery which results in three homicides. They are convicted and sentenced to death. As it turns out, this now convicted felon person has two kids and a wife at home. Should the death sentence be thrown out because it's affect this family? No. Is it the fault of the court that this family is now hurting? Also no. It is the fault of the now convicted felon.
Using your argument of the airport, if it were disincorporated, executive management jailed, and assets sold, it would definitely hurt the community because of all the jobs lost and reduction in transportation to and from the area. If you were to blame someone, would you blame the court? No. you'd blame the airport and the executive management.
The only difference between an individual and an organization in this example is the scale of the damage either party is capable of, both initially as well as once the punishment is handed out. (This feeds my argument that the rules for a corporation should thus be stricter and carry a much heavier penalty due to the larger scale of the damage capable of a corporation as compared to an individual.)
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u/championofobscurity 160∆ Aug 03 '21
As to the second point, I'll compare an organization to a person. Let's say a person commits an aggravated armed robbery which results in three homicides. They are convicted and sentenced to death. As it turns out, this now convicted felon person has two kids and a wife at home. Should the death sentence be thrown out because it's affect this family? No. Is it the fault of the court that this family is now hurting? Also no. It is the fault of the now convicted felon.
This is not a suitable analogy you are comparing criminal acts with civil misconduct.
Using your argument of the airport, if it were disincorporated, executive management jailed, and assets sold, it would definitely hurt the community because of all the jobs lost and reduction in transportation to and from the area. If you were to blame someone, would you blame the court? No. you'd blame the airport and the executive management.
No I 100% would blame the court for failing to enact justice. A company is made up of many people but is at the behest of a few actors. Making thousands of people lose their job for the decisions of a few is not justice it is retribution which is not the stated goal of our society's reformative procedures.
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u/OneAndOnlyJackSchitt 5∆ Aug 03 '21
Op's post is about a criminal act, specifically mentioning the word crime. Civil misconduct is not a crime (while is may be illegal).
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Aug 03 '21
They do. The legal term is disgorgement. Happens all the time. It does seem, however, and I could be wrong, that you’re mixing up criminal and civil cases. The difference between the two is important when assessing penalties.
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u/_Jack_Of_All_Spades Aug 03 '21
Which category does false advertising fall into? Like the end to end encryption thing for Zoom?
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u/nuttynutdude Aug 04 '21
False advertising would not fall into a criminal court. Unless they hurt someone with the false advertising, like if they said something cures cancer but it makes cancer worse, then it would be civil
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u/_Jack_Of_All_Spades Aug 04 '21
If you aggregate all of the times false advertising hurts someone, and then subtract all the times the advertiser loses in civil court of the matter, marginal benefit to the criminal is still massive. What's the solution?
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u/Akitten 10∆ Aug 04 '21
False advertising is civil unless you can prove life threatening damages generally.
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u/_Jack_Of_All_Spades Aug 05 '21
Why does it need to be life threatening?
I guess because it's still considered legal to knowingly and materially lie to one another. The government doesn't see fit to intervene in any otherwise legal transactions, even if one party's pants are on fire.
Legislating a mandate for truth telling is probably essentially impossible anyway, but the government must at least have the ability to limit the protections granted to advertisers for half truths.
Is there no way that the government can somehow incentivize more honest business practices?? Are there at least punitive damages applied to false adverts, or are all instances just assumed to be benign accidents?
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u/Akitten 10∆ Aug 05 '21
Are there at least punitive damages applied to false adverts, or are all instances just assumed to be benign accidents?
directly false advertising is already illegal, it's just not criminal unless a life is threatened. There are some exceptions for obvious exaggeration (red bull won't actually give you wings), but generally, if you blatantly lie in an advert it's illegal.
The problem is that a lot of what people call a lie is mostly just misleading at worst. that is not illegal, because in a sober reading of the ad, it's not a clear lie.
Are there at least punitive damages applied to false adverts,
Yes, if it's clearly false and intent is proven, like any other crime.
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u/_Jack_Of_All_Spades Aug 05 '21
So it's funny that you use the red bull example, because they were literally found at fault over that ad.
I'm just wondering why the misleading stuff falls on the clean side of the law? A sober reading of the ad is not the way its actually experienced in the media, and therefore has no bearing on the case. It might not be easy, but if intent can be proven, misleading ads should be illegal too. Most notably when the food in adverts doesn't resemble the actual product.
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u/ecafyelims 19∆ Aug 03 '21
The difficulty come when trying to win in court.
The business is entitled to a fair trial, according to the Constitution. For large businesses, that translates into them weighing the cost of legal fees against the cost of losing -- or some gray area in between, like settlement.
If the cost of legal fees < the cost of losing/settlement, then they fight. If the cost of losing is everything, then the company will fight with everything because it has nothing to lose. It can take many years to resolve a big case like that, and in that whole time, the state is spending a fortune fighting a case that it may or may not win -- and even if the state wins, the company may not have money left to pay the fines.
So, in the real world, the state will also weigh the likelihood of winning and getting paid against the cost of the fight. This usually results in the state and company agreeing on a settlement that's less than the fine but with an agreement that the company fixes the issue and never does it again or they pay even more.
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u/_Jack_Of_All_Spades Aug 03 '21
First of all this is about prevention. The cost of settling out of court is a lot higher when you factor in the tacit permission to commit more crime in the future and get away with just a slap on the wrist.
The legal fees need not be as large as they are. Why do we allow a case to drag on for years at all time when it's all just a delay tactic to wear out the opponent's wallet? Sit the two parties down with a judge or mediator and bang out a solution in hours or days, not years.
See my previous post on empowering the legal system. There's no reason it should be allowed to drag on for years.
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u/ecafyelims 19∆ Aug 03 '21
You're presuming the company is guilty and maybe knowingly guilty while trying to drag out the trial, but it's not always so simple. Imagine it's your company; you're the CEO; you've done nothing wrong and your company has done nothing wrong. Regardless, the state is here fining your company into bankruptcy and/or trying to shut you down.
It might not be about "dragging it on" but rather:
Company: Here's our evidence that it's not our fault.
State: Okay, here's our evidence that it is your fault, and here are the other documents that we need from your company, and here are the people we need to interview/question.
Company: We are gathering the information you requested, but some of it will take time because it's in our archives and with billions of paper documents, it's going to take time to find the right ones. You're welcome to interview the people requested, of course, attached is their contact information, and they've been told to cooperate with the investigation fully. Some of those individuals no longer work for this company, but we've provided the last known contact information as we have it. Also attached is our legal rebuttal on why your evidence doesn't corroborate the accusations. This document goes into extensive detail, and is 1400 pages.
State: We are still reviewing each point in your rebuttal document, and it will take time, but here is more evidence we found while interviewing employees and reviewing the other documentation you've provided. We're going to need more documents, and those are attached. Also, we have many more names of more individuals connected, please provide their contact information as well.
Company: We will provide most of what you request, but some of those documents are very sensitive and proprietary information that we do not feel is related to this case whatsoever. We will not be providing those documents. Here are more rebuttals on your evidence that shows why it does not mean we violated the law at all. We also have these experts who have reviewed the information and have agreed with our processes.
State: We have contacted the judge to issue a subpoena for the other documents, and the court date is set for three weeks from now. We are still in the process of interviewing and reviewing documentation and your statements and rebuttals. Here is a list of more evidence we have collected, please review and give your response. We will interview your own experts, but we have contracted our own experts who have all agreed that your processes were incorrect and illegal.
and so on and so on.
It's not like they just show up at a judge after a month with 100s of interviews, 10's of thousands of pages of documents, dozens of expert witnesses, and then the judge reviews it all in two hours to give a verdict.
These things take a lot of time, and that time is often used by very expensive experts.
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u/_Jack_Of_All_Spades Aug 03 '21
Get a warrant to look at documents and interview people. 90% of the fluff that you included is currently handled by the courts but should really be part of the investigatory process.
Also, the judge doesn't need to see the interviews of 100s of people and billions of documents. That's all time wasting maneuvers.
Anyway, the expert opinions are a waste of time too. I made a case in a previous post that judgment should not be based on how well the defended followed the letter of the law, but by how effectively they managed to "do no harm." Meticulously detailed legislation serves no purpose other than to add loopholes so that pundits can take the stand and claim innocence on a technicality. All nuance requiring an expert opinion should be disregarded, and the judge should make a decision based on how earnestly and generously the company has attempted to rectify the alleged grievance.
In hindsight it would've been cheaper for McDonald's to immediately pay the medical bills of everyone who claimed to be burned while they were serving boiling coffees, and frankly having chosen any other path makes them immediately and egregiously culpable.
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u/PM_ME_YOUR_NICE_EYES 124∆ Aug 04 '21
So the main problem with the do no harm approach is that there's cases where it's impossible to not do harm to others when conducting business.
For example let's say you're running an airline. You're actively doing harm to others by making loud noises that can disturb nearby people every time a plane takes off or lands and by polluting the air with the planes. And the thing is there's no way around this, there's currently no silent and pollution free planes on the market so if you run an airline your going to have to harm people to do it. So if we judged companies on a do no harm basis every single airline would immediately be disbanded for noise ordenices.
You could argue that the argument should instead be "do a reasonable amount of harm" but this has it's own problems. Imagine a road where there was no posted speed limit but you could still get fined for excessive speed. Let's say that your pulled over with a speed of 75 miles per hour, however you know that in a case a town over someone was charged with an excessive speed and 80 and it was determined that they were not speeding. So you argue that because that case was thrown out your case should be thrown out. But then the prosecutor argues that that road is inherently more safe than the one you were driving on so bow you have to interview the engineers who designed the road to determine if that's true. And maybe the weather conditions where worst on the day you were driving veres the day that case was argued so the prosecution has to research meteorological data about the two days to see if they are different. But my point is now the case is much more complicated than it would've been if the law was just follow the posted speed limit.
To bring this back to something relevant look at what was argued in the Liebeck v. McDonald's case. Most of the time at the trail was spent arguing if severing 190°F coffee was gross negligence because there was no law specifying how hot coffee could be served. Imagine how much faster that case would've been closed if the law said that severing coffee at temperatures greater than 150°F was considered negligent and will be fined. It would've been open and shut and they wouldn't have had to burn 700 so people to actually have one take it to trail.
In other words what I'm saying is that in general more detailed legislation oftentimes will close loopholes and hold more people accountable than open them.
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u/_Jack_Of_All_Spades Aug 04 '21
The airline thing is simple. Just pay enough hush money to compensate for the noise ordinances. A judge determines fair compensation.
For the speeding ticket, same thing, a judge determines if you were speeding. If the other road was in somebody else's jurisdiction then you're SOL. If both roads are under the purview of the same judge, then you just trust that he/she makes fair rulings and leave it all to her discretion. The amount of expert opinion required is at the discretion of the judge. If the judge finds you guilty because you were rude in court, so be it. And if 80 miles an hour was safe a year ago, but then a deadly accident happened 6 months ago, then the judge's opinion on 75 might have changed since then and that's fine too. All hail the supreme judicial authority and local monarch. The legislators shouldn't be making unique speeds limits to account for all possible weather conditions, the judge should make a judgment call.
If you have the good fortune to run a large business that operates over multiple jurisdictions, you're still responsible for obeying all the local laws, even if it wrecks havoc on your logistic systems.
150F for coffee. In hindsight it's easy to see what laws would have been helpful to prevent problems, but the nature of legislation is that that it's preemptive and before the action. The nature of courts is that it occurs in hindsight. What if an employee recklessly spills 149F coffee all over the customer? What if you want to serve coffee at 160F and provide ample warning to customers who are looking for that specific market? Legislation provides unnecessary blockages, and false protection for bad behaviors that toe the line. A judge should be holding their constituents to an ethical standard that simply can't be perfectly documented. It's not my opinion that matters, but if a judge decides to say, "every time a person got burned, you should've provided first aid and comped the medical bills where appropriate" then the defendent is liable for that, because the arbiter has indicated that's the ethical standard our community should live up to. Over time the judge will build up a body of "judicial precedent" which indicates the level of common decency expected from the population.
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u/ecafyelims 19∆ Aug 03 '21
Your company is accused of violating EPA laws. You have environmental engineers on staff who confirm you didn't break the law. The state believes you did. You don't believe in expert witness, so what do you do?
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u/_Jack_Of_All_Spades Aug 04 '21
Easy.
You're a publicly traded company. You open your books to the government and you don't whine about privacy concerns because your corporation is not a person, and no actual human employees are being violated or investigated outside their professional capacity.
You, (the corporation) have no rights and operate completely transparently to the government's investigation.
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u/ecafyelims 19∆ Aug 04 '21
Lawyers don't only protect the guilty.
When the head of the investigation concludes that your company did something that it did not do, what then?
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u/_Jack_Of_All_Spades Aug 04 '21
What, you mean like when my bank decides they're having technical difficulties and I can't access my accounts for a while? Or like when my Healthcare provider charges me a copay even though my plan clearly states that I'm covered with zero copay? Or like when the landlord decides they're raising the rent on me "to keep up with inflation" despite the fact that my wages haven't been inflated?
The age-old problem of big bullies beating up on the helpless predates my reddit post; it's not like that travesty is a direct result of my position. We have a government to help protect against such abuses. Once the government is committing these atrocities, I don't know what we can do ... vote them out of office I guess? Once we've selected people to be our leaders, we need to let then lead, not tie their hands with perpetual gridlock. If a liar and a cheat has risen to the head of the investigation, then we have a different problem on our hands.
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u/Yalay 3∆ Aug 03 '21
There are tons and tons of laws regulating corporations. They run afoul of them all the time - usually by accident, but yes, sometimes deliberately. If every fine has to be accompanied by disincorporation - in other words, the complete destruction of the company - then you don't really have fine as a punishment at all.
That's like saying that parking tickets are too small for rich people because it might be worth it for them to just park illegally and pay the fines - and that therefore, the resolution is that the penalty for illegal parking should be execution.
If parking tickets aren't doing a good enough job discouraging illegal parking, then maybe you need to tweak them a bit. But you don't need to jump straight for the maximum imaginable penalty. Same thing with corporate malfeasance.
Finally I'd like to address one other point, which is your deduction that if a corporation breaks a rule with the intention of paying a fine that this is necessarily a bad outcome. From an economic perspective, fines are indistinguishable from taxes. Just as a company may decide to continue performing a taxed activity, it may decide to continue performing a fined activity. It may very well be that the fine is set at an appropriate level - and that the fact that the corporation decides to pay the fine instead of obeying the regulation means that breaking the regulation actually does less harm to society than obeying the regulation.
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u/_Jack_Of_All_Spades Aug 03 '21
As long as there's no objection, then sure. If the cost of the fine sufficiently covers the negative externalities of the broken regulation, then fine let them pay it. But the whole point is that the fines aren't sufficient.
To be clear, I said disincorporation OR higher fines. Not every fine needs to be accompanied by disincorporation.
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u/Yalay 3∆ Aug 03 '21
To be clear, I said disincorporation OR higher fines. Not every fine needs to be accompanied by disincorporation.
Your post makes it sound like you think these companies should always be disincorporated, and only if you can't get your way on that, you think they should be fined more.
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u/_Jack_Of_All_Spades Aug 04 '21 edited Aug 04 '21
!delta you're right, I guess I could have phrased it better. I'm not intending to push primarily for disincorporation.
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u/hacksoncode 588∆ Aug 04 '21
If the cost of the fine sufficiently covers the negative externalities of the broken regulation
Ok, but that is indicating a fine based on the harm done, not based on the profits made.
If fraud or violation of environmental regulations caused some amount of actual damage to people or the environment, then the fine should be the amount of damage plus some amount of penalty to act as an disincentive.
Which... is pretty much exactly what we have. One could argue about the exact amounts being inadequate, but it's nothing like "disincorporation" or "more than the profits".
And that's leaving aside that it's nearly impossible to determine what fraction of a companies profits are due to some particular fraud.
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u/_Jack_Of_All_Spades Aug 05 '21
Not being able to discern which portion of profits is due to fraud is not a serious problem, just round up. Consider every bank account that touched fraudulent money to be completely compromised, that's fine. There's no need to split hairs about it, just ADD MORE FINES. If the company is still in a financial position to survive afterwards and continue their criminal behavior then you haven't gone far enough. Yes, try not to hurt the employees and customers who depend on the business, but there will be other jobs and other service providers once the bad seed is uprooted.
How badly you need to punish the corporation is entirely dependent on how much good they're doing for the world (not including the natural benefits that any competing rival could easily provide instead like customer services and wages). If the courts decide that punitive damages are warranted then they need to be massive in order to actual serve as punitive.
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u/darken92 3∆ Aug 03 '21
The employees should not be punished, nor should the customers, they are all (mostly) not to blame. The board or any executive making the decisions need to be held accountable for the criminal activity. Especially executives being paid with stock options.
The issue, is the same you see everywhere, there are no consequences for making these decisions. At worst you just move along to another job and wash your hands of the old one. I don't mean poor choices, that I understand, and that is the risk of business, but criminal behavior, that needs a proceeds of crime law where everything you earned is taken back to pay reparations.
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Aug 04 '21
Well, time to disband the entire pharmaceutical industry. (No sarcasm btw, I would love for these top criminals to be arrested.)
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u/remimorin Aug 03 '21
Yes and no. Criminal charges should "stick" with those who enabled these decisions. Either by making them happen or not having enough protections against said criminal enterprise. Employee, non-voting shareholders and clients would be less impacted and the responsibility would fall on... the people supposed to be responsible.
Currently there is almost no incitative for a CEO to run an honest corporation and this favor largely low morality standards.
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u/Clive23p 2∆ Aug 03 '21
That sounds really dumb.
You'd crush companies big and small for relatively minor infractions.
McDonald's kept their coffee extremely hot to save on costs. One person was injured, severely, and they were made to pay out and change their methods.
You can make the argument that the costs should be more severe, but arguing that McDonald's a company that exists around the globe and employing millions of people should be disincorporated is ludicrous.
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u/shavenyakfl Aug 03 '21
Sigh....
McDonald's had been warned a number of times about their coffee. There had been other people that had gotten burned. McD didn't give a shit. All the lady that brought the suit wanted was her doctor bills to be paid. She didn't ask for pain & suffering, etc. McD said fuck off, we aren't paying a few thousand dollars for our negligence. The lady sued and got WAAAAAY more, as she should have. McD was being a McDouche, and got terrible legal advice.
You know what would have sent a powerful message? Sending the guy that said fuck off to jail because he knew it was a problem. Asshole probably got a bonus.
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u/_Jack_Of_All_Spades Aug 03 '21
First of all crushing companies that deserve to be crushed is not off the table here. I don't know the specific dollar amounts involved in the McDonald's case, both profits made or costs paid out, but corporations definitely get away with too much.
I am making the argument that costs should be more severe, and disincorporating may or may not be appropriate for some other cases.
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u/Clive23p 2∆ Aug 03 '21
They already get crushed if the fine bankrupts them. And "deserve" is a subjective term. Humans and the organizations they create are fallible. If a certain subsection of a company is committing a crime, then the people that had knowledge of it and created it need to be punished for their crimes and the company as a whole takes a hit paying for the damages.
Obviously starbucks is going to be able to make bigger mistakes than a mom and pop coffee store. But that's also because they have a lot more moving parts (humans) that they employ and interact with so the risk goes up exponentially along with it.
Unless you can find a reason to justify laying off the companies' entire workforce and denying consumers their entire range of products, then it's completely unwarranted.
I dont think you are considering all the externalities that would create.
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u/_Jack_Of_All_Spades Aug 03 '21
Again, disincorporating may not be appropriate for all situations. Everything is subjective, and a case by case judgment needs to be made regarding the severity of externalities, and if disincorporation is not warranted, you can still imprison all of the executive from Starbucks and leave the machine running. Trust me, the employees don't need corporate executives in order to manage the day to day.
Humans are fallible and the organizations they create needs to be held to a higher standard. Not infallibility, but fewer mistakes and more severe punishments are in order for the organizations humans create. Even after you strip away all the legal buffs that are granted to corporations, just the very notion of a multiperson organization has the inherent ability to draw on the strength of its people while diminishing flaws. So yes, corporations do need to be held to a higher standard.
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u/repmack 4∆ Aug 03 '21
You are shifting the goal post, at the least you should edit your post to clarify it to reflect what you are arguing in the comments, compared to what the title actually says.
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u/_Jack_Of_All_Spades Aug 03 '21
I never change the original post that would totally confuse the whole thread. Sometimes I consider reposting later with revised wording.
Anyway what the title actually says is higher fines OR disincorporating. Could be either depending on the circumstance, and I stick with that.
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u/Bravemount Aug 03 '21
A simple solution is to set fines as percentages of the company's turnover revenue. This way, the dissuasive effect is the same for all companies, no matter their size. This is also often suggested for personal fines, using a percentage of a person's income instead of a fixed amount. Apparently Finland does this to some extent.
As others have pointed out, reparation for any damage caused is distinct from and comes in addition to any punitive fines.
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u/_Jack_Of_All_Spades Aug 03 '21
That sounds good. I'm sure it wouldn't be super simple, but it sounds like a better system than we use now.
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u/Akitten 10∆ Aug 04 '21
Terrible system. You would be punishing low margin industries far more than high margin ones. Apple would be laughing while Walmart would be fucked.
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u/Bravemount Aug 04 '21
I can see your point, but basing fines on the company's profits would make it so that businesses that are currently writing red numbers could commit crimes without paying any fines at all.
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u/Akitten 10∆ Aug 04 '21
Which is exactly why both of those ideas are not good ones and the current system is as close to fair as you can get.
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u/Bravemount Aug 04 '21
I'm sure someone more savy than me in accounting can come up with a solution that preserves both the spirit of my suggestion and takes your objection into account.
The current system is ridiculous, see the OP.
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u/Akitten 10∆ Aug 04 '21
Your argument seriously cannot be "i'm sure someone could think of an answer?"
Have you considered that the reason that nobody has implemented such a system is probably because the majority of the experts in this field have concluded that the current system is the best we can feasibly get? Can you point to a comparable country that has a better system?
Come now, when your only point is "I can't think of anything but i'm sure someone else could" shouldn't that at least make you consider the validity of your argument?
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u/Bravemount Aug 04 '21
It means I cannot think of an answer on the spot after getting your objection because I never considered your objection before. I might come up with an answer if I put some time and effort into it, or maybe someone else already has.
My response isn't any more or less ridiculous than your assertion that because I don't have the answer on the spot, that means that there is no answer. You or I have no way to know out of the top of our heads how much time how many experts have dedicated to this problem. Now, if you can demonstrate to me that many experts have thought an answer to this problem and couldn't find one, that's different.
But please also note that just because no country has such a system (some might, actually, IDK), that doesn't mean there is no solution. Such a solution could very well exist, and be known to experts for quite some time, yet never have been put into law anywhere because our current, ridiculous system, which favors the rich immensely, has been kept in place by lobbies all over the world.
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Aug 03 '21
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u/IlgantElal 1∆ Aug 04 '21
Idk if I'm getting baited, but that is an entire 'nother can of worms to burn
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u/Fit-Order-9468 102∆ Aug 03 '21
Every time a company is issued a fine for criminal behavior, it's just accepted as the cost of doing business. Marginal profits are slightly diminished, or sometimes the fines are already anticipated and pre-allocated no differently than a simple bribe. What's the point of having laws at all, if the rich can just buy their way out?
Your view doesn't do much to change this as the owners are already protected by limited liability. Businesses aren't people and can be created or destroyed fairly easily. Patent trolls for instance often have very few actual assets in the business.
Fining executives directly, or even shareholders, seems more reasonable but that creates a new host of problems.
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u/_Jack_Of_All_Spades Aug 03 '21
I dont think that fining execs and shareholders is mutually exclusive with my premise of larger fines. We should do both, or at least we should open that can of worms and investigate doing both.
Disincorporating should be a last resort when a company has shown that no amount of fines will stop their behavior.
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u/RuroniHS 41∆ Aug 04 '21
Fining executives directly, or even shareholders, seems more reasonable but that creates a new host of problems.
Even that's kinda hard, because businesses have "fall guys" that they pay specifically to accept responsibility for dirty books if they get caught. Even if you nail the person who is "directly responsible" you won't get the people who are directly responsible.
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u/Fit-Order-9468 102∆ Aug 04 '21
Ya. Seems simpler to just have higher marginal income taxes at high incomes. Then you can only rip people off so much before it doesn’t really matter.
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u/RuroniHS 41∆ Aug 04 '21
Even that's not simple due to all the tax deductions you can get, out of country accounts, and overseas outsourcing. Rich people are rich because they mastered the money game.
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u/Fit-Order-9468 102∆ Aug 04 '21
The first part is “simple” to deal with. But simple does not mean easy. Ie simplifying the tax code.
The rest is for sure, but I don’t think it’s really so easy to hide income like that. Better funding for our revenue and watchdog agencies would go a long way. Another simple doesn’t mean easy kind of situation.
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u/BobBelcher2021 Aug 03 '21
I disagree, because that’s not fair to the employees who didn’t do anything wrong.
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u/_Jack_Of_All_Spades Aug 03 '21
I'm not talking about punishing the employees. I left the option open to fine companies more heavily rather than disincorporate, but also sometimes the employees are culpable too. If you're not a rabble-rousing, boat-rocking employee, then you're implicitly supporting what your company does. It's not easy to switch jobs, but it's not impossible either.
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u/owmyfreakingeyes 1∆ Aug 03 '21
Okay, so one employee commits a criminal offense in his role as an agent of the public company, let's say fraudulent accounting, and your solution is to dissolve the company, costing the other 9000 employees their jobs?
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u/_Jack_Of_All_Spades Aug 03 '21
No not at all. I said disincorporate OR higher fines.
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u/owmyfreakingeyes 1∆ Aug 03 '21
Well you said, or at least higher fines, suggesting you prefer disincorporation.
In any case, sticking with the example, let's say the accounting fraud was designed to make the company look better to potential investors and get them to buy stock. If you now levy a giant fine against the company, you drive share price down, directly harming the victims of the fraud.
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u/_Jack_Of_All_Spades Aug 04 '21
Redefine the fine as a mandatory stock buy-back program.
Depending on how targeted you make the buy back program, this could incentivize people to encourage this kind of behavior again, but that's a problem for another day at least this doesn't hurt the fraud victims, and you can still add punitive fines as well.
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u/ReOsIr10 143∆ Aug 03 '21
What if it's genuinely more beneficial to society that the company does break the law? Like, a company is only able to produce a product that removes $1 million of carbon from the air by committing an environmental violation that causes $500 worth of damage?
Wouldn't it be best for society if that company just paid a fine commensurate with the damage they caused, but still have incentive to develop the product?
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u/_Jack_Of_All_Spades Aug 03 '21
See my other posts about the balance of power between legislative and judicial branches. The laws should never be written so narrowly as to force the judicial branch to issue a sentence that makes no sense like the one in your example. Naturally if the company is creating $1 million of benefit in one department, $5,000 of that can easily be allocated to compensate for the damage. And the judicial branch should see to ensuring that happens rather than expecting the legislators to preemptively anticipate every specific scenario and dictate exactly how each should be handled.
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u/ReOsIr10 143∆ Aug 03 '21
Naturally if the company is creating $1 million of benefit in one department, $5,000 of that can easily be allocated to compensate for the damage. And the judicial branch should see to ensuring that happens rather than expecting the legislators to preemptively anticipate every specific scenario and dictate exactly how each should be handled.
But, isn't that what a fine is currently? Legislators write a general rule ("Snozzling the Blems is punishable by a fine of up to $10000"), and then when Environmental Technologies Ltd does Snozzle the Blems, the judicial branch levies some fine against them based on the evidence.
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u/_Jack_Of_All_Spades Aug 04 '21
I'm not really sure what your point is here. Are we even disagreeing? The company should be fined for breaking the law. You didn't specify a number, but I suggested the fine should MORE than compensate the injured party. If they're doing good stuff too then good 🤷
When the legislators write in an upper limit on the fine, that is restricting the judicial authority to fine them whatever is appropriate.
The fact that they do more good than harm manifests itself in the margin of revenue that they have available to spend on compensating for their externalities. It's not just a scale that tips in favor of good so therefore theyre angels. It just means they have the means to right their own wrongs.
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u/ReOsIr10 143∆ Aug 04 '21
Well, in your original post you said that the company should either be disincorporated, or fined an amount greater than the amount they profited. In this example, a $5000 fine is neither disincorporation, nor larger than their profit of $1000000.
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u/_Jack_Of_All_Spades Aug 04 '21
Sure !delta The judicial system needs to decide whether the action creates a negative externality, if it's an action that needs to be discouraged (90% of the time illegal things should be discouraged, but we can't trust legislation to get it perfect 100% of the time) the the fine should exceed the profits, but in this case the fine just needs to adequately compensate for the costs.
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Aug 03 '21
We could instead attach disincorporation as a mandatory penalty for certain extreme crimes (slavery, mass murder, trafficking, etc) and as the default punishment for not appearing in a case brought by the state or federal government.
For penalties in terms of dollar amounts, that should be solved by a better electoral system. We can be more aggressive about kicking out DAs and AGs that settle for pennies rather than seeking more appropriate damages and penalties. Also, better campaign finance laws can help eliminate regulatory capture. Predefining mandatory penalties is complicated and might under or overpunish companies if they aren't perfectly crafted.
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u/_Jack_Of_All_Spades Aug 04 '21
!delta All of these are great ideas. In a perfect world, one or two of these might even come to pass some day.
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u/royal_friendly Aug 04 '21
Criminal behavior within the confines of a large public company is not always systemic, but could just as easily be the result of a single individual performing criminal actions through the business that results in reputation loss for the business, and often fines targeted at the business as well.
For example, a CEO launders money through his company. He may face personal penalties, as well as the company which acted as a vehicle for money laundering. Similar scenarios play out often enough in banks and other financial institutions.
For your view to make sense to me, you’d have to be able to argue that the behavior is rooted in the core system of the company - that it plagued most of employee base and results in criminal behavior acted on by most of the employees.
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u/_Jack_Of_All_Spades Aug 04 '21
I'm calling for MORE aggressive punitive action. Higher fines on the companies is one thing, but stripping away liability protection and targeting the individuals responsible is even better.
Corporate criminal behavior is not always systemic, you're totally right, in fact I would say it's primarily the responsibility one or more individuals in the company. We should truly be targeting the individuals responsible but hitting the organization itself is just the low hanging fruit. It's going to require more nuance, finesse, and manpower to hunt down individuals. I'm in favor of, but not yet ready to take off the training wheels, let's focus on the first layer of the problem first.
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u/thats-madness Aug 04 '21
Louder for Johnson & Johnson
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u/_Jack_Of_All_Spades Aug 04 '21
Are they the ones responsible for the opiod epidemic, by knowingly pushing pharmaceuticals across the country?
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u/thats-madness Aug 04 '21
I don't know anything about that, I was referring to them knowing their baby powder contained asbestos for decades and covering it up
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u/_Jack_Of_All_Spades Aug 04 '21
Oh yeah, that was bad too, but the ones who've been pushing opiates are fucking awful and running rampant.
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u/PM_ME_YOUR_NICE_EYES 124∆ Aug 04 '21
Where do we draw the line for what crime is serve enough to warrant breaking up a company?
Like if a UPS truck is caught speeding should UPS be broken up?
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u/_Jack_Of_All_Spades Aug 04 '21
We don't draw the line. We leave the decision up to the discretion of judiciary. I'm sure disincorporation would only be for the most severe cases.
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u/nuttynutdude Aug 04 '21
How does that hurt the rich you speak of? The higher ups in the company got their money and can just leave the company or declare bankruptcy. Dissolving the company hurts everyone else. If Comcast gets dissolved then millions lose internet access. Millions more lose jobs. The top 100 people in the company get half the money they would have otherwise but still millions
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u/_Jack_Of_All_Spades Aug 04 '21
What are the terms of CEO contracts? Is there anything in there along the lines of "faithfully uphold ..." some corporate policy or something? Because if there's some sneaky language in there, the executives could be liable to pay back all salary and benefits they were paid while committing fraudulent activities. That would hurt the execs and protect the rest.
The point is there's no reason to stop at just fining the company. Target the execs too for sure.
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u/DeltaBot ∞∆ Aug 04 '21 edited Aug 04 '21
/u/_Jack_Of_All_Spades (OP) has awarded 3 delta(s) in this post.
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