A lot of folks wonder why the boards and executives of banks and other companies, such as the Texas fertilizer plant that blew up, MF Global (Jon Corzine) and why the manipulators and double-dealers at JP Morgan, Goldman Sachs, etc., are not held personally liable for their malfeasance.For the most part, it's because such folks and their lobbyists have written the laws and regulations passed by our Congress (as well as the corporation laws of states such as Delaware). The laws are designed to specifically ensure that no perp walk shall ever befall the great and powerful who fund our elections.This state of affairs is not unique to the developed world of the 21st Century. When it has happened before, a few voices came forth to cry out and alert the people:"When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it."Frédéric Bastiat, Economic sophisms, 2nd series (1848), ch. 1 Physiology of plunder ("Sophismes économiques", 2ème série (1848), chap. 1 "Physiologie de la spoliation")."It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder..."Frédéric Bastiat, The Law, 1850, par. L.31."The law has been perverted, and the powers of the state have become perverted along with it. The law has not only been turned from its proper function, but made to follow an entirely contrary purpose. The law has become a tool for every kind of greed. Instead of preventing crime, the law itself is guilty of the abuses it is supposed to punish. If this is true, it is a serious matter, and moral duty requires me to call the attention of my fellow-citizens to it."Frédéric Bastiat, The Law, 1850In three years every Frenchman can know how to read. Do you think that we shall be the better off? Imagine on the other hand that in each commune, there was ONE bourgeois, only one, who had read Bastiat, and that this bourgeois was respected, things would change."Gustave Flaubert, The George Sand-Gustave Flaubert Letters. Ebooks.adelaide.edu.au. Retrieved on 2008-12-02.http://en.wikiquote.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiathttp://bastiat.org/en/the_law.html#SECTION_G006http://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat
Prosecutors continue to tell us that often it is difficult to prove that executives had criminal intent. Bad business practices are not against the law per se. But if they misled others and defrauded them, that is criminal.Executives are often clever enough not to leave written records. Someone else made the bad decision without the knowledge of headquarters. Executives prefer to plead incompetence (they did not know) rather than admit criminal activity. West Texas will probably maintain that they complied with current industry standards. Perhaps storage of large quantities of ammonium nitrate requires either burms surrounding the facilities (to protect the surroundings from blast damage) or spinkler systems to promptly extinguish any fires (and those then require protection from freezing).I would suspect that the fertilizer industry and its insurance companies will accept and comply with these regulations. But new regulations of the financial community will be fought tooth and nail all the way--with lobbyists in Congress and later in court if they fail to block them. Big bucks can fight long and hard.
Executives prefer to plead incompetence (they did not know) rather than admit criminal activity. - paulecklerBINGO!You hit the nail right on the head. Examine any number of statutes and regulations governing business practices and, more often than not, you will find the phrase that "knowing and willful" misconduct is subject to criminal prosecution.Proving "knowing and willful" misconduct is damn hard...practically impossible. That's why the phrase is so popular with all pro-business types, be they legislators or lobbyists for business interests.When push comes to shove, the CEO's who are paid so handsomely for their "acumen", "brilliance", "sheer mastery of business", "the Masters of capital allocation", simply plead IGNORANCE. They'll state they never knew what was going on at levels "beneath them". Fingers will be pointed at underlings. Fingers will be pointed in many directions, but never at the CEO or the Board of Directors. We can change all that, of course. We can write laws that hold CEO's and BOD's directly responsible (personally liable criminally and civilly) for harm done as a consequence of the actions of the corporation. We can change all that, of course. But we won't. We live in a plutocracy.
"When push comes to shove, the CEO's who are paid so handsomely for their "acumen", "brilliance", "sheer mastery of business", "the Masters of capital allocation", simply plead IGNORANCE. They'll state they never knew what was going on at levels "beneath them". Fingers will be pointed at underlings. Fingers will be pointed in many directions, but never at the CEO or the Board of Directors."This is what is so frustrating.I remember a few years ago reading in one of the financial rags a story about Jack Welsh and his pay as CEO of GE. Despite getting paid an obscene amount of money in salary, bonus, and stock options that year(don't remember the exact amount in the article but it is likely north of $100 million in total) the article was making the case that it was a bargin to pay him that much because the market capitalization of the company had gone up tens of billions of dollars that year.There are many problems with this but the biggest is that it makes the false assumption that Jack Welsh was responsible for all of the increase in the stock price! It ignores the fact that there were literally well over a hundred thousand other employees working to make the company money and increase the value of the stock.Now there is no doubt that CEO's are generally the most important person at a company and have a huge influence in the conduct and culture of the company (Mr. Obvious I know). The double standard is terrible though. I am fine with using either standard. Either pay the CEOs obscene amounts of money but hold them accountable when problems arise or pay them more modest sums and recognize that they are important employees but are not masters of the universe and irreplacable.You are right, we live in a plutocracy so the rules will never change.
Y'all would love to be highly paid plutocrats. You just won't admit it.(There's always Powerball.)
We can change all that, of course. But we won't.We live in a plutocracy. And here I thought it was a kleptocracy.Poz
You can't say plutocracy on METAR, only meritocracy. THE MANAGEMENT
"Y'all would love to be highly paid plutocrats. You just won't admit it."I will admit it. I will also assert that I would NOT want to be the CEO of a company that, say, kills people with defective products. I wouldn't want to be a CEO of a company that cheats and/or rips off its customers. In short, I would not want to be CEO of a company that I would deem immoral. Would I take the job? Of course....and would go about changing how the company does business, which means I would likely be fired. Then again, I am unlikely to be a CEO as I was to be pope, so such discussions are silly.....but really, they are also quite serious.Funny, isn't it....the idea of "morality" and "commerce" should somehow go hand in had.....ya know, that used to be the norm.Companies would prosper by putting out good products, treating customers and employees well, and the owners would be enriched thereby.Now, we have "get the numbers this quarter so we can get a big bonus" and "screw the employees we can make more shipping the jobs to China" and "the only morality is profit, however it is made."Read The Big Short. It is an amazing tale of the subprime meltdown. What you see is NOT incompetence....what you see is outright fraud, but done legally and logically. For example....why loan an immigrant strawberry picker who makes 14 k a year over 750k to buy a house? Easy! The picker had a good credit score, which when added to a basket of crap mortgages made the overall credit of the basket better...so the bank could sell the crap basket of mortgages to suckers. See, by making a loan the bank knew would NEVER be repaid, the bank STILL made a bundle! Oh, and yes, it was legal! Hooray!As an aside, read the book then smile the next time you hear some oligarch apologist claim "oh the banks had to loan to poor people because ACORN made them do it." Far from the truth it was...far from the truth.Ah well, back to work......
Well, um, there is another angle. Stock holders, who presumably are owners of the corporation, are not liable for the machinations of the company whose stock we own. If "we" who own stocks were liable for the crimes of companies whose stocks we hold, we we own them? And the same goes for limited partners in partnerships though general partners can be liable.Gun manufacturers got a law passed so that they are not liable for what is done with the guns they sell.brucedoe
A review of the business judgement rule will show you that even in civil cases it is difficult to win. So essentially if they say they made a simple mistake and you don't have enough ammo to sway someone, you most likely will lose. I would take a defensive case unless there was dead to rights fraud. Gross Negligence is difficult.Y'all would love to be highly paid plutocrats. You just won't admit it.This shows your ignorance of plutocracy. Real plutocrats pay people, they don't work for compensation by anyone else. If they have wages its tax beneficial or a formality.Now in a corporatocracy they earn wages, huge bonuses, have golden parachutes, and some of their income is given to them in tax beneficial ways. I have the view that a corporatocracy can be a subsection of a plutocracy. Either way it is not goodf or anyone but them.
Companies would prosper by putting out good products, treating customers and employees well, and the owners would be enriched thereby.Too often, price is the deciding factor, not quality. For example, Wal-Mart versus local Mom & Pop stores. I wouldn't want to be a CEO -- trying to come up with a compromise that keeps customers, employees, and shareholders all happy. Not to mention societal and environmental issues...
Gun manufacturers got a law passed so that they are not liable for what is done with the guns they sell.Should we hold smartphone manufacturers responsible for deaths that occur while people are texting and driving? Annually, that's more of a death toll than the Boston bombing or the Texas fertilizer explosion.
Now there is no doubt that CEO's are generally the most important person at a company and have a huge influence in the conduct and culture of the company (Mr. Obvious I know). The double standard is terrible though. I am fine with using either standard. Either pay the CEOs obscene amounts of money but hold them accountable when problems arise or pay them more modest sums and recognize that they are important employees but are not masters of the universe and irreplacable.I would regulate limited personal liability for any executive making more than, say 2 million dollars a year (including fair value of stock options and bonuses).Executives are rewarding themselves like owners, so they should bear risks like owners.The liability of a CEO the event of the bankruptcy of his company could be limited to his entire income derived from that company for the last five years, for example. Or perhaps any amount over 5 million cumulative income.For other senior executives making more then 2 million, it could be limited at 50% of such earnings.
Why executives aren't prosecuted...Why waste the money? Just take some out and shoot them. Cheaper and faster all around. And a really good "shot across the bow" to the rest of them.
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