Can you make a public policy case for a "death penalty" for multi-billion-dollar companies in mainstream industries? Who does that help? Who does it harm? Is it the most effective way to achieve the goal of the policy?
Since we have neither a corporate death penalty nor adequate criminal statutes for malfeasance, how is the "corporate death penalty" superior than laws that make it more straightforward to hold managers and directors accountable criminally? People who are willing to commit crimes to enrich themselves using companies are unlikely to be especially motivated by the well-being of the company, its employees, or shareholders.
The investors lose. The companies are liquidated and the assets bought by new investors. This actually happened to GM, to a degree. The workers don't have to lose out.
Realistically speaking, it's far more likely that in an established industry like autos the cheating company will simply beat their competitors at market because they can sell cheaper, spend less on research, etc.
It's nice to imagine that maybe it would breed "super companies" that are tougher, smarter, and more efficient because they thought they had to be to compete. But, there aren't any order-of-magnitude wins to be had in automobile technology. There are no lone geniuses who figure out how to eke out 10% more efficiency with this one weird (but patentable) trick. It takes research over a long period time to make even modest gains, and a cheater in the market bleeds the honest companies of resources.
And, to go further: Because Volkswagen made these claims about diesel tech, other honest companies may have been wasting resources trying to match the dishonest VW claims...when there are actual better techs they could have been pursuing. This may have led to even less gains over the time VW were faking data.
Often shareholders have a degree of culpability. Arms companies and tobacco are examples where in my view shareholders are using their money to promote harm. Automakers fall somewhere on the harm - good spectrum and I'd mostly not put them down as a net good. Fossil fuel emissions would be be the key reason. Shareholders have a choice where to put their money and many (most?) choose high returns over anything else. I'd say punishing this behaviour might be worth considering.
Every time we assess a multi-billion-dollar penalty against a public company, we acknowledge that its shareholders share some culpability.
Do you think shareholders of a company like VW, which includes pretty much everyone with a retirement plan, shoulder _all_ the responsibility? Because that's pretty much what a "corporate death penalty" means.
Sure. I agree! I don't think it's fair for shareholders to reap returns that were derived in part from malfeasance.
The question isn't whether companies (and thus their shareholders) should be penalized for wrongdoing. It's whether shareholders should be zeroed out by a "corporate death penalty". I think it's an interesting question, why we don't have one of those.
I appear to be arguing with someone who has the same viewpoint as me. Perhaps a better summary of my view is that the existing penalty system would be OK if the fines were larger (and this hit shareholders hard enough to incentivise others not to break the law).
I'm more surprised that there are not more corporate "death penalties" meted out. Usually the beneficiaries of bailouts or bankruptcies are the entrenched managers who brought the corporation to where it might be subject to a death penalty.
Whereas if the corporation were liquidated, the assets would be bought up by different corporations and run by different management.
Banks, most of all, are just bags of assets that can be run by other managers who run the same types of assets (otherwise these assets would be illiquid and not need active management) at other banks.
The same goes for airlines: If an airline is a brand + planes (probably leased) and routes, why EVER bail out an airline? Especially a legacy airline when it's assets could be bought by an economically viable new airline?
We don't have corporate death penalties because to a first approximation there are no laws that enable us to do that. To put companies to death, we'd need to pass enabling laws. But those aren't the only new sanctions we can enable in new laws.
It seems to me that we can break down those impacted by sanctions against corporations as follows:
* Officers and directors of the company
* Employees of the company
* Shareholders in the company
* Customers of the company
When we think about how to structure sanctions against a company, we should think about where (a) deterrence will have the most effect and (b) where retribution is most warranted.
How does a "corporate death penalty" apply those effects? It seems to me:
* Officers and directors of the company have a demonstrated track record of harming their employers for personal short-term gain; see, for instance, every stock buyback scandal. Moreover, officers and directors tend to be wealthy and thus more likely to have a professionally or at least competently managed portfolio: they're diversified out of a lot of impact.
* Employees of the company have extremely limited ability to alter strategic decisions made by management, and so aren't useful for deterrence. They also tend not to profit from strategic high-level malfeasance, and so aren't deserving of much retribution. Meanwhile: mergers, spinoffs, and acquisitions are almost invariable dreadful for employees, huge numbers of whom are made redundant, pension obligations scrapped, benefits reduced, and so on.
* Shareholders have virtually no insight into the operation of their holdings. Moreover, vast numbers of shareholders don't even know they hold companies, because they do so through pension plans and mutual funds.
* Customers who, for instance, bought VW cars during this scandal did so in an effort to minimize their impact on the environment; the scandal is that VW lied to them. Not only are they demonstrably incapable of being deterred from future scandals, but it's hard to argue that they've in any way earned warranty confusion, loss of service stations and personnel, and slashed resale values.
Compare that to a new law making this kind of malfeasance a strict-liability felony for officers of the company. Doesn't that make much more sense than a death penalty?
While there are not criminal laws that could compel a liquidation directly, the equivalent could happen by making a restructuring unfeasible through fines, thereby forcing liquidation.
Sure, but the reason that doesn't happen is that you can't fine arbitrarily; companies can dispute them legally, and those cases are murderously expensive to try.
So I'm acknowledging that you could pass laws that make an effective death penalty (through fines or through literally forcing liquidation) a reality, but then asking: why would you want to do that? Aren't there better laws we could pass instead?
"Better laws" that directly target the management responsible for malfeasance could do the job instead of dismantling the corporation out from under that management. But the same lawyers fighting to keep creditors from forcing liquidation are also fighting for the management that hired them, no matter the shades of ethics involved in that. It's a difficult problem. In the case of VW you have suppliers and engineers being told to produce results that are not possible without cheating. And then that eventually becomes part of corporate culture and the cleverness of the cheat gets institutionalized and probably even spreads through the industry as employees move around at various levels and as suppliers sell, on the down-low, the means to cheat.
Since we have neither a corporate death penalty nor adequate criminal statutes for malfeasance, how is the "corporate death penalty" superior than laws that make it more straightforward to hold managers and directors accountable criminally? People who are willing to commit crimes to enrich themselves using companies are unlikely to be especially motivated by the well-being of the company, its employees, or shareholders.