That's true but misleading. If you ranked every American by the value of the stocks they owned, the bottom 93% - the everyday people - would be splitting a paltry 10% of the total value. The bottom 50% hold only 1% of the market.
Even if 90% of the punishment ends up distributed across the richest 7% of Americans, I’m not sure what that would do to discourage corporate misconduct. A doctor with $10 million of stock in her accounts still has no individual say in what those companies do.
> Even if 90% of the punishment ends up distributed across the richest 7% of Americans, I’m not sure what that would do to discourage corporate misconduct. A doctor with $10 million of stock in her accounts still has no individual say in what those companies do.
That doctor has many things they can do:
1. Make and vote on shareholder proposals.
2. Refuse to own stock in any company that does not take sufficient action to "discourage corporate misconduct."
3. Etc.
And if a policy like mine were ever implemented, it's not like rugged individuals would only be able to take rugged individual action. The legal risk would reduce returns, and sophisticated mutual fund managers would have incentive to choose stocks that don't have those risks or vote their fund shares to make corporate policy changes to eliminate them.
Would you, personally, accept punishment if (when) your government is found to have done something wrong? After all, you can vote.
I get the feeling behind the desire, but this is why I don't think it's good.
You wrote up-thread:
> That's not sufficient though. The people who did the bad acts need to be punished, but the owners who profited from the bad acts need to be punished too. If you don't do that, you just create situations like Amazon: set an sounds-good internal policy but have internal incentives for employees to violate it (e.g. exploit 3rd party seller data to unfairly compete with them), then fire the employees as scapegoats when caught to deflect blame. So some harsh action needs to be taken the owners the shareholders.
And sure; but is it possible to determine when this incentive was created? If it is, can't it be stopped the moment it happens? If not, then the shareholders can't reasonably be blamed.
Unless the shareholders are the incentive, in which case sure.
> Would you, personally, accept punishment if (when) your government is found to have done something wrong? After all, you can vote.
That's fundamentally different. Everyone has to be citizen of some country or other, and it's difficult to change citizenships, but no one is forced to own stock in any particular company.
> And sure; but is it possible to determine when this incentive was created? If it is, can't it be stopped the moment it happens? If not, then the shareholders can't reasonably be blamed.
> Unless the shareholders are the incentive, in which case sure.
That example was meant as an illustration of using scapegoats to deflect consequences, and why the consequences have to bubble up beyond an individual doing a bad act on behalf of the corporation. I'm not sure what you mean by "the shareholders are the incentive."
My mental model for how this would work legally with shareholders would be modeled more on torts like negligence than on criminal law. So it wouldn't be necessary to determine exactly why the bad act was done to go after the shareholders, just that there was harm done on such-and-such date.
People are de-facto forced to hold stock in states that have no defined retirement benefit that can be lived off. The 401k in the USA is a good example.
I don’t think punishing stock holders makes any more sense than punishing all of Germany after WW1 did. You need to cut the head off the snake, not nibble at the tail. A hypothetical corporate death penalty should start at the top, then cascade down some amount of “tiers” down the executive chain. Executives tend to be the ones with the biggest stock rewards and the ones lining up unethical incentives in the first place.
The US has a defined benefit pension called Social Security. It is relatively generous compared to retirement pensions in other countries. A defined contribution plan like 401k is in addition to this pension; most developed countries also have something similar. In this regard there is nothing unique about the US.
> I don’t think punishing stock holders makes any more sense than punishing all of Germany after WW1 did.
Come on, stockholders are nothing like the subjects of a hereditary monarch.
> You need to cut the head off the snake, not nibble at the tail. A hypothetical corporate death penalty should start at the top, then cascade down some amount of “tiers” down the executive chain.
You need to do both: punish the owners and their agents.
What you're proposing is akin to punishing the generals and general staff, but letting the Kaiser get off scot free (including keeping his position).
Matt Levine's common refrain [1] of "everything is securities fraud" is useful here. If as a stockholder you suffer damages to your investment because a company did illegal things and hid it, you can sue for those damages if you argue that you invested in this company because you were assured they were not doing illegal things.
These lawsuits have been decently successful as far as I can tell from what stories make it to the media.
So the government reaches through the company to take money from shareholders, and then the shareholders sue to take it back from the company? Seems like you just get to the current system with extra steps.
Components that would simplify this are (a) limiting and simplifying damage calculation & (b) requiring companies to admit fault as part of settlements.
Currently, 'the company admits no fault' (but pays a fine), helps head off shareholder lawsuits.
If prosecuting entities and companies were instead required to include admitting fault, then shareholder suits would be much simpler.
The company has already admitted liability -> process directly to negotiation over amounts.
>
Even if 90% of the punishment ends up distributed across the richest 7% of Americans, I’m not sure what that would do to discourage corporate misconduct.
As a passive investor, you generally hope that active investors, who have very large stakes in a company's stock, and who care about their own returns, will steer company boards responsibly.
It seems to mostly work, if it didn't, there'd be waaaaaay more fraud in the SP&500. It's noteworthy that the overwhelming part of bad corporate behavior is stuff that doesn't get seriously punished.
https://finance.yahoo.com/news/wealthiest-10-americans-own-9...
Most business equity isn't even publicly traded; a complete accounting would show even greater inequality.