Fining shareholders would effectively force unlimited liability to shareholders, which comes with a bunch of negatives (ex: bigger shareholders would just own inside of an LLC wrapper).
Wouldn't fining more accomplish the same goal? If it was big enough, it would cause major drawdowns in the stock price, which would cause financial losses for the shareholders.
No. That would destroy the stock markets in an instant. The way it has always been is that with a classic stock, the only risk an investor has is the money they paid someone to acquire the stock.
There exist other classes with actual post-buy liabilities, e.g. stock options, as one particularly unlucky poor sod discovered at the start of the 2020 plaguefest [1], but normally these are (supposed to be) heavily gated for actually qualified investors for precisely that reason.
Personally, I'd keep it that way... and nationalize companies that can't pay their fees, without paying out the shareholders. That way, the shareholders get punished, the jobs created by the company aren't lost, and the government gains something of value.
To be clear -- the stocks are not the potential liability.
You're talking about situations where people are borrowing shares and selling them, with the hope of buying the share back later to pay back the borrowed share. Obviously that's a bad scene if you borrow / sell the share and then it goes from $20 to $20,000,000,000.... Your liability in these scenarios is infinite, but it is also part of the trading system to manage those exploding liabilities.
If you buy a property, and it turns out that property is a former toxic waste dump, you own that liability from that asset. What you thought would make a wonderful daycare is now going to cost you millions to remediate.
If you buy into a partnership, and one of the other partners does a silly thing and now the partnership owes someone millions, you're on the hook for that.
If you buy a stock, your liability is the money you've invested in the stock, which is why stocks are such a wonderful innovation (as seen from a 1400's perspective where debts are paid back by all owners).
Our entire western society depends on the ability to own and run businesses without personal responsibility for what the business does as an organisation. Sometimes in the case of fraud, or similar individual crimes within an organisation can be placed as blame on individuals or even management found to wilfully ignore internal warnings and so on, but on the whole, it’s rare that we go after private persons for what the organisations where they work does.
Shareholders are even further detached from this process, often having very little knowledge of what happens within organisations. Often having no influence on what happens within organisations. You likely own stock yourself through your pension funds, and if you made these laws your pension would be fined for what the index fonds it invest in does.
I guess from some political points of views all of this would be a good thing based on our current inequality in society, but the way to solve this isn’t through collective punishment. It’s through taxation. Right now, the entire economy is very much geared in favour of increasing the inequality by transferring more and more wealth to those who already have it. It hasn’t always been like this, 50 years ago, before the age of new public management, the taxation on things like wealth, stock and so on were high and the wealthy in our society paid most 80% of their total (not income tax) wealth generation. Today it’s often less than 10-20% through various tax law loop holes, and that’s if you keep your wealth generation absolutely legal.
Af far as organisation fines go, the situation is sort of similar to the general economy, in that major organisations and wealth owners have “rigged” the system in ways where it’s very hard to punish major corporations on a global scale. In Denmark we might find Facebook or Google guilty of something and fine them up to 10% of their income, but its income in Denmark, which is frankly so small on the global scale that they often don’t even bother fighting it in our courts like they do with the larger EU rulings. This could change, but it’s hard to do so, as the US isn’t interested in forcing US non-token companies fines to foreign countries. Similarly it would seem that even within the US there is competition between the various states to be the most company friendly.
That actually sounds like a remarkably elegant way to do it. We'll never know what the second order consequences could be until we try it. But I doubt they'll be as bad as what we're experiencing now.
Shareholders of large public companies have limited ability to challenge the actions of directors, as proxy fights are in a majority of cases unsuccessful and shareholder lawsuits are also difficult as courts such as the Delaware Chancery are generally highly deferential applying the business judgement rule. For optimal effect, if non-corporate liability desired, suggest liability attach to directors and officers first instead.
Hmm, could we apply a fine to share. Either as fixed amount or percentage at time it is transacted on next time. Basically make them partially non-fungible...
So fine is applied at end of some day. Now all shares are marked. And when they are sold next time this fine is paid.
Where do you think the money comes from? The organization has some money they can either use for stock buybacks or fines. Money that goes to fines necessarily does not go to buybacks or dividends
This SHOULD be the way as they are the ones who stand to gain the most. They should be the ones who lose the most if the actions of their responsibilities are nefarious.
xur17|2 years ago
Wouldn't fining more accomplish the same goal? If it was big enough, it would cause major drawdowns in the stock price, which would cause financial losses for the shareholders.
mschuster91|2 years ago
There exist other classes with actual post-buy liabilities, e.g. stock options, as one particularly unlucky poor sod discovered at the start of the 2020 plaguefest [1], but normally these are (supposed to be) heavily gated for actually qualified investors for precisely that reason.
Personally, I'd keep it that way... and nationalize companies that can't pay their fees, without paying out the shareholders. That way, the shareholders get punished, the jobs created by the company aren't lost, and the government gains something of value.
[1] https://www.forbes.com/sites/sergeiklebnikov/2020/06/17/20-y...
cduzz|2 years ago
You're talking about situations where people are borrowing shares and selling them, with the hope of buying the share back later to pay back the borrowed share. Obviously that's a bad scene if you borrow / sell the share and then it goes from $20 to $20,000,000,000.... Your liability in these scenarios is infinite, but it is also part of the trading system to manage those exploding liabilities.
If you buy a property, and it turns out that property is a former toxic waste dump, you own that liability from that asset. What you thought would make a wonderful daycare is now going to cost you millions to remediate.
If you buy into a partnership, and one of the other partners does a silly thing and now the partnership owes someone millions, you're on the hook for that.
If you buy a stock, your liability is the money you've invested in the stock, which is why stocks are such a wonderful innovation (as seen from a 1400's perspective where debts are paid back by all owners).
devjab|2 years ago
Shareholders are even further detached from this process, often having very little knowledge of what happens within organisations. Often having no influence on what happens within organisations. You likely own stock yourself through your pension funds, and if you made these laws your pension would be fined for what the index fonds it invest in does.
I guess from some political points of views all of this would be a good thing based on our current inequality in society, but the way to solve this isn’t through collective punishment. It’s through taxation. Right now, the entire economy is very much geared in favour of increasing the inequality by transferring more and more wealth to those who already have it. It hasn’t always been like this, 50 years ago, before the age of new public management, the taxation on things like wealth, stock and so on were high and the wealthy in our society paid most 80% of their total (not income tax) wealth generation. Today it’s often less than 10-20% through various tax law loop holes, and that’s if you keep your wealth generation absolutely legal.
Af far as organisation fines go, the situation is sort of similar to the general economy, in that major organisations and wealth owners have “rigged” the system in ways where it’s very hard to punish major corporations on a global scale. In Denmark we might find Facebook or Google guilty of something and fine them up to 10% of their income, but its income in Denmark, which is frankly so small on the global scale that they often don’t even bother fighting it in our courts like they do with the larger EU rulings. This could change, but it’s hard to do so, as the US isn’t interested in forcing US non-token companies fines to foreign countries. Similarly it would seem that even within the US there is competition between the various states to be the most company friendly.
hliyan|2 years ago
Alpha3031|2 years ago
Ekaros|2 years ago
So fine is applied at end of some day. Now all shares are marked. And when they are sold next time this fine is paid.
hef19898|2 years ago
bko|2 years ago
bilekas|2 years ago
Sai_|2 years ago
postingawayonhn|2 years ago