> Enron's accounting gymnastics were precisely to defraud their shareholders. How is that negligence on the part of the shareholder? It's not - it's criminal on the part of the executives.

Of course it is. Because in that case the perpetrators are the corporate officers and the victims are the shareholders. The shareholders were partially responsible for not choosing better officers, but for that they can only blame themselves.

But there are times when officers choose to harm third parties in furtherance of the interest of the shareholders. They do something illegal because it's profitable. And in that case losing their money is exactly what shareholders deserve for choosing officers with no scruples.

> It's not - it's criminal on the part of the executives.

So if this kind of behavior is prosecuted and severely punished (e.g. lifetime prison sentences) - shareholders would be less likely to be defrauded.

The protect-the-shareholders attitude is entirely oxymoronic here, since it just means that those exploiting the share-holders and the corporation know they are unlikely to face significant consequences and this encourages others to do likewise.

I didn't say it was negligence on the part of the shareholder. They are putting their money under the control of someone else, they should be thinking about risk when they do so. Is it so clear that a series of closer looks at Enron's books would have missed the fraud?

It's also the case that I was thinking more about the companies that are fined and keep operating with all the same officers in place than I was thinking about companies that implode. For example, shareholders of JP Morgan apparently aren't real sad with Jamie Dimon.

The reason why the government has to take action on this is because as a matter of policy, the government coerces people to invest in corporate America. If people were freer to not participate in the stock market casino, then there would be no need to regulate it.

But... inherently, Enron itself was defrauded by certain actors within Enron. It was a fraud based in very willingly ignorant denial, but still.