I really wish I could refute this. The protections incorporation provides for executives seem a bit too strong in cases like these.

Which protections are these? I thought that incorporation didn't give any protections for maliciousness, it's just that DAs rarely go after executives because any particular blame is so distributed throughout the corporation that it would make any case difficult to prosecute.

The diffusion of responsibility is one of those protections. There should definitely be some strict liability for certain corporate malfeasance, where it doesn't too much matter who specifically did the deed, the executive/C-level is responsible and takes the fall. Then prosecution comes down to 'Did your company do X? If yes, you're guilty.'

Exactly. If the CEO goes to prison if the company commits X crime, the CEO has a strong incentive to ensure the business is not doing that.

If the CEO's only concern is shareholder profit, crime usually pays pretty well.

The idea that a 10000 year jail sentence must be served by every share holder disturbed in proportion to how much they owe would make “shareholder value” mean “not making me check into jail to serve my 2 days of the sentence for my 1 share” which might change corporate behavior a bit. Especially if insuring shareholders income against that risk becomes a line item in the budget.

I think shareholders might be too detached from decisionmaking for that to make sense. It'd definitely have a huge negative impact on stock values, but I'm not sure it would prevent corporate malfeasance.

If nothing else it would make jail nicer in that case.

A more realistic approach is to take away personhood rights that these corporations rely on. A 10 year ban on political donations and lobbying would be a good starting point. Then prison for the C-levels if they violate those terms which are directly under their control.

Yes and the less you know the better for you when it eventually goes to court.

We had one of these cases recently in my country.

CEO of one of the biggest X in the country goes to trial for lying/not informing correctly about Y gross malfeasance. Walks free after years of investigation, because didn't know about it.

Not only would that be effective in disincentivizing the malfeasance, it has the added benefit of limiting the scale of corporations to what execs can effectively manage.

In the Coast Guard and Navy it doesn't matter if the Captain didn't know what was going on, its their job to know what was going on and they're always the ones held responsible one way or another.

This is because if you are in the military your subordinates are bound by UCMJ to follow all lawful orders. The officers are granted complete authority over the subordinates but bear the responsibility for all the actions of those under their command. There is no civilian equivalent for this kind of relationship between authority and responsibility(though law enforcement should be using the same model).

Holding both companies and management responsible can be tricky as well. IIRC Exxon-Mobil had an aggressive policy of destroying records from projects as soon as they were legally able to prevent them from being used against the company in litigation or investigations. In this case, having poorly structured laws or regulations encouraged the company solve the problem of liability, rather than one of accountability.

I think what you're describing is the difficulty in "piercing the veil" of an LLC to hold individuals accountable. You can search that legal principle and learn more about how an LLC structure shields individuals from repercussions for their actions.

I remember a nice Obama quote "the buck stops with me".

If you get the big pay check for leadership it is your responsibility when shit goes bad. Sadly about the worst consequence a failed CEO has is that he/she doesn't get invited to play golf for a few years.

> it's just that DAs rarely go after executives

I think after taking down Enron and Arthur Andersen and lot of people lost their jobs, which does not look good on TV. Politicians on both sides stopped supporting taking down execs/companys. So now the new normal is to push for fines.

I always wonder what will come first: laws to jail negligent execs for the next disaster, or an ambitious legislator with a magic solution to jail negligent execs for the current disaster.

Neither.

There's a web of power and influence invisible to people who aren't part of the system. Politicians who could create this legislation don't get reelected if they aren't participants; their election war chest evaporates.

This is how monied interests managed to design the system to work.

Where by "magic" you mean an ex post facto law? I'm all for going after execs for their crimes, but let's try to keep that particular part of the constitution in tact.

The article describes some pretty blatant negligence, though I suppose suggesting that a legislator might get involved implies ex-post facto lawmaking.

Maybe the responsibility is too diffuse. But these "no one could have predicted this" kind of Therac-25 situations with multiple people responsible are exactly where that boss -- the one getting paid the big bucks (for the risk they take! for the difficult decisions they have to make! for the complex structures they have to oversee!) -- to actually take responsibility for the decisions inherent in the incentive structure they created in the workplace that they have total control over.

> The article describes some pretty blatant negligence

Is it? The article tries strongly to imply that the whistleblower is right and the manager is wrong, but that's never conclusively established. With the same facts presented in the article, I can paint a different story of the whistleblower trying to make a mountain out of a mole hill, and how he was obviously wrong everyone else seems to think it's fine.

It is interesting that we can use RICO go to after mob bosses even when they have layers and layers of indirection to protect them.

But with CEOs it seems RICO doesn't apply.

CEOs generally aren’t racketeering so they can’t usually be hit with that

The main driver of RICO, however, wasn't to stop racketeering. It provided the provisions for the FBI to pursue mob bosses for hits they ordered. Prior to RICO it was very difficult to throw a mob boss in jail for such things.

All we need to do is extract that portion of the bill. However, I suspect the answer is like usual. Congress does not represent the people and their corporate owners would not be pleased. Larry Fink would probably have a millenia worth of consecutive life sentences alone. We might spur innovation in healthcare technology just making him serve the time he owes.

The reason for that is there are only a tiny number of crimes that qualify as RICO predicates. We need to expand RICO to include more types of criminal activity.

Exactly, fining companies doesn't do anything. Fine and jail the PEOPLE doing these crimes.

There's always plausible deniability so that if anybody does take the fall it's probably going to be some mid level suit that was 'just following orders.' I'd rather that liability starts with the CEO and Chairman. You need to make sure executives cannot simply hide behind fallguys.

You then create a top-down incentive for these people to genuinely make sure everything is on the up and up. The biggest problem is that this probably creates a strict cap on how large a single corporation can grow, which sounds much more like a feature than a bug.

This is all well and good to say, but impossible to implement within our current system. That's what's so depressing about it. And by 'impossible' I grant its theoretically possible, just not in practical terms. Of course the other side of the coin is that even if it was implemented, then prosecutors, and hence government, would now have this new power over CEOs and it wouldn't be long before some corrupt politician got in office and used it corruptly.

Sarbanes-Oxley would seem to imply that it’s possible to enact new laws that enforce consequences for fraud among top level executives?

In theory at least I guess. Maybe someone else can comment on how it actually works in practice.

Its not enough for the laws to exist, they must also be enforced.

>I'd rather that liability starts with the CEO and Chairman. You need to make sure executives cannot simply hide behind fallguys.

Why can't you appoint a fall guy as the "CEO", and then have a COO or whatever that actually runs the day to day?

Even c-levels, including the CEO, can be fired by the board, which is why I think accountability should include such.

Okay, then you have a whole c-suite of fall guys, and the real CEO is actually called "VP of global operations" or whatever.

I prefer jail time for companies. The entire operation has to shut down for a set period of time. No money going in or out. No one can work. No one can open their laptop. No one can go in the office. No one can discuss business. No new contracts signed.

If corporations have the same rights as humans, make them suffer the same consequences.

So all of the employees get fired en masse, but the rich CEO, managers and shareholders actually responsible for malfeasance get an extended vacation?

Yeah... that'll show them.

The effective outcome of corporate jailtime is that the company is instantly destroyed. There are no companies that would survive being shit down for years. Shareholders would be left with nothing.

And if people would be out of jobs - good. It would stop people from working for companies that don't provide transparency into the legality of their operations.

> You have to go directly after the people who are making decisions for the company.

Usually in this case the person really making the decision doesn't take the blame; that just flows downhill.

Yeah, it's one thing when you make some billionaires lose money, it's another thing when you potentially give thousands of people cancer because you polluted their land and air with carcinogens.