Over half of the stock market is held in the retirement accounts of everyday people. This is just a tax in a roundabout way. I don't have a solution, they all suck. But I'm not convinced this is any better.
The stock market represents a tiny and shrinking sliver of the overall economy. https://businessreview.studentorg.berkeley.edu/why-your-favo.... In many cases there is no distributed class of shareholders, just a concentrated set of owners, so both this and the argument it was responding to about wiping out shareholders are irrelevant.
For companies that are publicly traded, if you were to wipe out the shareholders, that would disproportionately hurt financial institutions that pick and choose stocks and concentrate their holdings and exert influence on the corporate policy over passive investments from the average Joe's retirement fund. To the extent that it's "just a tax", it's a tax that's progressively higher on the people more likely to be at fault.
The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that "manages pension and health benefits for more than 1.5 million California public employees, retirees, and their families". . . . CalPERS manages the largest public pension fund in the United States, with more than $469 billion in assets under management as of June 30, 2021.
> Over half of the stock market is held in the retirement accounts of everyday people. This is just a tax in a roundabout way. I don't have a solution, they all suck. But I'm not convinced this is any better.
And how many people own no stock, and how many people own the other 50%?
That argument relies the same bullshit conceptual framework that's used to excuse so much capitalist dysfunction: since some of the ownership is spread very widely and very thinly. all ownership gets to dodge responsibility. It's still murder if somehow you arrange it so a million people pulled the trigger.
Edit: IMHO, the 401k was a genius stroke of manipulation and propaganda. It's convinced so many people to neglect or even argue against their own core interests in the off chance their account could be worth a few bucks more.
> Lots of Countries/Government have gotten away with it, though.
Going there is a derail. And it doesn't even work because my analogy relied on the relationship between private groups/individuals and the legal system, which is quite different than the relationship between a country/government and the legal system.
The poster has a point though in that the government is the Ur-legal-fiction. What ends up being a problem with any subsequently spawned legal fictions will necessarily be an issue with Government.
That being said, you're absolutely correct, and I don't think that it is on you to solve the Government level issue, and there is nothing about the Government level issue stopping us from slapping some additional constraints on legal fictions it spawns. The devil, however, is in the implementation details; many of which tend to cross increasingly hairy and controversial lines.
Things like limits on freedom from compelled speech for corporations with regard to privately funded research. Revocation of trade secrets (therein tend to lay the fertile ground for corruption). Mandatory recordkeeping practices that start violating the human dignity of everyone to be free from constant scrutiny, as it is only with complete comms records that one could actually piece together the facts of what happened; which still runs into the issue of criminals gonna crime; so what you effectively do is partition your population into two groups. Those that aspire to comply, and those deadset on success even at the risk of non-compliance.
These are not low-stakes social changes we're talking about here. This fundamentally refactors just about everything about our ways of life, from lowest employee to the hoghest level exec, to every small business owner.
It’s not necessarily a capitalist thing.
People will try to avoid any responsibility while getting the most of any system if you let them.
A retirement system like we have in France where older peoples shift the pension responsibility to younger generations regardless of their efforts as parents/cohort is not better at all.
Same as a bank? If you lie to investors and get yourself nuked, the owners or what passes for owners get wiped out, which is normal. The people who really qualify as victims are those who were harmed and didn't benefit from the fraud, which is everyone else.
Sure, some people would lose money but didn't intend to cause harm. Those are victims of the fraud. Their shares of the criminal company still get wiped out and they get in line to get bankruptcy proceedings.
Wouldn't the investment funds be motivated to avoid investing in these companies, the same way they are motivated to avoid investing in companies likely to crash? So reducing funding (via share price) of a company at risk of the death penalty would select for safer/better companies.
Pushing the externalities back into the company is exactly the thing we want - and the fewer companies that conduct themselves like this, the better off we all are.
> Wouldn't the investment funds be motivated to avoid investing in these companies, the same way they are motivated to avoid investing in companies likely to crash?
But they aren't. A small probability of huge return makes likely crash a non-problem.
However this deterrent effect is unfortunately conditional on the full risk of the outcome being apparent in advance to investors and indeed investees. I fear that often it is not, as in this 3M case. This boils down to our drive for progress leading to employing new technology beyond our ability to evaluate its risk, as e.g. currently with "AI". Deterrence of that cannot be acheived at the corporate level. It is a societal problem.
Conveniently, the great majority of those everyday people also own (via diversified retirement funds) vaguely-comparable amounts of the stocks of SleazeCo's competitors. So - when the feds ship SleazeCo off to the forced-liquidation slaughterhouse, the stocks of those competitors will rise, reducing the harm to the little folks.
Plus - reduced mass poisoning will improve the long-term prospects for the whole economy, also helping the investments of all those everyday retirees.
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.
People letting some other entity control their dollars with an expectation to grow by itself is flawed. These people are handing their money over so the corporations use it to their advantage by introducing these toxic products to begin with.
If “every day people” lose their money because they handed it over to someone else—that’s on no one but themselves.
People need to be investing in local businesses instead and take FULL responsibility for an investment that they actually understand.
If someone with the resources of a retail investor can do enough due diligence on every company of an ideally very diversified portfolio to determine which companies are committing crimes, someone with the resources of the US government can do so for every company and prosecute them. If the government can't figure out that a crime is being committed, how could we expect the average citizen to do so? There's just no point in making it their responsibility except as an excuse to say it was their fault.
I should have clarified but I mean with respect to financial loss, not culpability.
Every dollar is a unit of work, and people are saying, “meh, you guys do the work and pay me something.” They abdicate responsibility out of laziness. Gone is the good old fashioned entrepreneurial spirit in favor of indentured servitude.
That would be ideal. But I'll bet people won't do this though. I wouldn't. I don't have time to do the due diligence. So the downside is that you have a lot more "dead" capital that isn't doing anything productive and is slowly losing value due to inflation. Dead capital means it's harder to fundraise, to borrow money for your mortgage, etc etc.
Now I'm not saying that's necessarily /worse/...but we should be clear about what the real downside is.
The best local investment one can make is in the land. I'm in a rural area in the Pacific Northwest, surrounded by "baby" trees and the skeletons of the old forest that used to be here. The list of foods that indigenous peoples used to eat around here is long, and I would be happy to thrive on that alone. Now, though? There are a few huckleberry spots within walking distance, some mushrooms now and then, elk of course (I get why people pen cattle, but elk and other game require much less maintenance, along with some effort and consideration when hunting), some greens (I've been eating nettles for the past month, on top of good grown elsewhere thanks to petrochemical fertilizers), some invasive greens (dandelion and oxeye daisy), and probably some things I'm not yet aware of. I'm not fishing the river, as there's not much fish there anymore.
The best investments we can make for life is towards community and the land we're on. I don't need an easy life, I need a meaningful one.
I hate to say this, but the OP is right. Nothing will change until we stop supporting the problem. I think the best course of action is to stop supporting corporate culture. People really do need to stop working for all corporations. We need to stop blaming them, we are supporting them with our energy, time and money.
Find a job at a local honest establishment, or create your own service.
Make it a priority to stop supplying these establishments with power.
Use your skills in a place where you have direct control over the outcome of your work.
Anything less is just you trying to convince yourself that you can carry on blaming others for the problem you/we created/are creating.
When corporations are unable to find people to work for them, something will shift.
I’m sorry you get downvoted because that’s basically the truth.
Previously retirement was done by investing in your children and environment. It makes a lot of sense, is a lot more secure and positive than any of the bullshit we came up with.
Only reason current system works is because mistakes get diluted and peoples don’t have much choices because of monetary control.
