The corporate veil is meant to protect the shareholders, not the executive/employees

In theory at least, usually the CEO is legally responsible for the actions of the corporation. And all employees are accountable for their own actions

In practice we’ve seen that, at least big corporations, and their executives, get away with just paying fines and settling lawsuits

would be hilarious to sentence a company to, say, 4000 years in prison and divvy out punishment proportional to the ownership stake. like, this guy owning a few hundred shares on TD ameritrade must report to jail for 38 hours next week. bring a book.

We would probably see much more law abiding companies as the next shareholder meeting would involve an entirely new board of directors (the previous still serving time) and all of the shareholders themselves having spent time in prison be it hours or days or weeks would not permit such behavior in future.

An entirely new section to the shareholder meeting agenda: criminal exposure.

I wonder if we would also have mandatory market rate buy-back of securities for when a shareholder can't find a buyer but also no longer wants to bear the risk of the corporation's behavior? Similarly, mutual funds might refuse to hold securities that expose them to criminal punishment.

Companies like Uber that work in regulated industries would find it nearly impossible to operate. Healthcare companies - like the ones that manufacturer pacemakers or implants - would find it basically impossible to raise money. Ditto for aerospace, construction, and tool companies.

Why would investors want to get involved when they're one lawsuit away from going personally broke? Limited liability is a good idea and shareholders really shouldn't be held responsible for the actions of the C-suite.

Ok, but what's the downside?

You don't see a downside to freezing out investment in medical devices or other risky but useful technologies?

I know snarking is fun, but it's really annoying when it's clear you didn't read my comment before replying.

I read it. I just don't believe that companies, morally, should exist. Like, categorically. Sure, they have their upsides, there are positive consequences, but that's arguing that the ends justify the means.

Then I suppose you either believe that advanced technology falls out of the sky or should be created by government agencies. Both of those are harder to make accountable than companies.

The ends do sometimes justify the means. That's why we can require people to get vaccinated or be licensed to drive. It's insane to think otherwise; OBVIOUSLY we act this way and it's not controversial.

Going broke is not possible since lawsuit damages would be capped at the stock price value. And I'm not suggesting eliminating limited liability. Just, giving judges the authority to strip it (this is already a thing as the corporate veil can be peirced) with real shareholder consequences, instead of pussyfooting around.

And if you think that means shareholders will be on eggshells. Yeah great. Maybe we'll have fewer psychopaths as CEOs, or at the very least if you are a CEO that fucks up badly you will never fail up.

Nah, you would just find suddently nobody is willing to deal in equity and suddenly corporate bonds would absolutely explode.

And even piercing the veil, or similar - oftentimes CxOs have contracts that guarantee the corporation will pay their legal bills and any damages awarded, directly or through insurance.

>Executives should be held accountable for making decisions or approving company direction that break laws

Isn't that already the case? If an executive ordered a hit on someone, that doesn't become magically legal because he was doing it on behalf of the company.

In practice it often looks more like the case of the Ford Pinto: the company knew that the design was flawed and could result in the fuel tank exploding in a fireball during a rear-end collision, but the $9 it would cost to fix the issue was considered too expensive.

Convicting an executive for explicitly ordering a hit on a specific person? Fairly easy. Convicting an executive for letting several anonymous people die in order to increase profits? Virtually unheard of.

Ordering a hit is a pretty extreme example that probably would pierce the corporate veil

But also the problem isn't that it becomes "magically legal",the problem is that the corporate veil means that if a company takes illegal actions then often only the company is held accountable, instead of the people responsible for directing the company to take illegal actions

And it takes a high bar (like ordering a hit) to make the legal system try and hold individuals accountable for company actions

I am arguing that is absurd. I think individuals inside companies take advantage of this often to get away with illegal shit to enrich themselves at the company's expense

This isn’t what piercing the corporate veil is. Piercing the corporate veil is when shareholders (not employees) are made liable for the corporation’s actions. It is not when an individual is charged with a crime personally when there are also charges against the corporation.

Not as far-fetched as you'd think:

https://en.wikipedia.org/wiki/EBay_stalking_scandal

Note that while minions went to jail, the CEO came out of this scot-free.

>Note that while minions went to jail, the CEO came out of this scot-free.

Because it was determined that the minions committed the crime and that the CEO didn't know about it?

>The CEO Wenig's messages were deemed "inappropriate" by eBay, but eBay's internal investigation concluded that the CEO did not know about the stalking and harassment activities.

> but eBay's internal investigation concluded that the CEO did not know about the stalking and harassment activities.

I can't imagine them concluding otherwise.

I'm not arguing he's been proven innocent, just that he hasn't been proven guilty. Therefore it shouldn't be outrageous that he got away "scott-free".

The argument in this thread is that he's responsible for the actions of his subordinates and therefore deserves some of the punishment, not that he's directly culpable in the crime and therefore should receive punishment.

There have been many situations where corporate incentives or structures, plus the innate power imbalance, pressure low level employees to commit crimes that benefit the corporation and the fact that employers are not responsible for the actions of their employees when not directly ordered means that those structures aren't fixed.

>The argument in this thread is that he's responsible for the actions of his subordinates and therefore deserves some of the punishment

Even if the subordinates went rogue and he wasn't aware? Where do you draw the line? Should UPS's CEO be responsible if one of the delivery drivers crashed into a pedestrian?

It's a spectrum. If the CEO creates an environment that incentivizes unsafe driving practices among their delivery drivers, either directly or indirectly, then perhaps yes, they should shoulder some portion of the responsibility. It doesn't have to be only 100% or 0% responsibility. The amount can be modulated based on their own behavior or leadership of the company.

For example, if they consistently drove the company towards a culture of safety, and incentivized subordinates to prioritize safety and disincentivized unsafe practices, then perhaps they would share no responsibility for such an incident. They did what they were supposed to do.

If however they set ever more aggressive profit goals and other metrics, and incentivized those at all costs among their subordinates, and presided over a company culture that focused on profits above all else, then perhaps the should share some portion of the responsibility.

What is a leader without responsibility? If they reap the rewards of the successes of their subordinates, then they must also reap the outcomes of the failures of their subordinates. By any other logic, a CEO should only be paid commensurately with the tangible benefit they directly provide to the company with their own two hands.

To clarify, I agree with the post above yours. There should be a corporate veil, but it should be pierce-able in extreme cases. Maybe it's already that way, but doesn't seem to be employed all that often.

My reason for the corporate veil is essentially a social theory, that society benefits from the higher level of investment that is made possible by letting people shelter their personal assets to a reasonable extent. It's essentially a government manipulation of the economy.

It's regularly pierced in many jurisdictions for failure to pay wages. This most often happens with small businesses.

If an exec breaks the law, they can and should be prosecuted. Whats weird is filing criminal charges against a company, it’s not like the company can be incarcerated. There are ways to impose fines/injuctions via the civil court system.

More and more I think part of the problem is the burden of proof. It's too easy for executives to hide behind plausible deniability. There needs to be a presumption of individual executive guilt if bad conduct by the company is found to have occurred. In other words, if it happens on your watch, you are guilty of it.

Another way forward is that the presumption of innocence should be a sliding scale based on the amount a person has benefited. So if you made $100 million from the company, the bar is very low; you don't get to make $100 million unless everything is absolutely squeaky clean. If you were just an average joe taking home a $50k paycheck, you get much more benefit of doubt. So it's basically like making a lot of money off any endeavor is itself something that requires extra-good conduct; the default position is no one gets to make a lot of money at all.

If execs are willfully blind to criminal activity done by employees, they can and should prosecuted. Problem is they have too much clout and money that they won't get prosecuted.