Well we could just change the law to make the CEO's and the board liable both financially and criminally for labor law violations. Like, CEO is convicted of violating labor laws, gets 32 months on prison and banned from serving as an officer of a corporation for 10 years. These guys are so used to never facing personal consequences they don't know a good situation from a bad one.
If CEOs reliably expect to go to jail for doing illegal things, boards will have a hard time finding a CEO who will do it. If you still feel this is not a solution, perhaps we add holding the board personally liable for the actions of the company, and see if that helps. :)
What if we could hold the board and the CEO personally liable with prison time for crimes by all the agents, contractors, employees, and so on of a company (with exception when they explicitly went against company policy to commit said crimes)? You'd think that was already the law but given that the Wells Fargo CEO avoided any prison time when management misused blacklist on employees who didn't meet their illegal quota, I am not holding my breath.
The fix is to make individuals in the company, e.g. the directors, personally responsible. In many countries the legal framework is already in place for that.
As long as the fines are only coming from the company the only one you're really punishing are the shareholders who really have no control over the company's day to day activities and these decisions. They have no visibility into this either.
The CEO should be held responsible for any illegal activities the company undertakes under his direction as should the directors. Assuming they're aware of it. Otherwise the responsibility is probably at some lower level. This does not contradict the responsibility of the company as a legal entity which is a party to these contract.
EDIT: A decision that may cost the company 100M in fines in 10 years and help the CEO make his bonus this year is a no brainer. This is not unlike deciding to do share buybacks when you hold stock options...
Make the CEO criminally responsible for everything under his or her watch.
They are getting paid crazy amounts of money for not much risk currently. I bet even with the threat of criminal liabilities, a lot of people would still be willing to be CEO for $100 million.
CEOs being held personally liable might not fix anything - one goes to jail, the board hires the next. And before you say “CEOs just won’t agree to do risky things”, if they won’t, they get fired, and some other CEO will. Same as what happens with programmers that refuse to do unethical work. They’ll just get replaced.
The company goes on as normal. The issue is harder to solve than “just arrest the CEO”. But I’d like to see it solved, too.
1) it’s rare, if ever, that a CEO, CFO or COO faces jail time for crimes the company committed that are similar or worse compared to jail-able offenses by individuals. So your second point doesn’t really happen in practice.
2) shareholders SHOULD be punished for the actions of the company. If my dog maims you because of my negligence to control it, I’m liable. If a corporation knowingly commits crimes, then the CEO (and everyone in the chain down to whoever performed the criminal action) is a criminal, and the board and the shareholders should be liable for not exercising proper control and guidance. When you own something you also take on responsibility for that object. Stocks are no different.
We start sending CEOs and members of the board to prison (preferably for life) for acts of a company's employees, contractors, and agents in service of the company. Rinse and repeat until companies get the message.
The CEO and the board must serve prison time for things like this. No measure less than prison for the CEO and all board members is enough to curtail this because it just becomes the cost of doing business.
No, you can’t say it wasn’t your decision. If you want to not be held accountable for the work your employees, contractors, and agents do on your behalf, you should have to prove they acted against your express written orders.
Alternate approach that doesn’t involve sending people to jail just to make an example of them:
Make up a new position with equal authority as the CEO, but their only charter is safety and compliance. Lift the corporate veil specifically for that role (and only that role) so that they are personally liable for the performance in their role and the safety of the company’s products.
Require that companies halt sales and production if this role is unfilled.
In a free market, no sane human would accept that job unless there was a (legitimately) extremely small risk that they would ever be personally liable.
CEOs need incentive structures like this in order to change their priorities/behaviors.
Penalties for corporate misbehavior are absurdly small, particularly in cases of obvious malice or fraud.
Until executives and shareholders feel real pain, companies can simply make their decisions based on cost outcomes. In most cases, the financial incentive to cheat and flaunt the law is just too great compared to the risk of penalty.
Throw some execs in jail, starting with the CEO. If CEOs are so valuable that they can be paid 100x median employee wage, then they should have some real responsibility. And penalize the stock in some way so the investors feel the pain. Sure, it's not their fault necessarily; but if you make the investors angry enough, they will demand proper behavior from the companies they invest in.
More importantly I hold them criminally liable for their actions or lack thereof after the incident. There should be no retirement here. The CEO should already be in jail pending bail and should be found guilty and sent away for a long time. If found not guilty, we must amend laws to make sure the CEO goes to prison for a long time next time this happens. Nothing else will work. Fines will not work. Congressional hearings will not work. After all, we all read about how many phone calls the DNC and the RNC require our representatives and senators to make and how much money they must raise.
Prison for CEO and the board should be the least we need to do.
Maybe there's a middle ground between sending people to prison and the company only having to pay a fine.
If a large corp flaunts the law in such a blatant way that theoretically you could charge them criminally, maybe it's useful to fine the corp but with conditions. Those conditions would be: 1) Those making and implementing those decisions are fired immediately. 2) They cannot work in that position for any company for X years.
Condition 1 leaves a lot of room to negotiate. Are you someone low on the corporate ladder? Maybe you'll get a severance package to get you back on your feet. Are you a higher up in management and got bonuses for implementing that decision? Maybe not so much.
I'll admit this just came to me right now and maybe it's a bad idea. It seems like a compromise between not sending people to jail and still having personal responsibility.
If you punish the CEO for every illegal thing done in a corporation (often without their knowledge), then no wise person would want to be CEO. In order to function, large companies would have to make the CEO position largely ceremonial and appoint desperate risk-takers, and do the actual executive leadership somewhere else.
So a strict rule like that risks setting up a formal scapegoat situation which could then lead to the opposite effect.
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