I feel like we need to back off the shareholders are immune from liability by a quarter turn. In particular fine the shareholders with voting rights not the company. And not the ones that currently own the stock, the ones that did when the company did something bad.
As an investor, how am I supposed to know about various pieces of malfeasance by a company? Is it in their quarterly earnings announcements? Are they required to give me tours of their factories to whatever extent I feel?
I agree with your concern and aims, but there really isn't a window between when normal investors find out, and when the general public does. The board, executives, etc. are a different story.
I think if you have enough influence to vote in policies the company performs, you should have some responsibility if it can be proven you're benefiting from illegal behavior from the company. Potentially in the form of having those returns taken back from you, because they're effectively stolen from society, in the same way that I shouldn't get to keep a stolen TV because someone I loaned money to regularly decided to pay me back via this cool new TV that I didn't inquire the source of.
All corporate structures that I’m aware of give voting rights to all shareholders, in proportion to the number of shares they have. Some companies like Google and Meta give more votes to different types of shares.
With the popularity of ETFs and mutual funds, any American with a retirement fund has voting rights in the 500, and probably more public companies.
The proper way to do things is properly penalizing the company sufficiently to affect the share price.
> With the popularity of ETFs and mutual funds, any American with a retirement fund has voting rights in the 500, and probably more public companies.
You do not receive voting rights when you hold index funds, ETF or otherwise. You only get to cast your own votes if you are an individual shareholder. Your index fund votes get voted by the fund runner.
That's why I said voting rights. If the if index fund managers find themselves on the hook for stocks they used to hold they'll take a much bigger interest in the CEO and Boards shenanigans.
I agree, particularly in the case of companies where institutions own a majority of the shares (which is more than you’d expect, TWTR had something like 70-80% institutional ownership before going private)
as an investor, it is your responsibility to be informed as to what people are doing with your money. the entire purpose of liability limitations is to make it so people don't need to do that because all they have risked is money.
If I was short the company at the time of the bad behavior, presumably I should get a pro-rated share of the fine paid directly to me (because there are more long shareholders who would each owe a portion of the fine).
that's not how fines are supposed to work. Fines aren't monies owed. Fines are monies as deterrent. Since a corporation's purpose is to acquire monies. I'm for fining the voting shareholders in proportion to their holdings but to pay the shorters is not something I would get behind. Those that are shorting are betting against the company and so fines/bad pr/etc are already movements in their favor.
But the shorts have created additional shares (and therefore additional proportions of fines). If there are 100 shares of a company outstanding and the company is fined $1M, each shareholder owes $10K to cover the fine.
Now, in a world where someone has shorted 10 shares, there are now 110 shares held long, meaning the total fines paid would be $1.1M, leaving $0.1M available to pay to the shorts.
Shorts do not create shares that way; they're shares that have been borrowed, which means they've temporarily changed hands. Consider for voting. If you've borrowed shares from someone else over the time period that determines voting rights, only one of you gets to actually vote - you haven't magically created new votes in the process.
The shares are borrowed, but not always with the knowledge of the original shareholder. So should one owner get excluded from the fine just because their broker happened to loan out their shares and not the shares of another equally eligible holder? Opposite thing happens with dividends and the original holder is still entitled to those.
My point about proportion of holdings is that if a company is fined $1M to the shareholders and there are 1,000 voting shares held, not every holder is holding 1. Some are holding more than 1. Some are holding 400 or more. So the formula would be:
> fine the shareholders with voting rights not the company
This would turn every fine into a Madoff-trustee clusterfuck. Instead of collecting a fraction of the fine at a multiple of the cost, just fine the company more. Practically every creative solution to corporate malfeasance (apart from fraud) is inefficient in comparison to bigger fines.
Well that's an incentive/reward for private people taking on risky ventures to accomplish the objectives of the state. Too bad they took out the work requirement and it just became welfare.
If you don't limit the liability, you will see the stock market die.
This would be more a case of you buying stock on the game company, and the next day somebody discovering that the previous dividends were fraudulent and only happened because the company stole 100 times more than its market value, and then you being on the hook for paying 100 times more than the stock price as restitution.
I do agree that the liability limitation is currently too strict. But it can't just be removed.
But that's new information. The talc issue has been known for years. How serious or what the monetary outcome would be was not known but should have been a calculated risk for those purchasing stock
