> I do not think that would be fair to stockholders (among which are pension funds).
How is it not fair? Why should they bear no responsibility in the behavior of something they are funding? They should indeed lose money for being reckless in their investment.
The alternative is to let the rest of society, that has no stake in the company, bear the cost of their toxic activity. How is it more fair than making stockholders pay?
The punishment should be proportional to the damage that has been done. The settlement they reached was for 190 million dollar. That affects stockholders directly. You can argue that that fine is too low. I can agree with that, but saying the company should be put into bankruptcy is saying that the fine should be 275 billion dollar. I do not see how you can justify that.
I do not think destroying the complete company as a deterrent will help. That will not deter executives which will still be making money hand over fist. It will however deter investors in investing in companies in general.
I think a better way to address this situation is by reimbursing affected customers (which has mostly happened AFAIKT), compensating wrongly fired employees, disciplining the responsible executive (by firing and clawing back their compensation, which has happened partly). Improved oversight (internal/external) and whistleblower procedures should also be instated.
$0.190 billion is a trivial amount for Wells Fargo: it amounts to 3.4% of their Q3 2016 profits. They made $5.6 Billion dollars last quarter on $22.3 Billion in revenue. [1]
If an individual commits one count of Social Security fraud they would pay a fine of $10,000 or about 20% of the median household income. [2] (This is an arbitrarily picked form of financial fraud)
If the bank had a proportional punishment they would pay 20% of their annual revenue for systemic fraud, which would be roughly $18 billion dollars.
Yes, the fine is quite small for WFC and a fine of 18 billion dollars definitely would get their attention. It's still something WFC could survive (it's about a year's worth of profits), and totally different from putting WFC into bankruptcy.
I'm not convinced you can compare personal law and corporate law. The fact that it's a fixed fine in personal law, regardless of income/wealth doesn't seem fair. Also, if you want to extend the analogy maybe it would be more appropriate to take 20% of profits? 20% of revenue it much easier for Apple to stomach than Walmart, because of higher margins. But then what do you do with companies that don't make a profit...
How is it not fair? Why should they bear no responsibility in the behavior of something they are funding? They should indeed lose money for being reckless in their investment.
The alternative is to let the rest of society, that has no stake in the company, bear the cost of their toxic activity. How is it more fair than making stockholders pay?