August 4, 2010
Exploring Corporate Personhood Through Citi-SEC Settlement
Over at the New York Times Dealbook, Andrew Ross Sorkin questions whether the SEC's $75 million fine as part of a settlement with Citigroup (for failing to tell shareholders about some $40 billion of subprime mortgage exposure) is punishment to the companies or the shareholders.
Sorkin writes that "institutions are nothing more than their constituent parts — individuals who make choices on behalf of the organization. Some of those choices are good and some are bad. When they are very bad, the decision makers should suffer the consequences."
This is certainly a reasonable assertion, but it is not a foregone conclusion that corporations are (legally speaking) "nothing more" than their constituent parts. Furthermore, how bad does the decision have to be to hold the decision maker accountable? If the decision maker is responsible for poor choices, does the decision maker then get to take the resuling benefit if the decisions are "very" good?
Regardless, the posture of this settlement provides another great example through which to explore the relationship between shareholders, directors, and the "fictional person" that is the corporation. For a good set of fairly recent discussions on a few of these issues, see here and here (and the links found there).
August 4, 2010 | Permalink