In the News: Bad Decision? Go to Prison!
Over the past two days a new process has picked up a small following and whispers have begun to escalate – it must STOP! Bankslaughter is the notion that executives may be held criminally liable to their past decisions (10 years or more past, by the way, not 6 months) if the bank were to fail or suffer significant losses. In other words, if JPM fails in 15 years, or suffers massive losses, Jamie Dimon can be hunted down and brought up on criminal charges for buying WAMU, or Bear Stearns, or for just allowing his bankers to lend money to firms that were already marginally levered.
While supporters believe that this may actually help executives to make more prudent business decisions, I have to believe that it will more likely stifle creativity, and the healthy risks associated with the finance world. What this notion states, in plain English, is when an executive takes a chance, and makes a decision, if that decision turns out poorly for the company, not only can he be brought up on civil charges, but also on criminal charges, while an executive who makes a similar decision is unscathed since his decision luckily broke even. Executives should absolutely be liable for their decision, but through financial, not criminal (where criminal acts were never committed) means. Essentially it is a case of who is luckier – if two people take the same risk, one should not be a criminal simply because his company lost money – losing wealth is one thing, but he is certainly not a criminal for taking a risk.
I think that if we were to head down this path, it would result in far less risk-taking by sensible people, and the same, if not more, risk-taking by those reckless employees who would be taking big risks anyway (because to those few, making money is all that matters, and anything else including prison is inconsequential). It is one thing to tie bonuses and even claw back money (which, except in extreme cases seems a bit absurd to me as well), but it is entirely another thing to start a new class of criminals for these executives – if there is criminal action, then so be it, but simply making a bad decision (yes, even a very bad decision) is not grounds to label a person a criminal and lock him/her up.
