On the heels of the BNP Paribas ruling there has been much discussing how no high profile executive has faced jail time for what took place – that the punishment metered out punished the shareholders rather than those who carried out the transactions and those who ok’ed the transactions. There is a small problem with such a claim that it is punishing shareholders, those who carried out such transactions, did so at the indirect behest of the shareholders who incessantly demanding higher and higher profits – failure to obtain those profits through what ever means necessary (keep in mind that shareholders are always happy to get rid of executives who fail to meet targets even if the said executives give a reasonable explanation as to the circumstances which lead to the poor result) means they go and the shareholders will find someone more willing to do their bidding. In the case of the executives from BNP Paribas the commandment that they broke was “thy shall not be caught” but more importantly had the shareholders been more willing to accept modest returns and when the shit does hit the fan (lower profit or making a loss) to accept the reasonable explanation given rather than throwing a hissy fit, the whole situation wouldn’t have happened.
I’d go so far as to take the hypothesis further and claim that had there not been the pressure put on executives to chase more and more riskier ventures the whole banking industry wouldn’t have gone belly up nor would we have seen the scandals in the late 20th and early 21st century. Shareholders have a lot to answer for when they demand higher profits, higher rates of return and then complain that their reckless demands result in what we see today. Maybe at some point we’ll see society realise that when you demand something it comes at a cost; demand cheaper McDonalds and corners have to be cut to bring down the cost of the ingredients, demand higher profits and companies will go into more risky ventures etc. every decision we make comes at a cost – something that far too many in society are unwilling to face and accept.