April 13, 2010
Personal Responsibility and the Corporate Executariat
Posted by David Zaring

There's a strong desire on the part of regulators, legislators, and maybe voters to hold individuals accountable for business failures - a desire that I often find to be at odds with limited liability and the corporate form, to say nothing of the policies of fresh starts in bankruptcy that are deeply rooted in American history.  Still, finding personifications of financial crises has a rich history.  Hence all the prosecutions of S&L executives during the 1980s for something arguably rooted in monetary policy, the personification of the failure of Enron in Law and Skilling ... you know the drill.
Anyway, there has been no such personal responsibility inflicted during this crisis.  Not yet.  But if the Times has its way, that may change:

  • I always thought Dick Fuld was the most likely CEO to go to jail, and the Times appears to want that, spending a lot of real estate describing ... an off balance sheet entity where Lehman parked assets.  This is sort of fighting the last war - that was part of what Enron did, and seems to me like an effort to yell bloody murder about something that's both legal and widespread, but maybe future developments will be more compelling.
  • The stakes are pretty high, as Peter Henning observes.  White collar criminals are going away for really long periods now - die behind bars sentences, rather than Michael Milken, served my debt to society, now pursuing philanthropy sentences.
  • Meanwhile, in Britain, they have fined and banned Northern Rock executives - that's the big mortgage lender that had to be nationalized.  That's personal responsibility I can believe in - maybe executives who manage firms that have to be nationalized shouldn't go run other banks. 

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