Elizabeth Warren wrote an Op-Ed in today’s Washington Post about the need to hold corporate executives personally accountable for crimes committed under their leadership. She starts with the example of Wells Fargo.
Opening unauthorized bank accounts. Cheating customers on mortgages and car loans. Mistreating service members. If you can dream up a financial scam, there’s a good chance that Wells Fargo ran it on its customers in recent years. Last week, after years of pressure, the company finally parted ways with its second chief executive in three years. But that’s not nearly enough accountability. It’s time to reform our laws to make sure that corporate executives face jail time for overseeing massive scams.
She makes the case that if you rob someone, or have an a few ounces of Pot, you could face jail time. If you are a corporate executive, and defraud thousands of people, the worst you can face is a fine to the company, paid by shareholders, and maybe you are forced to quit with full benefits. The whole incentive structure for corporate executives is wrong.
Too often, prosecutors don’t even try to hold top executives criminally accountable. They claim it’s too hard to prove that the people at the top knew about the corporate misconduct. This culture of complicity warps the incentives for corporate leaders. The message to executives? So long as you bury your head in the sand, you can keep collecting fat bonuses without risk of facing criminal liability.
Elizabeth Warren is introducing the Ending Too Big to Jail Act aimed at holding Bank executives responsible for actions taken under their watch. Combined with stronger enforcement of existing laws this can really change the behavior of the largest Banks.
That bill would make it easier to hold executives at big banks accountable for scams by requiring them to certify that they conducted a “due diligence” inquiry and found that no illegal conduct was occurring on their watch. This would force executives to look for wrongdoing or face prosecution for filing false certifications with the government. The proposal would also create a permanent and well-funded unit dedicated to investigating financial crimes.
While this legislation is aimed at Big Banks there’s no reason why this concept could not be expanded to all the largest corporations. It would provide incentives to prevent fraud in the first place, and make it easier to prosecute bad and/or negligent actors.