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Business: Economics
anti enron policy   (+2, -2)  [vote for, against]
im not entirely sure if this would work

It struck me the other day that with all the huge multinationals lying about profits there must be billions of money that doesnt actually exist. When these companies are discovered there could be huge economic trouble if not collapse because this money will disappear. <rant deleted>

My idea is to fine/confiscate from the companies responsible to the amount they lied about, subtract from it the amount of loss the economy can withstand and redistribute it equally to all companies that have not cheated. Any company that cheats after it has gained from this policy has its gain included in part of the amount confiscated.
-- chud, Jun 29 2002

It would probably be best that distribution was unequal as it is the companies most like Enron, WorldCom and Xerox that are going to suffer the most if they are innocent. Equal distribution would see companies being formed solely on the basis that, because an empty company can always be ethical, they would get a cut from unethical divies.

A good idea that gets French breakfast food from me.
-- Aristotle, Jun 29 2002

A problem with this, is that the innocent (investors who knew nothing of the wrongdoing, including staff who in addition have lost their jobs) are punished as well.
-- pfperry, Jun 29 2002

dont the companies already lose the money they lied about? i just proposed that the money not be suddenly removed from circulation with the effects that that would have on people with no connection with the company. The shareholders and employees are already screwed and i cant see any way of stopping that short of pre-emptively beating the crap out of the executives.
-- chud, Jun 29 2002

An example of what makes a company honest could be early implementation of FASB accounting rules such as:
Emerging Issues Task Force (EITF) Rule 01-14 ("EITF 01-14"), "Income Statement Characterization of Reimbursements Received for `Out-of-Pocket' Expenses Incurred." This new rule requires firms to report reimbursements received from customers for out-of-pocket expenses, incurred on their behalf, as revenues.
My money doesn't just ‘disappear’, so I hope yours doesn't either.
-- reensure, Jun 29 2002

when a company announces profits that its hasnt actually earnt does the money exist? if so, does the money still exist if the company is found out? (if the answer is yes then this idea is probably redundant) if so where is it/whose is it?
-- chud, Jun 29 2002

You kinda sorta forgot about Creditors
-- thumbwax, Jun 30 2002

Wouldn't it be nice if some of us restricted our ideas to areas which we might know something about!

First of all: The Enron mess was created by the DotCom boom. So much money went into the pipe dreams of the DotCommers that other companies were starved of capital. That is the reason companies like Enron padded their books. It was to make their legitimate business look to investors on equal footing with the fake business of the DotCom boom.

Secondly, there was no money magically created by the padding of earnings reports. American money is created by the central banks under authority of the Federal Reserve. The value of that money or any other values in our system is created soley by people who choose to hold or sell those assets.

Thirdly, jailing criminals and fining the shit out of them personally and further barring them from holding office in publicly traded corporations is usually good enough to discourage rule-breaking behaviour. Punishing the investors in the corporation for the acts of the executives is both counter-productive and adding further injury to an already injured class.
-- hughiebaby, Mar 25 2004

random, halfbakery