Whilst seating on the beach, I read last week’s (now) famous Economist piece on fines.
I was quite astonished to read that The Economist supports further increases in corporate fines. The conclusion of the paper speaks for itself: “To deter bad behaviour fines need to rise. The watchdog are biting, but some need sharper teeth“.
That said, I found the paper a little weak. Strangely enough, it says nothing of most issues that currently matter in respect of corporate fines:
- No word on sanctions for individuals, in the form of director disqualification orders;
- Some references to theoretical studies, including references to the economics of crime (G. Becker) and cartel overcharges (O’Connor & Helmers), but no word on principal-agent problems in large multinational corporations;
- No word on the issue of fines in times of economic crisis;
- No word on compliance programmes.
Is there a hidden agenda there or am I again reading newspapers like the devil reads the bible?
Arguably, those omissions may be explained by the fact that the paper is not antitrust-related only (quod non). The paper opens with some words on the economics of corporate fines, and follows with a brief discussion of the penalties inflicted to Barclays a few weeks ago. But after this, the meat of the paper really is a discussion of antitrust fines. And even if it were true that the paper takes a larger focus, it remains silent on a number of key issues. Think, for instance, to the trade-off that regulators are now facing, i.e. sanctioning banks with hefty fines v. ensuring banking stability with subsidies.
The bottom-line: The Economist can do better…