Comments on: The Continuing Woe’s At The NSE http://www.kenyanentrepreneur.com/the-continuing-woes-at-the-nse "A black market is a free market operating against the wishes of the state." –Harry Browne. Fri, 30 Jul 2010 10:42:38 +0000 hourly 1 http://wordpress.org/?v=5080 By: kenyanentrepreneur http://www.kenyanentrepreneur.com/the-continuing-woes-at-the-nse#comment-95975 kenyanentrepreneur Fri, 21 Nov 2008 00:59:27 +0000 http://www.kenyanentrepreneur.com/?p=1298#comment-95975 Inari: Aren't the civil lawsuits I mentioned a good example of shareholder activisim? I can see why the government might not bring a case against many of the directors of these failed public companies. It's hard to prove "corruption" especially when many of the executives will simply say that their mistakes were honest business decisions that just didn't work out (& this argument might work especially because the laws were changed and these new laws gave them enormous leeway to do what they wanted). So, they could successfully argue that they were "technically" operating within the law and if the law is bad, then it's not their fault since they don't write the laws. The politicians do that. This is where the civil lawsuits by the shareholders come in because the burden of proof in civil suits is much lower than that in criminal cases. Why? because in a civil suit, you don't face jail time. Whenever you face jail time, the burden of proof will be much higher. Besides, if you're a large shareholder who's lost a significant amount of money and the CEO of that company is sitting on a $500 million dollars pay check, you'll want to get some of that money from his pocket and the only way to do it is to sue his ass and hope he is driven into a settlement. In Kenya, we're stuck with Amos Wako, a man who has never met a criminal he ever wanted to prosecute.

Inari:

Aren’t the civil lawsuits I mentioned a good example of shareholder activisim?

I can see why the government might not bring a case against many of the directors of these failed public companies. It’s hard to prove “corruption” especially when many of the executives will simply say that their mistakes were honest business decisions that just didn’t work out (& this argument might work especially because the laws were changed and these new laws gave them enormous leeway to do what they wanted).

So, they could successfully argue that they were “technically” operating within the law and if the law is bad, then it’s not their fault since they don’t write the laws. The politicians do that.

This is where the civil lawsuits by the shareholders come in because the burden of proof in civil suits is much lower than that in criminal cases. Why? because in a civil suit, you don’t face jail time. Whenever you face jail time, the burden of proof will be much higher.

Besides, if you’re a large shareholder who’s lost a significant amount of money and the CEO of that company is sitting on a $500 million dollars pay check, you’ll want to get some of that money from his pocket and the only way to do it is to sue his ass and hope he is driven into a settlement.

In Kenya, we’re stuck with Amos Wako, a man who has never met a criminal he ever wanted to prosecute.

]]> By: Inari http://www.kenyanentrepreneur.com/the-continuing-woes-at-the-nse#comment-95972 Inari Fri, 21 Nov 2008 00:43:49 +0000 http://www.kenyanentrepreneur.com/?p=1298#comment-95972 I can understand the righteous indignation when it comes to white collar crime, but I think you're a bit off when you cite the example of the US. If the directors escape jail, <i>cui buono</i>? Who benefits? The investors have still lost all of their money, people have lost their jobs, and the only people who collect anything are the lawyers! Far better would be rigorous regulation and increased shareholder activism, where the board is actually held to account and can be removed by the shareholders if they are seen to be failing in their duties to maximise shareholder value. The law should remain a last resort; it is up to those of us who entrust them with our money to hold directors to account. After all, we're the ones paying their salaries.

I can understand the righteous indignation when it comes to white collar crime, but I think you’re a bit off when you cite the example of the US. If the directors escape jail, cui buono? Who benefits? The investors have still lost all of their money, people have lost their jobs, and the only people who collect anything are the lawyers!

Far better would be rigorous regulation and increased shareholder activism, where the board is actually held to account and can be removed by the shareholders if they are seen to be failing in their duties to maximise shareholder value. The law should remain a last resort; it is up to those of us who entrust them with our money to hold directors to account. After all, we’re the ones paying their salaries.

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