> I think it’s nearly impossible to expect most shareholders to understand the business underpinnings to this degree within the existing system. Think of pensioners with mutual funds, do you think most even understand all the businesses in those funds let alone the operations of those businesses?

That's true, but I don't think that matters. Those same shareholders both profit and lose based on all kinds of other factors they don't understand. Adding new ways to lose tied to illegal activity doesn't really fundamentally change anything.

Also, there's something important to note: pensioners with mutual funds have savvy proxies (fund managers) who should very will understand the business underpinnings to this degree, and vote their shares to avoid losses due to these kinds of fines.

>Adding new ways to lose tied to illegal activity doesn't really fundamentally change anything.

I think it does because it creates a adds a dimension to the loss that will disproportionately affect the assessment that of risk. For one, this added dimension has only a downside. Think of an auto insurance company who operates in no-fault States. Their behavior (and by extension, the policies they offer) is changed because the risk they incur is higher despite their customer being a good driver. (The analogy being a “good” company still gets punished in the form of less investment under the proposed rules because the risk to the investor is increased).

Second, while people are well attuned to think about risk, they are very bad at judging it. That’s why the fund managers are not generally capable of out performing the market for extended periods. They are either not as savvy as you assume or work under such constraints that they can’t use it to their advantage. Behavioral psychology/economics shows that people are disproportionately risk-adverse so if you think increased risk without an even higher commensurate increase in reward, they tend to avoid taking on any extra risk.

You are responsible for your property. If you own stock, you own part of a company so you are responsible for its actions. In the case of mutual funds, it's the funds' job to understand the businesses it invests in for you. There could be an exception for non-voting stock though.

Well this is just false. You are not at all responsible for a company’s actions just because you are a shareholder. HN is evidently quite out of its depth with these kinds of threads.

Just to underscore what was previously stated, I think this philosophy would drastically change the paradigm. I’m guessing it would severely restrict the money flowing into stocks which would have repercussions in other areas like pensions etc. Point being, I don’t think it can just be layered onto the existing system without serious blowback.

As I wrote, there could be an exception for non-voting stock. At least temporarily.

But ultimately, it's supposed to change the paradigm. Because currently the economy is run by paperclip maximizers that no human is held responsible for. Which is not ideal.

Non voting shares are a minority already. Combine that with the fact that literally trillions of dollars would be aligned against such a idea, i fear it unfortunately relegates it to a thought experiment rather than a pragmatic policy proposal.

The difference here is that you would be uniting all business interests. Normally they are a fractured group with competing interests. It would take a truly revolutionary movement to enact that kind of change. Not impossible, but also not no particularly likely.