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US104 - Responsible Corporate Decision-Making
| Congress should require corporations to pay for negative effects of their businesses | |
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Description
If corporations are made to pay for the negative effects of their business, these negatives will factor into their bottom line and thus their decision-making. They will have to manage and minimize these costs to deliver maximum shareholder value. The problem now with corporate decision-making is it's not on the hook for many key costs (e.g., lives for cigarettes companies, emissions for oil/gas/car companies, financial crises for highly-levered banks). We can align incentives and have things go better by making them pay.
The payment could come in various ways - through monetary damages, replacement, etc. - and be to individuals or to government funds.
Arguments
Corporations have to pay for negative effects to some extent through the legal system (e.g., defective product causes physical injury), but this system of collecting after the harm only captures a small fraction of offenses. Congress should give increased regulatory authority to make them pay for negative externalities.
Great idea. Right now the government and the public has to shoulder the burden of externalities. If the goods or services you sell at a profit in turn create costs for society or government, and you are made to feel some pain with those effects, you will seek ways to decrease the negative impact. Examples abound: junk food/fast food and obesity, natural gas hydrofracking and drinking water pollution, etc. You can still reap the profits, you just have to factor in negative effects.
Counterarguments
If they have to pay for the negative side, they should be able to collect on the positive side. Don't you want them to pursue the good things? Plus, it's unfair to only look at the downside. This all becomes a bit uncalculable though.
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Discussion
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