RE: transparency vs regulation ...
Okay, I think I've got the vocabulary right.
I'm thinking here that "transparency" is always good, but it doesn't solve the whole problem. If the company is making a good decision for its stockholders, wouldn't it continue that decision even after it told its neighbors that it is putting them at risk?
Yes, the company would likely try to do that, but with the transparency there, the neighbors (and their appointed officials) should be challenging the company, and saying they can't do that. So yes, this could come back to the community threatening to set regulations, which could be required in a "tragedy of the Commons" situation. I'm still thinking that this is best served by the industry itself. They could say - "here are the safety standards we use when there are residential units within X feet of our facility. We exceed all these standards, and have been audited by independent parties to verify that. You can hire an auditor, and we will pay the fee." If the industry has been conservative with this approach, the neighberhood should be satisfied. I'm guessing that approach could generally be better than leaving it to legislative bodies to determine.
However, this is a long term view. In the short term, it might be 'best' for the company to try to get away with it. I think this plays into FoA's comments on short term CEOs running long term companies.
The reason I'm going this direction is that I think this is an issue in regulating financial institutions. Suppose that well-informed bank stockholders are comfortable with the company increasing leverage to increase ROE. The stockholders know there is a risk, but the risk/reward balance says it's a good decision for them. But the rest of us are at risk of a "complete meltdown of the financial system" - a loss that far exceeds anything an individual company loses.
Yes, but if we have transparency - who wants to do business with a bank with a poor rating? So THAT will affect the shareholders.
Some of this recent talk about companies that are "too big to let fail", because they take so much down with them concerns me. I am thinking that the govt should get in and take action before a company can get so big and have so much impact. It's tough to say what would trigger that, and what the action should be, but it does frighten me that a single company or industry can hurt so many out side that company/industry.
Yes, this is a very good point! They completely discounted the unwanted risk that the public assumed unwillingly. This attitude is rampant throughout our society among power stakeholders. Think about the decisions that corporate executives make when not adequately funding their company's pension funds and cities that make pension/health care promises to civil employees that can never be fufilled through city coffers or taxation. Our congress which passed the medicare prescription drug plan which greatly increased the cost of medicare, now in danger of running out of funds.
These people in power often do what is expedient without weighing the costs, short and long term. I think our entire society is wanting in that regard. And it is a failure of our ethical culture, I think. Something not easily changed without a big wake up call. Unfortunately, that is very painful.
Well said. I think this is playing into the "tragedy of the Commons" thing again. So many people want something from the govt, and want to let the "other guy" pay for it. An individual can take more than their share, but if a majority take more than their share, it falls apart.
I still think the solution is education. We need to somehow make the majority aware that, for example, not everyone can benefit from an insurance program (which is really what a lot of these govt programs are). Everyone pays, and everyone (on average) loses. But some people are saved from an extreme problem, so (on average) we decide that is worth the cost. But it seems like too many people think that *everybody* should benefit - hey, the govt will pay for it!".
-ERD50
