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The Guardian: Notebook: Are big fines fine?

The Guardian: Notebook: Are big fines fine?

“Ever since the Financial Services Authority clouted Shell with a £17m fine, a debate has been raging about whether it is right that regulators levy hefty penalties on companies guilty of wrongdoing.”

8 Sept 04

Ever since the Financial Services Authority clouted Shell with a £17m fine, a debate has been raging about whether it is right that regulators levy hefty penalties on companies guilty of wrongdoing.

The argument against is that the fine hits shareholders, who should not be held responsible for errant management. The FSA’s chief executive, John Tiner, seemed to concede as much in a speech this week when he stated that the regulators’ fines should not be too onerous since shareholders would usually have been hit by a drop in the guilty company’s share price.

Of course, the overriding aim of the FSA’s fines policy is to provide a deterrent. As with the reaction to all the sexual and racial discrimination cases before the courts, when companies can see a clear potential liability – such as a multi-million pound damages award and a heap of bad publicity – they tend to adapt their behaviour. Big money focuses large companies like nothing else.

But Mr Tiner should come clean about what big fines also do: they help pay for all the regulators.

http://www.guardian.co.uk/business/story/0,,1299334,00.html

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