Not to get all too political on HN, but the increasing number of cases like this over the last few years is the most positive thing I've seen happen in the US in a long time. And one of my biggest worries for the next administration is that they will put an immediate stop to this.
These cases all come down to a very simple thing: "Don't lie if you're a publicly listed company". Which is an enormous boon to society if enforced, like it is indirectly through these lawsuits.
Fake job interviews aren't securities fraud - as long as you don't lie about them. Bad passwords aren't securities fraud - as long as you don't lie about them. It has become entirely second nature for companies to lie about everything; there's a whole industry around it (usually known as "PR"). These lawsuits can disrupt this status quo. Stop saying A and doing B. All these cases are very clear in that the company said A without even doing A at the time. It's not like they were forced into either saying A or doing B. Both Wells Fargo and Solarwinds could very easily just not have made false claims wrt diversity and security. They willingly, knowingly did so.
Lying in public seems like it would include "lying to investors", no? Sure, lying at the water cooler doesn't matter. But the Solarwinds case seems to be about lying on their website.
A company could have bad passwords without lying about them, just don't comment on passwords at all.
But it's hard to see how to have a "Fake job interview" without lying, as the publicly listed job would itself be a lie. Or in the example given, the "diversity" candidates interviewed without any real intent to consider them for the job, were lied to.
yes, I see that this is covered better in the article.
Hey HN, want a side project idea that's easy, and would be a huge hit?
Make a web crawler that hits publicly traded tech companies careers page, once a day, and tracks how often their job listings change. Make a big line chart at the top of a landing page that compares the different companies job openings (by count), over time. Penalize listings that list/delete/re-list job openings to always make it seem like they are hiring. Maybe have a max time a job post can be open before it's no longer part of their count (3 months?)
What you'll end up showing is similar to this article: A lot of company's stock is evaluated on growth, and part of the growth estimation is based on how much they are hiring in this down market. Some companies know this, and are trying to game the system
Anyways, I bet a decent amount of people would watch that like a hawk, and the honest companies would love it because it would show how great they really are doing
Working in some hiring-tech stuff right now, there are systems where the business-domain/database-model explicitly incorporates "evergreen" job postings, meaning ones that are left up constantly often because the company really is always hiring due to high turnover.
In other words, there are some legitimate reasons for a job posting to be indefinite, even if it doesn't seem common for software engineering jobs in particular.
If it doesn't explicitly say it's an evergreen/non-urgent position, I'd still penalize it.
But sure, that doesn't happen often in tech because they would hire a consultant or a specialized contractor for such roles of its necessary and very specialized.
I've worked at a large company where the job portal showed open roles in chronological order, newest to oldest, so recruiters would constantly delete and repost unfilled roles to get them back up top for a while.
I had some code partially written that did this with the HN API. I was going to call it "Who's Not Hiring?" and find/call out companies that had the same job posting week after week. Got bored and never finished it.
Sell the data to hedge funds. I saw a company selling this data at an alternative data conference a few months ago. I can't remember of the name of the company but if you message me I'll find it.
The most incorrect assumption about stock is the idea that it's based on reason of metrics and evidence. In reality it is orchestrated by handshaking of existing wealth. Value is whatever they want it to be.
What would happen is the information goes ignored for the corps in good graces, and used negatively for the ones already going under as a small bullet point.
If you want markets based on sane economics this isn't the one to be in.
> Wells Fargo did a bad thing. But the badness of the thing is uncertain, amorphous, hard to quantify: People were harmed, but not in ways that the legal system can easily reduce to money.
> But the financial system can: The bad thing that Wells Fargo did caused its stock to drop, which is a good rough measure of how bad it was. The shareholders perform the socially useful service of measuring the badness [...]
I think this is a really interesting point - assuming the actors in the market who are buying and selling stocks share the same general morals of the rest of the population, they can penalize companies that do bad things. But that would mean market forces would need to act on moral grounds and not on profit motives.
> The shareholders perform the socially useful service of measuring the badness
That's a dangerous idea as it presumes that shareholders are investing not for profit but to improve "goodness" in the world. This is obviously not true.
The shareholders are providing the economically useful service of measuring _risk_ to those future profits. These two factors may be linked through an abstraction but they are most definitely not equivalent.
> they can penalize companies that do bad things
Without journalists to expose the bad things in the first place the investors can do no such thing. There is no mechanism in place to discover these facts and there is no effort to build one independent of journalism.
The author (Matt Levine) is always a bit tongue in cheek about securities fraud and the “socially useful” role shareholders play in pricing securities. He writes about these kind of incidents in a weekly basis, so his typical audience knows to read it that way.
It doesn't presume that shareholders are altruistic.
It presumes that shareholders' only objective is to maximize the share price.
From Wells Fargo's reports to investors, it's clear that management believed that investors would interpret successful diversity efforts as important to maximize the share price.
After the diversity rules were suspended, the share price dropped.
It's nearly impossible to prove cause and effect, but the plaintiffs don't have to prove direct causation. They only have to show that management misrepresented the facts in reports to investors, that the false statements were material, and that investors suffered a loss at that time.
> Without journalists to expose the bad things in the first place the investors can do no such thing. There is no mechanism in place to discover these facts and there is no effort to build one independent of journalism.
Isn't that backwards? Investors are a major funder of journalism in the broad sense, and one of the few robust revenue sources left for it.
This is a part that he takes on faith which is completely unsupported. What the market is really doing (assuming rationality) is judging how much any punishment Wells Fargo might receive from regulators, customers, counterparties will alter the net present value of the stock.
I think this explains a lot of the "companies only act in the interests of their shareholders" thing, too. I know there's a legal obligation to act in the interests of the shareholders, but additionally, as TFA points out: shareholders have a really easy time quantifying their damages so that a case can be brought.
Employees having a really bad time at a company because it keeps doing bad things have to be able to quantify that bad time in dollars, and that's hard.
It's interesting to think of how we could adjust the legal system to allow for emotional distress, environmental damage, morally bad actions, etc on their own terms without having to convert them to monetary damages. Make it easier for a court to judge executive decisions on moral grounds and that makes it easier to claim damages for bad decisions and that makes it easier to keep companies behaving morally.
Morals are subjective and fluid. They are effectively areas where society has "agreed to disagree".
Morals that society agree on are codified into laws. The legal system is set up to enforce and uphold laws. It cannot uphold morals because they are not law.
As executives we allowed alcohol at the year end party. If some of our group gave a moral position of no alcohol (say Mormons or Muslims) is that morally incorrect for us yo allow it?
What if said objector imbibed at the event? Are we "morally responsible"? Who gets to decide and tell us what is morally ok or not ok?
I think the point of this case is that they don't have to be moral at all. They penalise the company for doing bad things not because they think it's bad, but because they have financial incentive to do so.
Markets are not about morality. They are designed to allocate resources optimally. If you want moral outcomes, you would need to inject incentives that make those outcomes optimal for the market participants
> not in ways that the legal system can easily reduce to money
this is a sad truth for lots of things. Like folks who collect, then lose private information. It is wrong and bad, but rarely quantifiably so in court.
This is inaccurate, and the article itself actually contradicts itself by showing that it's inaccurate.
They can penalize companies for lying. If the companies just stop lying that they do/will do/will not do/don't do a certain thing, there's no securities fraud. The issue is that they lie about it.
There is a financial accounting line item called “goodwill” and it’s often non-trivial.
In a functioning market customers (whether consumers or enterprise purchasing decision makers) tell you to take a walk if you act with bad will in any kind of consistent way.
There isn’t much money to be made in markets that are both of “mature” and functioning.
Goodwill has a very specific definition that has nothing to do with your behavior. It is simply the difference between the price an acquirer pays for something and the book value of that thing
I really like Matt Levine's quote from his previous article (https://archive.ph/eKH6k) on this topic:
> To some extent you have to manage a big organization with simple, crude, legible metrics. In a big enough organization, somebody will game those metrics. Ideally you create a culture that minimizes that gamesmanship, one where employees understand and buy into the organization's real goals rather than just trying to maximize the dumb metrics. Wells Fargo seems to be having some trouble creating that culture.
It's really just a fantastic example of Peter Drucker's famous adage "Culture eats strategy for breakfast." And it's why I get very wary of any large organizations that focus too much on data-driven goal setting (OKRs and the like) without having some way of stepping back and doing a reality check. To be clear, I actually like OKRs if they are used correctly to help prioritize and focus, but too often I've seen them become a weird, gameable time sink.
It's truly shocking how organizations do not bring the hammer on managers who outright try to game the metrics. At least never (?) make the claim that gaming the metrics will get you booted. There is a feeling that, within rather lax limits, gaming the metrics is seen as good sports.
Because yes, in the US I rather suspect that this comes from high school and college sports worship. Winning is what it's about and someone who bends the rules to win can probably be put to good use and should be promoted to where they can do the most damage?, bending?
> Ideally you create a culture that minimizes that gamesmanship ... having some trouble creating that culture
This ideal culture is like unicorns and rainbows - some of it exists under very specific atmospheric conditions and some of it, when you look closely, is really just a horse with a toilet roll on its forehead sprinkled with glitter.
This is simply because it has become second (or rather, first) nature for companies to lie about everything. Stop lying, and there's no more securities fraud. Be honest.
They could start by citing Matt Levine’s own 2021 introduction to the idea published during the halcyon days of r/wallstreetbets and pandemic markets, titled “Is Everything Securities Fraud”[0] ;-)
Well....he's kinda right. There is a staggering amount of fraud in the world these days, and some of the more nefarious propagators of said fraud don't even bother hiding it.
Everything is securities fraud is just a subset of the general idea that everything is fraud. By which we mean, "every company is lying about things, all the time".
Turns out this is trivially true, because the game theory for rational corporations (and its executive decision makers) clearly suggests that on net, lying all the time is very, very profitable.
I'll never truly understand what the practical value of suing companies as a shareholder of those companies, when if they lose, they have to pay it out of cash, which is neutral for you as a shareholder. You're incurring the cost of litigation either way, so it's always a negative proposition.
That's obviously only true if you remain a shareholder, but given the majority of stock generally doesn't change hands it seems like most people who are being represented as the victims in these lawsuits are worse off. Shouldn't the people who remain shareholders be able to exclude themselves from the suit, thus shrinking the size and maybe making it cheaper to settle? (It is possible this is a thing you can do, I've just never heard of it.)
I worked closely with lawyers for a time and a colleague of mine pointed out something interesting. She said that if we could remove emotion entirely from lawsuits and get both parties to only think rationally, the vast majority of lawsuits would never happen.
Sounds like a Causal Decision Theorist. Every other rational decision theory supports suing under some circumstances, and refusing to settle under some circumstances; even when the expected monetary return (considered in isolation) is negative.
For the same reason we lock people up in prison. It’s a punishment and incentive to behave.
Also, oftentimes the bad action of the management impacts the value of the company. The past malfeasance and fraud committed by Wells Fargo is an excellent example of that, where it moved to criminal liability.”
Not necessarily, depending on how many shares you own.
Typically shareholder lawsuits are brought by minority shareholders (or, as you say it’s pointless) seeking to get paid to compensate for some malfeasance they feel was being perpetrated against them by the majority shareholders (and management, as their agents).
A majority shareholder might still decide to sue, hoping that any short-term loss would be offset by long-term gains if the lawsuit served to dissuade future malfeasance on the company's part.
> Typically shareholder lawsuits are brought by minority shareholders
I don't know if this is true - I just asked Claude and it said the type of lawsuits I described are significantly more common, at least among suits against public companies.
But regardless of relative frequency, you say it's pointless, so why does it happen? (The answer seems clearly to be because the lawyers want it to happen, but still seems like it's a very inefficient process for most shareholders.)
There are a few good reasons to sue as a share holder. The first is that you just have different interests. For example, the board and CEO decide to do something that benefits themselves and their other financial interests. In that case you can sue and stop them doing whatever it was. So it's a mechanism of control - and you don't need a shareholder vote or a majority of support, what you can force can be unpopular but in your interests. That was the pretext for Tesla getting sued for Elon Musks' compensation package - the shareholder won and Musk had to hand back billions in compensation, that's strictly a financial gain for the shareholders.
But secondly, there's the meta game. If you're a good lawyer and you spot some company doing something egregious you can go shopping. Go and find a shareholder and say "Hey, we can sue that company, I'll take care of all of it, I just need your name because you're a shareholder". You can then conduct a massive expensive lawsuit against the company and if you win? They have to pay your exorbitant costs. Going back to the Musk example, the shareholder who sued to reverse the compensation package had a derisory number of shares, but the lawyers who took on that case are now asking for something like $5Bn in costs. That's a pretty nice payday, and in some ways it works like a bounty against companies with poor governance.
The pattern here with Wells Fargo is interesting (you may recall they got into a ton of trouble by setting aggressive sales targets, causing employees to defraud customers).
There’s clearly a huge disconnect between the numeric targets they set and the resulting behavior of employees. That’s always a hazard, but I wonder why it’s such a pattern at WF
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These cases all come down to a very simple thing: "Don't lie if you're a publicly listed company". Which is an enormous boon to society if enforced, like it is indirectly through these lawsuits.
Fake job interviews aren't securities fraud - as long as you don't lie about them. Bad passwords aren't securities fraud - as long as you don't lie about them. It has become entirely second nature for companies to lie about everything; there's a whole industry around it (usually known as "PR"). These lawsuits can disrupt this status quo. Stop saying A and doing B. All these cases are very clear in that the company said A without even doing A at the time. It's not like they were forced into either saying A or doing B. Both Wells Fargo and Solarwinds could very easily just not have made false claims wrt diversity and security. They willingly, knowingly did so.
But it's hard to see how to have a "Fake job interview" without lying, as the publicly listed job would itself be a lie. Or in the example given, the "diversity" candidates interviewed without any real intent to consider them for the job, were lied to.
yes, I see that this is covered better in the article.
Make a web crawler that hits publicly traded tech companies careers page, once a day, and tracks how often their job listings change. Make a big line chart at the top of a landing page that compares the different companies job openings (by count), over time. Penalize listings that list/delete/re-list job openings to always make it seem like they are hiring. Maybe have a max time a job post can be open before it's no longer part of their count (3 months?)
What you'll end up showing is similar to this article: A lot of company's stock is evaluated on growth, and part of the growth estimation is based on how much they are hiring in this down market. Some companies know this, and are trying to game the system
Anyways, I bet a decent amount of people would watch that like a hawk, and the honest companies would love it because it would show how great they really are doing
In other words, there are some legitimate reasons for a job posting to be indefinite, even if it doesn't seem common for software engineering jobs in particular.
But sure, that doesn't happen often in tech because they would hire a consultant or a specialized contractor for such roles of its necessary and very specialized.
Seems too easy to be abused.
https://www.sec.gov/enforcement-litigation/whistleblower-pro...
1) Provide a paid service for users to get more pro level insights. Targeted at job seekers who don't want to waste time.
2) Expand into a job board where only companies that pledge not to engage in such tactics can advertise.
What would happen is the information goes ignored for the corps in good graces, and used negatively for the ones already going under as a small bullet point.
If you want markets based on sane economics this isn't the one to be in.
> But the financial system can: The bad thing that Wells Fargo did caused its stock to drop, which is a good rough measure of how bad it was. The shareholders perform the socially useful service of measuring the badness [...]
I think this is a really interesting point - assuming the actors in the market who are buying and selling stocks share the same general morals of the rest of the population, they can penalize companies that do bad things. But that would mean market forces would need to act on moral grounds and not on profit motives.
That's a dangerous idea as it presumes that shareholders are investing not for profit but to improve "goodness" in the world. This is obviously not true.
The shareholders are providing the economically useful service of measuring _risk_ to those future profits. These two factors may be linked through an abstraction but they are most definitely not equivalent.
> they can penalize companies that do bad things
Without journalists to expose the bad things in the first place the investors can do no such thing. There is no mechanism in place to discover these facts and there is no effort to build one independent of journalism.
It presumes that shareholders' only objective is to maximize the share price.
From Wells Fargo's reports to investors, it's clear that management believed that investors would interpret successful diversity efforts as important to maximize the share price.
After the diversity rules were suspended, the share price dropped.
It's nearly impossible to prove cause and effect, but the plaintiffs don't have to prove direct causation. They only have to show that management misrepresented the facts in reports to investors, that the false statements were material, and that investors suffered a loss at that time.
Isn't that backwards? Investors are a major funder of journalism in the broad sense, and one of the few robust revenue sources left for it.
This is a part that he takes on faith which is completely unsupported. What the market is really doing (assuming rationality) is judging how much any punishment Wells Fargo might receive from regulators, customers, counterparties will alter the net present value of the stock.
Deleted Comment
Employees having a really bad time at a company because it keeps doing bad things have to be able to quantify that bad time in dollars, and that's hard.
It's interesting to think of how we could adjust the legal system to allow for emotional distress, environmental damage, morally bad actions, etc on their own terms without having to convert them to monetary damages. Make it easier for a court to judge executive decisions on moral grounds and that makes it easier to claim damages for bad decisions and that makes it easier to keep companies behaving morally.
Morals are subjective and fluid. They are effectively areas where society has "agreed to disagree".
Morals that society agree on are codified into laws. The legal system is set up to enforce and uphold laws. It cannot uphold morals because they are not law.
As executives we allowed alcohol at the year end party. If some of our group gave a moral position of no alcohol (say Mormons or Muslims) is that morally incorrect for us yo allow it?
What if said objector imbibed at the event? Are we "morally responsible"? Who gets to decide and tell us what is morally ok or not ok?
this is a sad truth for lots of things. Like folks who collect, then lose private information. It is wrong and bad, but rarely quantifiably so in court.
This is inaccurate, and the article itself actually contradicts itself by showing that it's inaccurate.
They can penalize companies for lying. If the companies just stop lying that they do/will do/will not do/don't do a certain thing, there's no securities fraud. The issue is that they lie about it.
Deleted Comment
In a functioning market customers (whether consumers or enterprise purchasing decision makers) tell you to take a walk if you act with bad will in any kind of consistent way.
There isn’t much money to be made in markets that are both of “mature” and functioning.
> To some extent you have to manage a big organization with simple, crude, legible metrics. In a big enough organization, somebody will game those metrics. Ideally you create a culture that minimizes that gamesmanship, one where employees understand and buy into the organization's real goals rather than just trying to maximize the dumb metrics. Wells Fargo seems to be having some trouble creating that culture.
It's really just a fantastic example of Peter Drucker's famous adage "Culture eats strategy for breakfast." And it's why I get very wary of any large organizations that focus too much on data-driven goal setting (OKRs and the like) without having some way of stepping back and doing a reality check. To be clear, I actually like OKRs if they are used correctly to help prioritize and focus, but too often I've seen them become a weird, gameable time sink.
Because yes, in the US I rather suspect that this comes from high school and college sports worship. Winning is what it's about and someone who bends the rules to win can probably be put to good use and should be promoted to where they can do the most damage?, bending?
This ideal culture is like unicorns and rainbows - some of it exists under very specific atmospheric conditions and some of it, when you look closely, is really just a horse with a toilet roll on its forehead sprinkled with glitter.
[0]: https://www.bloomberg.com/opinion/articles/2021-02-03/goldma...
Turns out this is trivially true, because the game theory for rational corporations (and its executive decision makers) clearly suggests that on net, lying all the time is very, very profitable.
That's obviously only true if you remain a shareholder, but given the majority of stock generally doesn't change hands it seems like most people who are being represented as the victims in these lawsuits are worse off. Shouldn't the people who remain shareholders be able to exclude themselves from the suit, thus shrinking the size and maybe making it cheaper to settle? (It is possible this is a thing you can do, I've just never heard of it.)
Sounds like a Causal Decision Theorist. Every other rational decision theory supports suing under some circumstances, and refusing to settle under some circumstances; even when the expected monetary return (considered in isolation) is negative.
See https://intelligence.org/2018/10/31/embedded-decisions/
Also, oftentimes the bad action of the management impacts the value of the company. The past malfeasance and fraud committed by Wells Fargo is an excellent example of that, where it moved to criminal liability.”
Typically shareholder lawsuits are brought by minority shareholders (or, as you say it’s pointless) seeking to get paid to compensate for some malfeasance they feel was being perpetrated against them by the majority shareholders (and management, as their agents).
I don't know if this is true - I just asked Claude and it said the type of lawsuits I described are significantly more common, at least among suits against public companies.
But regardless of relative frequency, you say it's pointless, so why does it happen? (The answer seems clearly to be because the lawyers want it to happen, but still seems like it's a very inefficient process for most shareholders.)
But secondly, there's the meta game. If you're a good lawyer and you spot some company doing something egregious you can go shopping. Go and find a shareholder and say "Hey, we can sue that company, I'll take care of all of it, I just need your name because you're a shareholder". You can then conduct a massive expensive lawsuit against the company and if you win? They have to pay your exorbitant costs. Going back to the Musk example, the shareholder who sued to reverse the compensation package had a derisory number of shares, but the lawyers who took on that case are now asking for something like $5Bn in costs. That's a pretty nice payday, and in some ways it works like a bounty against companies with poor governance.
There’s clearly a huge disconnect between the numeric targets they set and the resulting behavior of employees. That’s always a hazard, but I wonder why it’s such a pattern at WF
See also: https://superbowl.substack.com/p/beware-the-variable-maximiz...
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