As the Levine article explained, and as has been reiterated several times in this comment thread:
J&J is not "freed from the shackles of any liability", because it is still liable to its own subsidiary for the talc lawsuit claims, up to the full value of J&J itself (the parent company).
In a sense, the claimants are becoming shareholders of this company. That is, like shareholders, they have a claim to a certain portion of future cash flows. Like shareholders, they should be hoping that the business continues to thrive so that their claims can be paid out.
The decision not to cut dividends in the face of an earnings shock is a pretty common one and not generally a sign of an executive team attempting to enrich themselves. It's more of a sign to shareholders that the executive team has faith in the robustness of the business, which helps if the goal is to survive the present difficulties.
> In a sense, the claimants are becoming shareholders of this company. That is, like shareholders, they have a claim to a certain portion of future cash flows. Like shareholders, they should be hoping that the business continues to thrive so that their claims can be paid out.
This is an extremely perverse incentive and shows how fundamentally broken some of these mechanics are.
"You injured me, and need to compensate me. But in order to do so I have to hope you continue to prosper, potentially injuring others along the way, so I get my compensation. I can choose between getting you shut down, but potentially not being compensated, or being compensated but knowing that you go on to be able to do this to others."
Ok, no "outrage" here @somenits. This is a variation on a "bad bank" scheme that normally is suggested only where jettisoning the toxic liabilities from the main entity will facilitate a government bailout of the resulting "bad bank". That's what makes the scheme work, normally. There isn't a bailout on the way for J+J's bad bank, and the closest suggestion of any value-creation from the manuver comes from disassociating the consumer brand from consumer injuries they allegedly caused. However, that doesn't sound like a compelling case for such a remarkable corporate manuver.
So then, what we are left with is a "bad bank" scheme that is devoid of a compelling legitimate justification, which you yourself do not offer. This naturally raises an inference that J+J hopes to cram down tort claims via the maneuver. Perhaps the cram-down is in administrative overhead associated with litigation. Maybe it's some kind of mismatch in claim acceptance or approval criteria. None of the materials explain, and while I adore Matt's writing the bottom line is it looks like a shell game and that's from someone with no "outrage" whatever involved.
Would you have preferred I refer to a shell game rather than "three card monte." I do confess some ignorance of street hustle lingo. Or, maybe the street people have already switched to simply calling it the "bad bank game?"
I don't think you really understand what "Limited liability" means, nor who these supposed capitalists are. All those public pension plans & unionized retirement funds probably appreciate that they're not on the hook for unlimited liability from J&J.
So? You have said nothing to refute his point. Pention funds are capital.
You don't need to optimise returns on capital at the cost of a generation that in currently young and working. Pention system can be managed differently if needed too.
You're right, they probably do. They're pretty relieved that they don't have to govern (which is what they're doing, by the way) with any regard for anyone but their shareholders.
Boomers who made bad investments instead of just saving for retirement. I sure would feel bad if those were raided to help alleviate the suffering of sick or bereaved people here, now. /s
Not in the general case, but in this specific case it does show that limited liability does more than provide welfare to companies to but also protects a large number of individual investors, including the commenter.
"Well they could do things to harm themselves [because we treat non-profit employees like they implicitly have a wealthy spouse or should live in a shoebox]" is also not helping the argument very much.
One does not need to be a Stylite to have an opinion on society; comparing the actions of individuals, without significant power or influence, with corporate-fiction persons that come equipped with lobbying arms and sufficiently dispersed decision-making power that nasty shit comes out of them regularly, is not and never persuasive.
It’s called having the courage of your convictions. Plenty of people live off of non profit salaries without having a wealthy spouse or even do public sector work.
Not at all. Suppose you believe corporations are out of control, and it's on, what the best way to hurt them? Work for a charity and live in poverty? Become a hermit and live in a forest? no!
Find the corporation tou hate most and get a job there. Do damage from the inside, sleep with the boss, work your way up, drive it bancrupt. Cause it to loose all talent.
Work in two places at once, and do nothing in both jobs. Something like that
And according to a sibling link, 59% have some money in stocks. How many public sector workers for instance who have pensions or retirees who have dividend paying stocks like J and J do you think are cheering for those “evil capitalists pigs” to go bankrupt?
