Comment by __egb__ | Hacker News Reader

Comment by __egb__ | Hacker News Reader

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> but shareholders (who should put pressure on executives and the board to act with prudence to avoid these kinds of disasters) are adequately punished.

So if I own some Vanguard mutual fund as part of a retirement account, it’s now on me to put pressure on 500+ corporations?

Perhaps it’s on Vanguard to do so…but Vanguard isn’t going to just eat the cost of increased due diligence requirements. My fees will increase.

How does that increased due diligence even work? It’s not like I or Vanguard can see internal processes to verify that a company has adequate testing or backups or training to prevent cases like today’s failure.

When, on average, X number of those 500 companies in my mutual fund face this share seizure penalty per year…am I just supposed to eat the loss when those shares disappear? Does Vanguard start insuring against such losses? Who pays for that insurance in the end?

This doesn’t even really hurt the shareholders who are best placed to possibly pressure a company. This doesn’t hurt “billionaire executive who owns 40% of the outstanding shares”. I mean, sure, it will hurt that little part of their brain that keeps track of their monetary worth and just wants to see “huge number get huger”…but it doesn’t actually hurt them. It just hurts regular folks, as usual.

If you own a mutual fund, then you do not own shares of the 500 companies, rather you own shares of the mutual fund itself.

Consequently you don't put pressure on the 500 companies, you put pressure on the mutual fund and the mutual fund in turn puts pressure on the companies it invests in and exercises additional discretion in which companies it invests in.

>Perhaps it’s on Vanguard to do so…but Vanguard isn’t going to just eat the cost of increased due diligence requirements.

Yes they do, because mutual funds do compete with one another and a mutual fund that does the due diligence to avoid investing in companies that are held liable for these kinds of incidents will outperform the mutual funds that don't do this kind of due diligence.

> It’s not like I or Vanguard can see internal processes to verify that a company has adequate testing or backups or training to prevent cases like today’s failure.

I don't know specifically about Vanguard, but mutual funds in general do employ the services of firms like PwC, Deloitte, and KPMG to perform technical due diligence that assesses the target company's technology, product quality, development processes, and compliance with industry standards. VC firms like Sequoia Capital and Andressen Horowitz do their own technical due diligence.

Just perhaps the idea of sticking everyone's retirement funds into massive passive vehicles was a bad one and has an unhealthy effect on the market, as you illustrate here. It is the way of things now so I see your point and it would be harmful to people, but getting in this situation has seemingly removed what could be a natural lever of consequence. We can't really hold companies accountable lest all the "regular folks" that can't actively supervise what they're investing in become collateral damage.

Other stocks will go up as a result. It's not like money is ever destroyed.

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