Risk

What pervades the business world, at the least the world of claims in business that I see so often, is the way we handle risk.  Not just enterprise risk, or economic risk, but the risk that someone who works for you will do some damn fool thing and you'll get sued.

The first thing is insurance, and there is a bunch of that available.   You can insure everything from an executive harassing an underling to a stockholder saying your directors are crooks, in addition to the usual slips and falls and traffic accidents.

Where it gets interesting is when you can't buy insurance.  So you manage, with training and well-drafted contracts and avoidance of situations where the risk exceeds the reward.

Makes you wonder how less risky things would be if there were no insurance.  We'd all try harder, as we do with the  non-insurance solutions.

Just as I've wondered how risk would be managed if the people making decisions would be held personally liable if they screw up.  We lawyers, and the doctors, and some others face this, and we seem to do OK (but we have insurance....).  What if the financial types who manage others' money thought they'd be personally liable if, say, they put their clients into the wrong fund, or derivatives that they knew were only riding a bubble?  Would they insist on a little more caution?

I think it was that way more often in the past.  My grandfather was a director, senior executive and shareholder in a bank in the '30's, it was closed in the Bank Holiday, never reopened, and he spent much of the rest of his life in litigation.  Based, as I understand it, on state law at that time that held out personal liability for bank directors  - my Mom used to call it "double indemnity".  For him it was too late - I guess he "won", but his career was ruined.  I would guess that his peers, however, through the rest of the decade, seeing what happened to him and others, became a lot more careful.

And maybe the big boys don't see that as a good thing.  If the financial people are careful, they shy away from risk, maybe the result is depression in the '30's, stagflation in the '70's, and whatever this economy turns out to hold in the teens.  Bad politics.  But if it liquidates all the undeserving debt, maybe a good new start.