Matt,

There are a lot of slippery slope arguments against your position. My problem is that companies do this all the time and reap the profits. To paraphrase Sen. Dirksen, a billion of fraudulent billing here and a billion of fraudulent billing there, and pretty soon you are talking about real money.

“If arbitration is better for consumers than filing suits, then, when given a choice, consumers will choose arbitration.”

The problem is that class action suits are created by lawyers who go shopping for a class, consumers do not choose class action suits.

As a consumer, If I was harmed by the a corporation, but the harm was too small to justify pursuing a personal law suit (the alleged justification for class actions) and a class action suit was my only option, I would just forget about it and move on.

Class actions make the lawyers rich while the class members recover pennies on the dollar.

I agree; the issue isn’t arbitration in general, but mandatory arbitration.

Nobody should ever be forced to give up their basic right to a trial by jury. Showing that arbitration, on average, results in about 2% higher awards doesn’t address this (and even that claim is rather dubious considering that the study couldn’t figure out the outcome in about 42% of the arbitration cases.) And no business should be able to force its customers to give up that right as a condition of doing business. (Just like no business should be able to force its customers to give up their First Amendment right to negatively review their products.)

If we need to reform class actions, fine. But if we do have them, they shouldn’t be opt-out for businesses.

1: Most CEOs and overpaid. Far too many boards (who are effectively hired by the CEO) listen to a consultant (who is effectively chosen by the CEO) who basically informs them of what the average CEO is getting and tells them that their CEO is better than the average CEO and should be paid more. Like Lake Wobegon, every CEO is above average.

2: There is no way to judge the effectiveness of a CEO until after his time has passed.

3: For the past few decades, boards have attempted to “align management’s interests with shareholders” by giving them a lot of stock options, claiming that, because of legal accounting standards, these payments have been cost-free. In fact the dilution of shareholder’ interests have been exactly the opposite. About 2002 I dig some digging and discovered that Cisco had spent its entire profits over the previous decade buying back shares; during that time, the share count, after allowing for shares issued to purchase companies, had not changed. Cisco had been buying back shares issued as part of executive compensation, transferring all its profits to executives.

4: A simpler and I believe a more effective method of “aligning management’s interests with shareholders” would be to make them share holders. Don’t give them options, which they can execute and sell. Give them share which they can not touch during their tenure. In fact, I would give every employee the right to buy shares at a real discount to the current market (I have seen ESOPs which set the discount at 15%) which they may not ouch (except for collecting the dividend) for a significant time.

The fact that a suggestion like this has not occurred to highly-paid boards and executive compensation experts seemed odd to me until I considered who was giving them their jobs.

Sorry for the lack of jokes in this one, folks, but I’m in a rush today.

Bob

If arbitration is better for consumers than filing suits, then, when given a choice, consumers will choose arbitration. Forced arbitration is better for only the seller of consumer goods.

This is not a defense of class actions or consumer law suits. Certainly, there are abuses. But there are also abuses by the companies. The ill-gotten gains of companies should be disgorged. The question is: disgorged to whom. We should strive for a system that gives back as much as possible to those bilked by bad actors. Forced arbitration without class actions does not do it.

What the hell is “Franken-Dodd”?

Because the way new regulations are imposed means that they nearly always increase the overall complexity of the rules.

The more complex the rules are, the easier it is to cheat.