I think this line of argumentation follows and is logically consistent but if this is really how it worked then you're saying in the long run with probability 1 every executive will be a criminal. Nothing about what you're saying about the incentives is unique to white-collar financial crimes. For crimes that have a low chance of being caught the SOP is make the punishment disproportionately severe and weaponize the people likely to observe or carry out the crime. If all goes well you can't cycle through executives because none of them are willing to risk years of prison, fines, and being barred from leadership roles for life.
I don't see how your example resolves as anything other than the mid-level employee is guilty of bribery, and CEO of the insurance company is guilty of 2nd degree $yet-to-be-derermined-crime-name. I don't expect a CEO to somehow know of literally any crime that occurs by any of their employees, just crime by policy.
> I think this line of argumentation follows and is logically consistent but if this is really how it worked then you're saying in the long run with probability 1 every executive will be a criminal.
Certainly not. For example, if a company is run by an above-average executive who can produce good results without cheating, they won't be replaced by someone who cheats. But that's no general solution because it's not possible for every executive to be above-average.
> For crimes that have a low chance of being caught the SOP is make the punishment disproportionately severe and weaponize the people likely to observe or carry out the crime.
Yeah, that's the War on Drugs strategy. It's aggressively broken and encourages the dangerous and socially destructive behaviors associated with organized crime.
> I don't see how your example resolves as anything other than the mid-level employee is guilty of bribery, and CEO of the insurance company is guilty of 2nd degree $yet-to-be-derermined-crime-name. I don't expect a CEO to somehow know of literally any crime that occurs by any of their employees, just crime by policy.
A CEO in a company that isn't the size of a country is going to be directly involved in the company's operations. That companies have grown so large that their owners and executives no longer have a handle on what's happening inside them is the problem.
I don't see how your example resolves as anything other than the mid-level employee is guilty of bribery, and CEO of the insurance company is guilty of 2nd degree $yet-to-be-derermined-crime-name. I don't expect a CEO to somehow know of literally any crime that occurs by any of their employees, just crime by policy.