Originally Posted by
therealjjj77
I don't know really. I am leaning against it lately.
There are two aspects, you hit on the criminal aspect but there is also the financial aspect(if it goes under it doesn't affect the stockholders other stocks, finances, or businesses). I believe it would be better for society as a whole if corporate stockholders were unprotected by the government from the criminal aspect. However, I haven't broken down why it would be beneficial for society for the government not protect the financial aspect though I am sure that would also not be prudent.
Here's why the government should not protect shareholders from financial obligations and debts (such as when the company goes bankrupt and owes tons of money, possibly as the result of a lawsuit):
Under today's system, if a company becomes insolvent, its top shareholders don't have to worry about the debts the corporation incurred, and they get away scotch-free. This kind of protection essentially subsidizes bad behavior. If investors knew that they could be burned (proportional to their stake in the company) by investing in companies with questionable business practices that could get them sued or worse, they'd be a lot more careful not to invest in those companies, and the top stakeholders would be a lot less likely to allow those kind of shenanigans to occur on their watch. The end result: Less shenanigans would occur, less businesses would go insolvent, and less creditors and/or victims would be left uncompensated.
Of course, there's a catch here, too: Most corporations have secrets and strategies and such that only the top shareholders (and executives) are really privy to. In other words, they might know if the company is tanking or doing something that could get them in trouble, but ordinary investors like you and me would not. In that case, it's not really fair that ordinary investors who are "not in the know" should be punished - however, this is not for the government to protect even them against. Instead, a better solution is this: Investors would learn to invest in only companies whose corporate contracts either,
a.) Force only the top shareholders (ones privy to all information) to take all of the responsibility for debts, proportionately. This would make it safe for small shareholders. Or,
b.) Make all investors privy to all information (probably not a good idea if you don't want your competitor buying a single share and knowing all of your secrets!). Or,
c.) A combination of the two approaches.
Connect With Us