Limited liability in a free market society...

[Steven Douglas]

any good historical books for recommendation?

Gangs of America: The Rise of Corporate Power and the Disabling of Democracy

Geared more to appeal to the Occupy people, I think, but a very entertaining read nonetheless--factual and informative.


For a bit more scholarly background history of how the corporate camel got its nose in the legal and political tent, read:

The Corporate Reconstruction of American Capitalism, 1890-1916: The Market, The Law And Politics By Martin J. Sklar

That's a good one because it covers the rise of economic liberalism during the Progressive Era, and how Roosevelt, Taft and Wilson factored into all of it. Just as the Fed gets defended by the political left and right, each for their own non-principled self-interested reasons, a similar story plays out with the rise of corporate powers. My take is that presumably, anything that concentrates and collectivizes wealth/power was also thought to be easier to socially and centrally engineer. That's the madness behind the method, at least, and there's something to that, in a "At least my dog is on a leash and has to obey me" kind of way. It's not nearly as easy to regulate and control a herd of individual Citizen cats with actual rights, but if you give corporations favored status and artificially empower them with greater advantages geared toward concentrating wealth, they are presumably much easier to tax and control ::: snicker :::, as creatures of the state acting as a matter of privilege, and not rights.

[idiom]

I am just picturing running a multi-billion dollar organisation out of a personal account.

All revenue is income, profit doesn't exist? So taxation is at the maximum personal rate on the whole revenue not on profits?

Help me out, I use accounting books to prop up tables...

[Tpoints]

Actually, the problem isn't solved by this doctrine. Courts RARELY pierce the corporate veil. In my thirty years of law practice, including a year as a law clerk for a Federal judge when I saw hundreds of lawsuits with corporate defendants, I can't recall a single instance when a court pierced the corporate veil. That would mean plaintiffs would actually get to seek out stock holders personally and that just doesn't happen.

Do you recall the best example of a case where you believe the veil should be pierced? Is the problem the lack of a better doctrine? Or just the lack of courts using it?

Also, can't the problem be solved by suing the owner/board directly? I mean, after all, companies cannot act without the string pullers, so what's wrong with suing string pullers? (Let's assume, you are the plaintiff and you've been wronged by a company's actions, and you either know or have no reason to believe to the contrary that the string pullers made the direct decisions)

The government doesn't seem to have a problem peircing veils or prosecuting criminals if a company committed a crime in any way, is this problem only a problem when plaintiffs are seeking money?

[Bohner]

Do you recall the best example of a case where you believe the veil should be pierced? Is the problem the lack of a better doctrine? Or just the lack of courts using it?

Also, can't the problem be solved by suing the owner/board directly? I mean, after all, companies cannot act without the string pullers, so what's wrong with suing string pullers? (Let's assume, you are the plaintiff and you've been wronged by a company's actions, and you either know or have no reason to believe to the contrary that the string pullers made the direct decisions)

The government doesn't seem to have a problem peircing veils or prosecuting criminals if a company committed a crime in any way, is this problem only a problem when plaintiffs are seeking money?

Because since corporations are people, it's technically the corporate person pulling the strings. Just pay no attention to the man behind the curtain.

[Tpoints]

Because since corporations are people, it's technically the corporate person pulling the strings. Just pay no attention to the man behind the curtain.

Isn't personhood only for jurisdiction purposes?

I mean, if corporations did NOT have personhood for jurisdiction designation, is that better or worse?

[Acala]

I am just picturing running a multi-billion dollar organisation out of a personal account.

All revenue is income, profit doesn't exist? So taxation is at the maximum personal rate on the whole revenue not on profits?

Help me out, I use accounting books to prop up tables...

I'm no accountant, and I don't think tax policy should shape the market. In fact I don't think there should be an individual income tax at all. But when you own a business yourself, there is only one tax return - yours. Money that comes into the business is your income. You pay tax on that income after deducting various business expenses.

Most non-corporate businesses have separate accounts. You can have as many bank accounts as you want, dedicating them to different purposes. Some very large organizations have operated as partnerships - Loyds of London, all the giant law firms and accounting firms (although most of them have corporate identities now).

[Acala]

Do you recall the best example of a case where you believe the veil should be pierced? Is the problem the lack of a better doctrine? Or just the lack of courts using it?

Also, can't the problem be solved by suing the owner/board directly? I mean, after all, companies cannot act without the string pullers, so what's wrong with suing string pullers? (Let's assume, you are the plaintiff and you've been wronged by a company's actions, and you either know or have no reason to believe to the contrary that the string pullers made the direct decisions)

The government doesn't seem to have a problem peircing veils or prosecuting criminals if a company committed a crime in any way, is this problem only a problem when plaintiffs are seeking money?

The liability shield is the main PURPOSE of the corporate entity. It allows them to gather vast sums of money essentially anonymously. So courts rarely pierce it. And it applies to officers and directors as well. Of course they still have individual liability if they personally act criminally, but that's not the big problem.

To me the big problems with the corporate business form are:
1. Those who profit from the activity of the entity are shielded from responsibility
2. The entity is immortal
3. No human being has a public reputation intertwined with the activity of the entity
4. Separating ownership, management, and legal responsibility into separate parts encourages reckless activity, short-term thinking, lack of loyalty to the customer and employee, lack of concern for the community, and insularity of the real owners.

There are more . . .

[Acala]

Isn't personhood only for jurisdiction purposes?

I mean, if corporations did NOT have personhood for jurisdiction designation, is that better or worse?

Corporations own property and enter contracts just like a real human being. But they never die and the people who pull the strings are shielded from personal liability.

[misean]

I was looking on Mises and was surprised that there is even a debate as to whether limited liability should be legal. Limited liability (ie. corporate personhood) is completely incompatible with libertarian philosophy IMO.

The idea that company's like Bain can buy a company, rip away and sell off all it's assets piece by piece, have the company take out loans in order and use that money to pay themselves and then bankrupt the company, rinse and repeat while taking no personal responsibility for the bankruptcies sounds like crony capitalism at it's finest.

Most of the problems associated with unlimited liability could easily be negated through liability insurance anyways.

Thoughts?

First of all who is teaching you about private equity? Robert Reich? That isn't what Bain did/does. Think for a second about why the bolded isn't true. Banks have to loan Bain the money. They aren't going to loan Bain money if they don't expect to get paid back.

And of course the part about buying a company and selling off the pieces is not unethical. Its creative destruction. The assets they sell will be distributed throughout the economy for more productive use.

[Tpoints]

Corporations own property and enter contracts just like a real human being. But they never die and the people who pull the strings are shielded from personal liability.

so when you rob the shell of its assets, wouldn't you force the puller to come out in defense?