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We have long had death and taxes as the two standards of inevitability. But there are those who believe that death is the preferable of the two. "At least," as one man said, "there's one advantage about death; it doesn't get worse every time Congress meets."
Erwin N. Griswold
Taxes: Of life's two certainties, the only one for which you can get an automatic extension.
Anonymous
The rule giving shareholders qua shareholders immunity to tort liability is an expression of the common law of tort liability.
If you scrapped the rule and directly applied the common law, you'd get more or less the same results.
Mind you, I'm not arguing one way or another, for either the rule or the common law.
My point is simply that it's misleading to call the rule a "privilege," since:
(a) it treats shareholders more or less the same as the common law would,
and (b) anyone can take advantage of this "privilege" (by forming a corporation)
But the tort immunity rule isn't governmental interference in the market, no more than application of the common law of torts would be.
It's ridiculous that all of these entity types even exist IMO.I can't remember the last time I formed a general partnership for a client. With the advent of limited partnerships, limited liability companies, and limited liability partnerships, no business should ever be run in the form of a general partnership.
There should be one, with a single set of default rules, which the owners can then modify to their hearts' content.
This was already covered by my second post here and the one by rev3.0 right above this.
State and federal governments expressly passing statutory law absolving Michael Dell's corporation of personal liability in the pursuit of his business venture, is not the sole avenue for limiting liability.
There is not only more than one way to skin that cat, but the previous way, through common law court cases, is the better way.
Again, you're assuming the personal risk exists outside of the federal and state corporate law absolving it.That wasn't my point. Suppose someone just wants to start a business that is both innovative and risky without necessarily having the dream of someday owning a multi-billion dollar company. Will he do so if he has personal liability?
This is straight out of an econ 101 textbook. And I can appreciate that some people haven't heard it yet.It's true that some people won't care, especially if they don't have a lot of personal assets to be put at risk (as Bob Dylan said, "When you ain't got nothin' you got nothin' to lose."). But in such a case he will need outside investors, and it would be very hard to attract them if they knew their personal fortunes were at risk.
You're writing from the bottom of a very, very deep hole, describing what the grass looks like at the entrance.
Yes, investment is necessary.
Does it HAVE to be stock?
Does stock HAVE to imply ownership?
Do companies HAVE to provide earnings reports? Like, is it necessary to the function of the business?
Do managers HAVE to keep shareholders happy, at the expense of employees and customers?
The only reason the answers to those questions, and a hundred others, are what they are, is because you're at the bottom of that very deep hole.
All I have to do is answer "No, stock does not necessarily have to imply ownership" and then bam, your liablity of investors is out the window.
You're quite well versed in the way things are. You're also reinforcing the statement that "corporations are not free market" by presuming that things have to be that way.
They don't.
There are no crimes against people.
There are only crimes against the state.
And the state will never, ever choose to hold accountable its agents, because a thing can not commit a crime against itself.
@fisharmor
Why do you prefer common law to statutes? Today, statutes tend to be unlibertarian modifications of a fairly libertarian common law, but I'd argue that that's an historical accident (the common law is older than the statutes and reflects the more libertarian values of an earlier age), not a reflection of the inherent tendencies of the two types of law. It's not hard to imagine a situation where the opposite is true. Suppose the common law keeps evolving in a leftward direction and then, in a century, libertarians take over the legislatures and start amending that leftist common law to make it more libertarian. So, it seems to me that it doesn't make any difference in the long run.
I would like to see what fisharmor says too, but speaking for myself, there is a qualitative difference between common law and statutory law rooted in different concepts of justice, with the concept of justice behind common law being the one that is more rooted in natural law, and thus the more libertarian.
Common law appeals to an objective and eternal law that already exists, transcendent to human beings, like the laws of math, logic, and physics. Our role with respect to this law is to discover it, not to invent it. We may not perfectly apprehend it, but we approach it from a starting point of recognizing that it applies equally to all people at all times and that we have no power to change it, and we may with effort and critical application of our minds and the law that is written on our hearts come to know it better and better.
Statutory laws are made up. They are invented, not discovered. They always change. They don't really exist. They derive their authority from the people who make them up, and those people derive their authority from violent subjugation of other people, in contradiction to natural law.
I like the way Lysander Spooner put it in his Letter to Grover Cleveland, which is a must read for all, though, you can be sure it will not go over well with the resident redhats.
https://oll.libertyfund.org/titles/s...cleveland-1886
Last edited by Superfluous Man; 10-15-2019 at 01:48 PM.
Because first and foremost, common does not consider the state to be an interested party in the proceedings.
Common law courts were a place where one individual could bring a claim against another individual and expect resolution between individuals.
Enough claims built up over time , with enough actual interest in resolving disputes equitably, that these very concepts emerged to serve as guidelines.
All of this liability talk not only presumes from the start that the state is an interested party, it assumes that the state is the PRIMARY interested party.
The overt argument "people won't innovate unless they are free from liability" is a thin veil for the real argument - which is that we need the law and the courts to engage in social engineering. The primary purpose of that law, the primary purpose of ANY statute - is not to protect people.
Statute's primary purpose is to further the aims of the state.
The state says limiting the liability of innovators is a good thing, and the undeniable result is that they get corporate vassals, large, internationally powerful entities that will do the state's bidding.
It makes every difference in the long run. Statute says little girls can't run lemonade stands. All common law ever said on the matter is you can't get away with poisoning your customers.
There are no crimes against people.
There are only crimes against the state.
And the state will never, ever choose to hold accountable its agents, because a thing can not commit a crime against itself.
I'm not sure what you mean by that.
Statutes and common law are both made by the state: one by its legislative branch, the other by its judicial branch.
Either way, the state is one deciding how to resolve the dispute.
That's a romantic view of the common law.
The reality is that it's made up (by judges) just as statutory law is made up (by legislators).
Take a legislator who has a bad idea about what the law ought to be; make him a judge and he'll resolve his cases per that same bad idea.
Last edited by r3volution 3.0; 10-15-2019 at 02:12 PM.
A judge may do that. There is no guarantee that judges will rule more justly than legislators will legislate. Nevertheless, there is an underlying conceptual difference that makes the former approach to law more amenable to libertarianism than the latter. The legislature's legislating proceeds on the assumption that the legislature has the authority to make up laws. The legislature needs to appeal to no higher law than itself. The judge by nature must appeal to a law outside himself. He may do that erroneously. But his ruling will then be subject to critique against the measure of justice itself (or at least justice to the degree that others understand it). And he will never be able to counter an argument that appeals to justice with an appeal to his own authority to make the law be whatever he wants it to be the way a legislature is designed to be able to do.
Indeed
In a statutory law system, the legislature makes the law, subject to no higher authority.Nevertheless, there is an underlying conceptual difference that makes the former approach to law more amenable to libertarianism than the latter. The legislature's legislating proceeds on the assumption that the legislature has the authority to make up laws. The legislature needs to appeal to no higher law than itself.
In a common law system, the judges make the law, subject to no higher authority.
...the only possible higher authority, the legislature, has decided not to give the judge laws to follow.
What does that mean in practice?The judge by nature must appeal to a law outside himself. He may do that erroneously. But his ruling will then be subject to critique against the measure of justice itself. And he will never be able to counter an argument that appeals to justice with an appeal to his own authority to make the law be whatever he wants it to be the way a legislature is designed to be able to do.
Divine Justice descends on a cloud and smites him...?
I disagree. Absent a statute granting limited liability to the shareholders or a similar provision in the corporate charter granted by the King, it's doubtful that shareholders had limited liability under common law. See Limited Liability for Corporate Shareholders: Myth or Matter-of-Fact at 24-33. https://uknowledge.uky.edu/cgi/viewc...text=law_facpu
But respondeat superior was the common law rule, and it was displaced in the corporate context by statutes granting limited liability.
That's true to a large extent for limited liability companies, in contrast to corporations. But the owners' agreements addressing their rights and obligations among themselves obviously can't affect third-party craditors and tort victims.
One reason these different entities exist is taxation: large corporations are subject to the federal income tax, while LLC's and limited partnerships aren't; their income flows through and is reported by their owners. Small corporations (100 or fewer shareholders, all of whom are individuals (excluding nonresident aliens), estates, or certain trusts) can elect to be Subchapter S corporations, which are taxed like flow-through entities.
We have long had death and taxes as the two standards of inevitability. But there are those who believe that death is the preferable of the two. "At least," as one man said, "there's one advantage about death; it doesn't get worse every time Congress meets."
Erwin N. Griswold
Taxes: Of life's two certainties, the only one for which you can get an automatic extension.
Anonymous
I don't believe this is accurate.
That his arguments, when soundly critically evaluated, will fail to convince and not be appealed to as a basis for future judgments.
The assumption in common law is that there exists an objective standard against which judgments can be measured. The assumption in statutory law (at least as we know it) is that no such standard exists, or that, if it does, it is in the form of other made up statutes like the Constitution. An attempt to appeal to the will of the people more abstractly may be made. But when not circumscribed by justice, this only serves to give the color of legitimacy to what is actually unjust.
Last edited by Superfluous Man; 10-15-2019 at 03:00 PM.
We have long had death and taxes as the two standards of inevitability. But there are those who believe that death is the preferable of the two. "At least," as one man said, "there's one advantage about death; it doesn't get worse every time Congress meets."
Erwin N. Griswold
Taxes: Of life's two certainties, the only one for which you can get an automatic extension.
Anonymous
If we understand one another correctly, you're arguing for the proposition that courts, based on traditional principles of tort liability, would find shareholders liable for torts committed by the corporation simply because they are shareholders? Can you explain how that makes sense in a specific case? E.G. For a 1/100,000,000th shareholder of oil-spilling Exxon, who did literally nothing except buy a share, what would the tort be? How would you establish causation?
At the same time the state created (really, stopped prohibiting) corporations, it gave them limited liability by statute. That is, there was never a situation where corporations existed but didn't have statutory limited liability, so we don't know what the common law would have done with that. I'm less interested in what courts actually would have done than with what we get by applying traditional tort rules in the abstract.But respondeat superior was the common law rule, and it was displaced in the corporate context by statutes granting limited liability.
If there were a single entity type, there could be a single tort rule.That's true to a large extent for limited liability companies, in contrast to corporations. But the owners' agreements addressing their rights and obligations among themselves obviously can't affect third-party craditors and tort victims.
As for creditors (by which I assume you mean counterparties in contract), the owners' agreement certainly can affect their rights. If the owners' agreement asserts limited liability, that simply means the entity is not empowered to contract with any third parties except on condition of limited liability (much like a restriction on the power of an agent to contract for his principal). This doesn't impair the rights of the third parties. If they don't like the terms, they don't have to enter into the contract.
Indeed, but the tax system itself is an abomination.One reason these different entities exist is taxation: large corporations are subject to the federal income tax, while LLC's and limited partnerships aren't; their income flows through and is reported by their owners. Small corporations (100 or fewer shareholders, all of whom are individuals (excluding nonresident aliens), estates, or certain trusts) can elect to be Subchapter S corporations, which are taxed like flow-through entities.
If it were more sensible, the structure of an entity would have no tax implications.
Who is the higher authority?
That depends entirely on the views of the other judges.That his arguments, when soundly critically evaluated, will fail to convince and not be appealed to as a basis for future judgments.
What makes you think that they'll be more libertarian in their views than the first judge (or, for that matter, the legislators)?
As I said, that's a romantic view of what the common law is (or ought to be).The assumption in common law is that there exists an objective standard against which judgments can be measured. The assumption in statutory law (at least as we know it) is that no such standard exists, or that, if it does, it is in the form of other made up statutes like the Constitution. An attempt to appeal to the will of the people more abstractly may be made. But when not circumscribed by justice, this only serves to give the color of legitimacy to what is actually unjust.
In all cases, in either system, everyone claims to be acting justly.
The reality is that both system involve unaccountable people doing what they please, which may or may not be just.
Last edited by r3volution 3.0; 10-15-2019 at 03:09 PM.
I am not sure the purpose of this thread. Government setting basic rules and enforcing contracts is consistent with libertarianism and free enterprise. If you don't like limited liability, that's fine. Everyone plays by the same rules. And there is nothing inherently anti-free market in it. It is one of the rules of the game that makes it easier to raise money through investment and grow the economy.
Mitt Romney captures the right tone when dealing people who are anti-corporation.
I'm not saying it makes sense, only that it follows from the common law rule of respondeat superior. The idea that a minority shareholder could be held liable for a corporation's activities was criticized in an 1829 article cited in the article I linked to:
Not so. The article I cited points out that in Massachusetts in 1809 shareholders of manufacturing corporations had unlimited liability. In addition, many of the charters granted in early New England provided for unlimited shareholder liability. You can even go back to a 1671 English case, Dr. Salmon v. The Hamborough Company. In that case the theory was advanced that although the members of a corporation were not liable directly for its debts, nevertheless if the corporation had a right to levy assessments on its members, the creditors of the corporation could force the officers of the corporation to do so for their benefit, and if these levies were not paid, the members may be proceeded against in their individual capacities. See the article at https://www.bus.umich.edu/KresgeLibr..._4.1.11-33.pdfA person purchasing a single share of one hundred dollars in a corporation may be compelled to pay debts of the corporation to the amount of a hundred thousand, the whole business of the concern being managed without any interference with, or even knowledge of it on his part .... He may thus be made liable to an indefinite extent for the acts of others over whom he has no control. His risk is altogether disproportionate to his chance of profit. Page 26 at https://uknowledge.uky.edu/cgi/viewc...ext=law_facpub
We have long had death and taxes as the two standards of inevitability. But there are those who believe that death is the preferable of the two. "At least," as one man said, "there's one advantage about death; it doesn't get worse every time Congress meets."
Erwin N. Griswold
Taxes: Of life's two certainties, the only one for which you can get an automatic extension.
Anonymous
One is capable of existing outside the state, and the other is not.
And your second statement is not a given.
And you have a very unromantic view of law in general.That's a romantic view of the common law.
The reality is that it's made up (by judges) just as statutory law is made up (by legislators).
Take a legislator who has a bad idea about what the law ought to be; make him a judge and he'll resolve his cases per that same bad idea.
If law is external, eternal, objective, and, to use your word, romantic, then it is worth having this debate.
If law is just some bull$#@! some dude in a dress said and we all have to listen or we get put in a rape cage, then in my heart I will keep nothing but disdain for it.
The difference is that when people romanticize statutory law, they're too busy listening to Lee Greenwood and making up excuses for why their position isn't inherently oligarchical and often racist, to recognize that that's all that romanticizing statutory law is.
When I romanticize common law, whether it's the Anglo-Saxon law, the Brehon, the Xeer, or any other example, I am romanticizing about the possibility of a system with a higher degree of fairness and justice.
That is what the market wants more than anything. And that is what statutory corporate law prevents.
As long as we're backing unicorns, I'm gonna back the unicorn with the better chance of not goreing me.
There are no crimes against people.
There are only crimes against the state.
And the state will never, ever choose to hold accountable its agents, because a thing can not commit a crime against itself.
Fair enough, but those were limited purpose corporations (e.g. tasked with building a specific bridge) created by special acts of the legislature. Only later were statutes passed which allowed anyone to create general purpose corporations as we know them today. AFAIK, the statutes that authorized those latter day corporations also gave shareholders qua shareholders limited liability as to torts. In any event, my overarching point isn't historical. If I'm mistaken, and the courts did apply common law tort principles to shareholders (in more than a handful of old cases), and reached the conclusion that shareholders should have respondeat superior type liability, then the courts were wrong. A sensible application (whatever the historical application) of tort principles cannot lead to the conclusion that shareholders qua shareholders should be liable for corporate torts (at least not for corporations with many owners). As I think I said in an earlier post, respondeat superior and similar doctrines (e.g. as to partnership liability) make a certain amount of sense in specific contexts, as a sort of shorthand for carrying out the full tort liability analysis, but it clearly makes no sense with respect to 1/100,000,000th owners.
Never attempt to teach a pig to sing; it wastes your time and annoys the pig.
Robert Heinlein
Give a man an inch and right away he thinks he's a ruler
Groucho Marx
I love mankind…it’s people I can’t stand.
Linus, from the Peanuts comic
You cannot have liberty without morality and morality without faith
Alexis de Torqueville
Those who fail to learn from the past are condemned to repeat it.
Those who learn from the past are condemned to watch everybody else repeat it
A Zero Hedge comment
You're conflating what the law ought to be and what the law is.
You, I, and Stalin all have ideas about what the law ought to be.
Then, in total indifference to our ideas of what the law ought to be, there is what the law in fact is.
And that is: whatever the guys with the guns say it is.
In the context of a state society (as opposed to an anarcho-capitalist society), that means the rulers of the state.
They, whether judges, legislators, or whatever, do in fact "make up" the law.
This would also be true in the context of an anarcho-capitalist society (which cannot exist, but that's another topic).
In that hypothetical society, there are individuals who resolve disputes (e.g. the owners of Rothbard's "private defense agencies").
These people, in resolving disputes, in fact "make up" the law.
"The law" isn't an entity that comes down from heaven and affects human beings.
It's the word which we assign to the rules which some human beings force other human beings to follow.
The human beings doing the forcing always "make up" those rules.
There's no alternative to this, and there's no reason for libertarians to oppose it.
The libertarian goal should be to ensure that the people "making up" the rules are "making up" libertarian rules.
Last edited by r3volution 3.0; 10-26-2019 at 10:53 PM.
That would make more sense than holding them all liable (at least for large corporations) but might still be too broad.
I tend to think that courts should look at each case individually, rather than apply an arbitrary rule.
We have courts precisely because we need human beings to apply common sense in situations which can't be anticipated by the legislature.
I think it would work well, those who wanted no liability could refrain from voting even if they owned a large fraction of the stock and those who owned only a small share but decided to vote would only be liable for a small share of any liabilities and only if their vote was for the winning candidates while those with significant power over the actions of the corporation would be significantly responsible.
Never attempt to teach a pig to sing; it wastes your time and annoys the pig.
Robert Heinlein
Give a man an inch and right away he thinks he's a ruler
Groucho Marx
I love mankind…it’s people I can’t stand.
Linus, from the Peanuts comic
You cannot have liberty without morality and morality without faith
Alexis de Torqueville
Those who fail to learn from the past are condemned to repeat it.
Those who learn from the past are condemned to watch everybody else repeat it
A Zero Hedge comment
Shareholders actually have little control over directors in the short term.
Once elected, the directors have enormous power until the next election.
For instance, imagine that you voted for a director who you thought was going to make Exxon great again, but then he bombed Gulf...
...should you be liable?
Yes, you put him in charge and that's a risk you take.
Maybe people would be more careful about delegating power.
But depending on what he said his policy would be then perhaps you should be able to hold him responsible for misleading you and make him pay you what his actions cost you.
Never attempt to teach a pig to sing; it wastes your time and annoys the pig.
Robert Heinlein
Give a man an inch and right away he thinks he's a ruler
Groucho Marx
I love mankind…it’s people I can’t stand.
Linus, from the Peanuts comic
You cannot have liberty without morality and morality without faith
Alexis de Torqueville
Those who fail to learn from the past are condemned to repeat it.
Those who learn from the past are condemned to watch everybody else repeat it
A Zero Hedge comment
Never attempt to teach a pig to sing; it wastes your time and annoys the pig.
Robert Heinlein
Give a man an inch and right away he thinks he's a ruler
Groucho Marx
I love mankind…it’s people I can’t stand.
Linus, from the Peanuts comic
You cannot have liberty without morality and morality without faith
Alexis de Torqueville
Those who fail to learn from the past are condemned to repeat it.
Those who learn from the past are condemned to watch everybody else repeat it
A Zero Hedge comment
Never attempt to teach a pig to sing; it wastes your time and annoys the pig.
Robert Heinlein
Give a man an inch and right away he thinks he's a ruler
Groucho Marx
I love mankind…it’s people I can’t stand.
Linus, from the Peanuts comic
You cannot have liberty without morality and morality without faith
Alexis de Torqueville
Those who fail to learn from the past are condemned to repeat it.
Those who learn from the past are condemned to watch everybody else repeat it
A Zero Hedge comment
I understand your point and, as I said, it's not unreasonable, but I don't think it would be helpful in this case. In every area of law, there's a compromise to be made between abstraction and specificity. The law can't cover every possible factual situation, because legislators, as they're drafting legislation, can't conceive of every possible factual situation. Imagine a self-defense law that had 100,000 pages of: "if a guy walks up to you wearing a red hat and says boo, then...if a guy walks up to you with a green hat and says boo, then...if a guy walks up to you with a blue hat and says boo, then..." In contrast, the law could provide an abstract principle ("if a person reasonably believes that his life is in danger, then...") and leave it to a court to apply this principle to the facts. If you're proposing a more specific rule in lieu of a more abstract rule, you ought to make sure that it works in every possible situation; otherwise it may result in injustice. It seems to me that your rule about electing directors would result in injustice (and not infrequently).
The difference is that I don't see it as injustice, people should be responsible for how they delegate authority.
We have been conditioned to think that you should be able to delegate authority without any responsibility but that is incorrect.
It's like the laws against insider trading, the market is supposed to function on "insider trading" and those who don't know anything should be wary to invest, especially if it is money they can't afford to lose.
The only insider trading that should be prohibited is government officeholders and employees trading based on advanced knowledge of government actions.
The system would sort itself out and more people would either not invest in companies they know nothing about or refrain from voting for directors.
And if directors and/or management were held to account by shareholders if they mislead them or behaved in an obviously inappropriate manner then there would be less incidents for people to be held responsible for.
Never attempt to teach a pig to sing; it wastes your time and annoys the pig.
Robert Heinlein
Give a man an inch and right away he thinks he's a ruler
Groucho Marx
I love mankind…it’s people I can’t stand.
Linus, from the Peanuts comic
You cannot have liberty without morality and morality without faith
Alexis de Torqueville
Those who fail to learn from the past are condemned to repeat it.
Those who learn from the past are condemned to watch everybody else repeat it
A Zero Hedge comment
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