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[nomad]

Hello to all..

My wife and I are interested but have some questions/concerns.

The first of many questions I'll probably have is:

What do you plan to do concerning corporations. Corporations, as they are currently implimented, are not compatable with a free state or society. You simply cannot afford a corporation the same Constitutional rights as a living, breathing, human being. A limited gov't as proposed by members of the FSP would be out stripped, out resourced and out financed by a single multi-national corporation in about 2 seconds flat. The gov't would be a lame duck, the citizens would be cannon fodder, and any natural resources would be gone.  If you don't think it would happen - then take a look at what they do currently with a mountain of laws regulating them.

Back to my question - what do you plan to do about corporations?

Sincerely,
JD


 

[JasonPSorens]

I think the evils of multinational corporations are seriously overblown.  Evidence suggests that they increase the productivity & income of economies in which they invest.

There are, however, some serious issues as to what extent limited liability is consistent with libertarian principles.  Basically, if you voluntarily do business with a corporation, it's understood that you recognize stockholders have limited liability.  However, third-party liability is another matter: if a corporation pollutes or commits fraud, for example, I think you should be able to hold stockholders liable, and under some circumstances current law permits this.

Corporations should not be regulated in their honest business practices by government: there should be no minimum wage, no corporate taxes, and no command-and-control environmental & safety regulation.  (These issues should be handled by courts, not bureaucratic agencies.)  Corporate subsidies should not exist.

In a free society we would probably see smaller corporations, due to an end to corporate welfare and the reforms in limited liability law I have outlined.  However, corporations would not be banned, and free trade and free capital flows would, I hope, be among our major goals.

[Eddie_Bradford]

Actually many of these regulations help large multinationals squash small businesses.  Enron for example was never against gov't regulation or action just against actions that hurt it.  It very much favored actions that would help it such as the public funds dumped into their Indian Nuclear Power plant boondogle.  Any organic small farmer will tell you how pesticide subsidies help factory farms pollute and make more money while raising the relative cost of organic farming.  Large corporations have the power to lobby and get special treatment and exemptions to rules that apply to all other small businesses.  By getting rid of this process and allowing all companies the same rights there will be a much more level playing field.
  Also many of us fell that banning corporations is akin to repealing the first amendment right of free asembly.  How would you discriminate between a corporation and a Religion for example.  Should people be allowed to form any kind of organization at all?  Should we make profit illegal?  Would that handle the problems.  
Basically I think most of us feel like many of the problems you're talking about are cause indirectly by the government.  If you have any specific concerns or specific examples of what a corporation would do that would harm society I would be happy to tell you what I think about it and whether I think it would be a concern in our free society.  Keep in mind these are my opinions and I don't speak for the group I just tell you what my impression is of other's opinions.  I look forward to your responce.
-Eddie

[SnowDog]

I disagree with abridging limited liability in corporations. The idea is to separate those responsible for the actions of a corporation, from those who are simply investors. As an investor you should not be held personally accountable if your money is used inappropriately, causing damage.

On a personal level, the argument is the same as this: If you let someone borrow your car, and he inadvertently committed manslaughter, should you be held responsible for that, even though you owned the car? Following the logic: Rental car companies would probably not be able to stay in business?

The actors need to be responsible for their actions; not necessarily the owners.

Craig (Houston)

[JasonPSorens]

Well, I think it's a little different from borrowing the car, because it's implicit in the corporate structure that stockholders are the owners of the corporation, have final decision powers in the corporation, and enjoy the right and duty to oversee management.  If it can be shown that certain stockholders implicitly or explicitly encouraged management malfeasance, I think they could be prosecuted.  Almost always these would not be small investors but the really big ones.

[SnowDog]

One thing I think is being missed: I think we both agree that we want those responsible for harm, to be held accountable. However, a stock-holder, if he's nothing more than a stock-holder, if he's not an officer in the company, and if he's not on the Board of Directors, has no control over the actions of a corporation, and should not be held personally accountable for its actions. He's just giving the company his money, in exchange for certain financial and legal guarantees. That's it. That's what his stock in the corporation, is.

[Reaper]

There must be a distinction between a stock holder who has no say in a companies activities and a stock holder who actively participates in the companies activities.

Problem is how do you tell the difference without creating a whole new bureaucratic pit of regulations and regulators?

[SnowDog]

You could probably assign liability to stockholders who have a majority number of shares, but these people are already on the Boards of Directors. Otherwise, you'd basically be assigning minority shareholders the responsibility for the company. Imagine taking this argument before the shareholders in Enron. They've already lost their entire financial position in Enron, (and a good portion of their retirement, as well). Now, if we make them responsible for the actions that Enron officers took, then we'd open the door to liability lawsuits, which would devastate them even further.

Craig (Houston)

[maestro]

There is non-voting and voting stock.  If you buy non-voting stock or bonds you are either buying some of the corps productivity, or lending them money, respectively.  Neither should generate any responsibility for the actions of the company, since neither gives you the ability to change the company's policy (other than taking your money away).  Voting stock, _does_ create a level of responsibility that should be legally binding as well as morally binding.

I am glad this topic came up.  I was going to write an essay considering the idea of dissolving all corporations in favor of partnerships, with both silent and standard partners.  The primary changes that would occur would be that the barrier against personal fiduciary responsibility would be removed and the corporation's status as a legal person would be revoked.  

This idea comes from the inherent dangers that limited liability has brought forth.  The corporation is currently an entity that has all the rights of a natural person, and few of the responsibilities.  The corporate person, if it becomes insolvent, can declare bankruptcy without any of the penalties that the natural person faces.  The corporation merely dies and _can_ be replaced by another with the same directors, since the bankruptcy does not follow the individuals within the company.  There are human issues that would tend to make finding investors difficult in this situation, but such issues can be easily overcome with a bit of deception.  The worst of these cases are when a corporation sets up a shell company from which it borrows significant amounts of money.  If the game is played well, the shell company can obtain the assets of the bankrupt company ahead of the stockholders, bankers, distributors, publishers, etc.  As such, since a corporation cannot be held responsible in the same way a natural person can, a corporation should not be considered a natural person, and a corporation should not be able to shield its directors and prime stockholders from fiduciary responsibility.  

The pragmatic concern that remains is that the limited liability corporation encourages much faster growth and a much wealthier economy due to such removal of liability.  This is probably true, but since when does expedience and profit stand above the law?  I have not been able to find any justification for the existence of the corporate structure in the constitution or in any other limited governmental law.  

The original corporations were public companies incorporated under severe restrictions by the local government and contract-bound to serve the community which granted it the incorporation and the many benefits that accompanied it, such as use of public lands, eminent domain, and monopolies.  This may seem like a socialist affair, but it was strictly within contract law and was intended to be an entity outside of normal capitalistic endeavors.

If someone can demolish my argument, I'd be happy to see it, since something seems wrong about it somehow.  So far everyone I've discussed it with has been unable to dismantle it, even though they disagreed with the solution.

[JasonPSorens]

I think the solution lies not in eliminating limited liability but in providing clear exceptions to it and in tightening up bankruptcy laws.

[maestro]

But what constitutional basis is there for limited liability?

[JasonPSorens]

Well, incorporation is done by state governments, not the federal government, so you'd have to look at the individual state constitutions.

[LaissezFaire]

Firms, companies, parnterships, co-ops, clubs, associations - these are all voluntary organizations and are viable in a free society.

However, corporations are State-chartered entities.  I fail to see how these are compatible with libertarianism.

I think too many people mix up firm and company with the term corporation.  I really could care less how the actually liablility is structured internally within in a firm, as long as it is voluntary.  Perhaps some shareholders and employees are shielded by contracts and liability insurance ....but someone is still liable.

At any rate, I really get a bad taste in my mouth when I see libertarians defend corporations.  Yes, most are voluntary organizations subject to the market, but a large percentage are perhaps the biggest cheerleaders for increased Statism (which means that the anti-corporate crowd has some valid points) all for their own personal profit.   And it is the corporation that acts as the front person for the organized theft known as the income tax ("withholding").

Plus it allows Leftists to smear us as supporting "corporate rule" and Rightist to smear us by actually supporting corporate rule and calling themselves "libertarians."

[Reaper]

If you buy stock in a corporation because the financial reports look good, or you just "have a hunch" they are going to do well, how does that make you more morally responsible for the actions of that corporations managers, board of directors, etc. than say . . . if you buy a municipal bond and the municipality uses the money wrongfully and ends up harming someone?  Or say than if you put your money in a bank savings account, and the bank lends it out to the same corporation/municipality?

I understand fully that stock is equity and the others are debt but morally there is no real difference.  In either case you are investing your money and the people you trust with it unbeknownst to you do wrong with it.

It just seems ludicrous to hold people who have no control or say over a company (or corporation, whatever) responsible responsible for it's actions.  That would be akin to holding the entire people of a state responsible for it's actions regardless of if or how they voted, or even if they could vote (ie preferred stock owners cannot vote).

The ones who make the decisions should be made to pay civilly and criminally, not everyone who happened to invest in it.

[maestro]

That was one thing that I was _very_ specific about.  If you merely bought equity or loaned money, you have no legal or financial responsibility for the usage of that money (or at least not without proven conspiracy).  If you buy _voting_ stock (I don't know which types are which, but I know that both forms exist) then you _are_ responsible for the actions of that company to the extent that you voted.  Of course if you voted against every illegal action and they acted anyway, then you will probably not be found to be among the conspirators in a court of law, but you will be subject to appear before that court as a defendant.  You will also be liable in proportion to your vote, both legally and financially.