Re: Corporations

[andie nachgeborenen <andie_nachgeborenen@xxxxxxxxx>]

the limited liability law means that a
> corporation is much more than a bunch of voluntary
> contracts amongst individuals. The power of the
> state means that the whole is more than the sum of
> its parts, so that the corporation is a "legal
> person." (A legal person that's like an actual
> person in many ways, with the obvious exception with
> respect to the right to vote.  But I doubt that
> corporations -- especially the bigger ones -- need
> the power to vote. They dominate government anyway.)

I agree that "metaphysically" a corp. is more than a
series or collection of contracts among individuals --
it has to be. Individuals could not contract to limit
their liability to the parties. The state has to allow
them to do that. The corporation's existence depends
on the sufferance of the law.

However, the while the corp is collective entity, like
a state or a union or any group that is more than the
sum of its parts, t make a corp. a person within the
meaning of the law required a specific _further_ legal
act by a body (in the US the S.Ct.) with the power to
say, as the S.Ct did, that a corp. is a "person"
within the meaning of the 14the Amendment. I don't
think is thsi is true in other countries. If its is,
it requiresa  specific legal act by a competent
authority.


> >With respect to tortious[*] liability, the
> corporate form provides no protection for
> individuals who commit torts.

That is correct.

 The only protection
> the corporate form provides is a modification to the
> doctrine of respondeat superior (the employer is
> liable for the acts of the employee who commits an
> act in the scope of the employment).<

I don't understand this. Protection for whom?



> > In other words, while the corporation's assets are
> liable for the acts of the employee, the
> shareholder's personal assets are not responsible
> for the torts committed by an employee,

Yes

unless the
> shareholder himsef committed a tort

But that is irrelevant to his being a shareholder ot
to the existence of the corporation.

 or the
> shareholder did not respect the corporate form
> (alter-ego).<

Well, the last is a bit confused. It is possible to
"pierce the corporate veil" in certain cases and id
certain conditions are met, reaching the assets of a
shareholder (who may or may not be an individual). The
conditions under which thsi is possible vary by state,
but most states include the conditions of failing to
respect corporate formailities, commingling funds, and
importantly, using the corporate form to commit a
fraud or injustice.

>
> it's the share-holder's greed -- as organized by
> stock markets -- that drives the company to
> accumulate power in order to maximize profit, which
> in turn puts people outside the company at risk in
> this situation. Why should the taxpayers pay for the
> clean-up? why should the neighbors of the company
> pay for the medical costs of the company's
> malfeasance? According to limited liability laws,
> they should (after a point). Even though they never
> made the decision to act in the way that caused the
> damage.

But first, is not a specific problem with
corporations. All capitalist enterprize externalize
costs, whether or not they are corporations.

Second, the short answer to your question is that the
corporate form is permitted to limit liability because
that's been determined by the legislature or the
competent authorities to encourage investment, promote
economic growth, and generally have benefits that
exceed their social costs. The following is therefore
false:

> The limited liability law is a free benefit given to
> corporations (at their own behest, basically, since
> they have influenced the courts in their favor since
> the 19th century), allowing them to shift risk to
> others. In theory, there is some compensation in
> that corporations are supposed to pay the corporate
> income tax. But in practice, that tax is very low
> and rapidly going away.

Unless you think that the consequences for economic
growth involved in abolsihing the corporate form, and
requiring all investors to expose themselves and all
their assets to potentially runious liability would
not be as serious as many suppose.

> which is true in the case of big disasters. But the
> limited liability law is always in the background,
> allowing the stockholders to ignore the morality or
> immortality and the non-financial risk of their
> financial holdings. The taxpayers are acting as the
> cost-payers of the last resort, so that corporations
> don't have do act "without a net."
> why? shouldn't those people who hired him -- the
> stockholders, through their agent, the Exxon
> corporation -- pay attention to who they hire?

Uh, that's silly. It would be irrational to demand
that sort of due diligence for every stock purchase.
No one could do it.

> Because they're not held responsible, the
> stock-holders are able to ignore the risks they
> impose on others (external costs). This encourages
> corporations in their malfeasance. If stockholders
> knew ahead of time about their responsibilities,
> they'd avoid investing in such companies.

Or any companies.

 > Example: if Arthur Anderson, LLP hadn't had limited
> liability protection, the top management (the
> owners) would have been much more careful in
> watching the actions of their "agents" in their
> dealings with Ken Lay and the Enron gang.

A friend here at my firm told me that AA was organized
under an old LLP law (Texas, I think) that offered
really limited protections, and that they really got
socked when the firm went under.



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