Re: Corporations

[andie nachgeborenen <andie_nachgeborenen@xxxxxxxxx>]

David:

Who said limited liability was limited to torts? The
corporate forms protects its investors against all
liabilities -- contractual, tort, property, civil
rights and other statutory -- even criminal to a
point, bankruptcy, etc.

Moreover it is not treue that the only argument has
been reference to limited liability vs. torts or
anything else. A number of folks, Ian and myself
include, have emphasized that the corporation is a
creature of law that has real social efficacy like any
other social groups. The contract is also a creature
of law, and like the corporate form depends on that
social entity the state, which not reducible to the
behavior of the individuals in it.

The corporate form, created by operation of law, is a
different thing from the contract: It depends on the
forbearance of the state in going after the
shareholderholders for the debts of the corporation,
something that the law does not permit the parties to
contract around. ("OK, you and I agree that we are not
liable for debts to anyone else." Good luck making
that one stick, fella!)

I don't know why you bring up strict liability --
liability without fault. That exists in some cases as
a matter of operation of the law. But it is sort of
anomalous. Anyway, there is nothing inherent about any
law -- positive law, enacted, common, constitutional,
administrative whatever. It's all a social product of
the state imposed of policy reasons or because of
political influence or corruption or whatever.

You may be right about the effect of abolishing the
corporate form -- a big shift to debt-based financing.
However, there are presumably reasons based in part on
efficiency and lowerted transactions costs for equity
based financing. There is no point in pretending these
are the same or equivalent.

I am not a defender come what may of the corporate
form, but I am not an uncritical enemy of it either.
It really depends on how it plays out. Big capitalist
corporations mainly suvk, but I suspect thay is
because they are capitalist rather than because they
are corporate. Pro-planning Marxists used to cite the
predominance of the corporate form as evidence that
there was no necessary connection between ownership
and good management -- an argument I still think is
valid. Maybe the recent problems with corporate
governance have undermined their confidence. . . .

jks


--- "David B. Shemano" <dshemano@xxxxxxxxxx> wrote:
> So many things to say.
>
> The only argument offered why the corporation is
> more than a sum of contracts is limited tort
> liability.  But as I said, that assumes that there
> is some inherent "LAW" that says the principal
> employer should be strictly liable for the torts of
> the agent, and that is simply not the case.
> Respondeat superior is a state imposed liability
> imposed for policy reasons.  I am very surprised
> that members of this list would act as if there is
> an objective Platonic law and limited liability is a
> deviation from that law.
>
> Second, I think the argument that limited liability
> is the primary benefit of the corporation is simply
> incorrect.  If limited liability were removed from
> corporations, there would be a massive shift from
> equity financing to debt financing.  In other words,
> investors will call themselves creditors and not
> shareholders.  The line between equity and
> subordinated debt is very close, but the courts have
> no problem calling one equity and one debt.  Are you
> going to take the position that creditors should be
> strictly responsible for the tortious acts of their
> borrowers (assuming they do not control the acts of
> the borrower)?  However, corporations would continue
> because of transaction cost advantages over
> partnerships and joint ventures.
>
> Jim Devine's insistence that limited liability
> permits shareholders to ignore external costs is
> simply not realistic.  It ignores that the
> corporation remains liability for its tortious
> conduct, and shareholders care about their
> investments.  To the extent that the corporation
> itself is not responsible for externalities, that is
> a different issue entirely unrelated to limited
> liability.
>
> I have been accused of being "reductionist."
> According to dictionary.com, reductionsist means:
>
> "An attempt or tendency to explain a complex set of
> facts, entities, phenomena, or structures by
> another, simpler set: 'for the last 400 years
> science has advanced by reductionism... The idea is
> that you could understand the world, all of nature,
> by examining smaller and smaller pieces of it. When
> assembled, the small pieces would explain the whole'
>  (John Holland)."
>
> Based upon that definition, I accept the label.  It
> is better than being "wrong."
>
> What really are we fighting about?
>
> David Shemano


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