From: jk@panix.com (Jim Kalb)
Subject: Re: Corporations (was Re: Libertarians live in Virtual Reality)
Date: Wed, 26 Aug 1992 22:58:18 GMT
Distribution: usa
Organization: PANIX Public Access Unix & Internet, NYC

pcollac@pyrnova.mis.pyramid.com (Paul Collacchi) writes:

>A consequence of incorporation was that it directed litigants to go
>after the fictitious entity, the corporation, rather than persons  who
>performed the alleged dirty deeds.  This is a deflection of direct
>feedback.

The persons who actually perform the dirty deeds are still liable.  By
making very large business concerns possible incorporation gives
litigants another very deep pocket to reach into, though.  Most of them
do just that and don't bother with the individual malefactors.  You're
right that it's a deflection of direct feedback and to that extent is a
bad thing.  On the other hand, big businesses are often in a position to
reduce risks in a more systematic way than small businesses.
 
>Under unlimited [I believe "limited" is meant] liability, a certain
>segment of corporate participants,  "owners" are more protected from
>the consequences of their actions, which are to choose to give their
>money to (potentially) unscrupulous persons and to not supervise same. 
>As you correctly point out, it encourages the  participation of someone
>who "won't know much about or have much control over what goes on..." 
>It doesn't support the mindful, engaged participation of owners who
>might otherwise stand to lose their shirts.  Losing your shirt, like
>gravity, wakes you up real quickly in my opinion.  The game is to wake
>ourselves up, to act responsibly, not to give  ourselves excuses for
>going to sleep.  Let the owners police their own corporations.

One could extend this line of thought by making lenders, customers and
suppliers liable for claims against businesses as well.  After all,
lenders and customers also give their money to potentially unscrupulous
persons and don't supervise them, customers ask for high-quality
products and services at a low price and don't inquire how that miracle
is achieved and suppliers give businessmen the materials they need to
engage in potentially unscrupulous acts and don't supervise how the
materials are used.

If you don't accept my extension of the line of thought, then it seems
you think there's something special about advancing risk capital
(compared with lending money, selling supplies or placing an order) that
in and of itself makes the investor personally responsible for what the
people who get the advance do with it.  I don't see why that should be
so.  If you do accept it, then it seems that you just don't like modern
economic life, which is based on world-wide markets with lots of
participants who really don't know or care much about the people they
have dealings with.  Of course, you might be right to reject modern
economic life.  Lots of people have objections to it, although few would
be willing to give up the goodies it provides.

>If there were no fictitious 'catch-all' entities, one would seek
>damages from specific, personal entities.  Again, the effect -- direct
>feedback  loops for the participants.  What you do comes back to you not
>the corporation [ . . . ] Bigness would diminish, I agree, unless it was
>capable of sustaining its level of risk, i.e. acting responsibly.
>Maybe certain big things are just too risky.  Maybe we ought to not
>undertake them.

I understand the first three sentences better than the last three.  In
the absence of limited liability, businesses would be smaller so risky
things would be done by people with fewer resources to pay claims than
(say) IBM has.  As a result, claimants would be worse off than they are
today.

-- 
    Jim Kalb (jk@panix.com)