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To answer your original question > why should a company be allowed to operate if it isn't insured against failure to meet its basic contract obligations? Beca

To answer your original question > why should a company be allowed to operate if it isn't insured against failure to meet its basic contract obligations? Because it is meeting its contractual obligation. The liquidation preferences were already part of the corporate bylaws when the employees joined. If the agreement was violated then we have a court system to work it out. The founders screwed up here and in this iterative game of prisoners dilemma their next venture won't be so easy. But I don't think we can point at this scenario and draw any systematic conclusions. The companies that would need this insurance are the one's that can afford it the least. Which is why "startups" have this profile of high risk and most likely a total bust. Having the option to work in a high risk environment is important because as individuals we all have a different risk profiles. And if you look at our public listed companies some of these risks have payed off immensely.

avar 9y ago
Since the context of this thread is the oddity of the American system compared to most other western countries, yes, of course you can draw systematic conclusions. Workers aren't systematically unable to get their final paycheck in most other western countries. There's a small flat corporate tax for this sort of thing, which addresses your point that startups would need to pay higher insurance rates for this. The insurance is run by state. The reason should be obvious, because you still want innovation and new companies, so it amounts to a net subsidy from big corporations to small ones. Unless you think unpaid wages are some big part of US GDP it's pretty hard to argue that the lack of this is some huge part of the US's success story. There's also no limit on working in a high risk environment. There's just a higher bar to being able to form a limited liability corporation. Sure, you can work with a bunch of people and if it all collapses none of you get paid, but you don't get to do through some arrangement that looks like a normal job. They need to explicitly sign up for that, e.g. as co-founders or through some other painfully obvious mechanism, not just some clause in the bylaws that nobody working at Starbucks is ever going to read.
- smokeyj 9y ago
  > Workers aren't systematically unable to get their final paycheck in most other western countries. How is a one-off event systematic? This is a chapter 7 bankruptcy. The employees become creditors and participate in the liquidation. If the founders were using bankruptcy intentionally to not pay wages then it becomes a matter for the department of labor. All these employees are eligible to collect unemployment in the state they're employed. These guys spectacularly crashed and burned for this to happen. Starbucks wouldn't file a chapter 7, they'd restructure and wages wouldn't be effected. If you want judge the entire US economy from this article and draw parallels about how this makes Americans and Europeans fundamentally different then you're painting with too broad of a brush.

avar 9y ago

Since the context of this thread is the oddity of the American system compared to most other western countries, yes, of course you can draw systematic conclusions. Workers aren't systematically unable to get their final paycheck in most other western countries. There's a small flat corporate tax for this sort of thing, which addresses your point that startups would need to pay higher insurance rates for this. The insurance is run by state. The reason should be obvious, because you still want innovation and new companies, so it amounts to a net subsidy from big corporations to small ones. Unless you think unpaid wages are some big part of US GDP it's pretty hard to argue that the lack of this is some huge part of the US's success story. There's also no limit on working in a high risk environment. There's just a higher bar to being able to form a limited liability corporation. Sure, you can work with a bunch of people and if it all collapses none of you get paid, but you don't get to do through some arrangement that looks like a normal job. They need to explicitly sign up for that, e.g. as co-founders or through some other painfully obvious mechanism, not just some clause in the bylaws that nobody working at Starbucks is ever going to read.

smokeyj 9y ago
> Workers aren't systematically unable to get their final paycheck in most other western countries. How is a one-off event systematic? This is a chapter 7 bankruptcy. The employees become creditors and participate in the liquidation. If the founders were using bankruptcy intentionally to not pay wages then it becomes a matter for the department of labor. All these employees are eligible to collect unemployment in the state they're employed. These guys spectacularly crashed and burned for this to happen. Starbucks wouldn't file a chapter 7, they'd restructure and wages wouldn't be effected. If you want judge the entire US economy from this article and draw parallels about how this makes Americans and Europeans fundamentally different then you're painting with too broad of a brush.