4 ms·

Corporate structures are designed to disperse liabilities in a tragedy of the commons sort of way. Therefore, what is the moral rationale for a “private” corpor

by netfl0 7y ago

Corporate structures are designed to disperse liabilities in a tragedy of the commons sort of way. Therefore, what is the moral rationale for a “private” corporation, or for that matter any liability limiting instrument for private parties. Public corporate ownership makes a lot of sense to me. (I was hoping this would spur interesting discussion)

seibelj 7y ago
If the failure of a business means personal financial (and perhaps criminal, as history shows) ruin then very few people would start businesses. Limited Liability for both the managers and shareholders is absolutely critical, unless you want everything operated by the same people who run the DMV.
- rdtwo 7y ago
  Only large companies can be truly be limited liability enterprises. Small business have to give personal guarantees for everything and you can bet that small business owners will be prosecuted to the fullest extent of the law if they screw up llc or not. It’s only the big players that are really allowed to benefit from the corporate veil.
  - snagglegaggle 7y ago
    It's possible to create a small LLC but there's a minefield of actions that could let a judge rule the LLC to be a "legal fiction" and to pop the bubble of limited liability. Such rulings are usually applied to small LLCs, and as far as I know to enforce debt. Why this bubble can not be popped in seemingly any other case, especially when criminal acts have been committed, is what GP is complaining about, and was the expected outcome by critics of limited corporations when they were introduced.
- pjc50 7y ago
  Limited liability is what allows "managers" and "shareholders" to be separated in the first place, and thereby allows the raising of huge amounts of capital. If liability is unlimited, would you really hand over unlimited liability to managers without extremely close oversight? No. So shareholders would have to directly run the business. Worse, would the shareholders hand over unlimited liability to a voting process in which they might lose to other shareholders? Conversely, it's both unfair and pointless to make the mere managers, who are staff and not contributors of capital, liable for the business operations. There are exceptions to this but they tend to be small to medium low-capital businesses. Accountancy and law firms often operate as partnerships, for example. No, the LLC is a primitive of operation on which the economy is built. It's not going anywhere. But if people start using it as an excuse to dump externalities on the public, there is going to be a policy response imposing some kind of "corporate social responsibility". But none of that is relevant here. This is the good old fashioned over-investment by the over-wealthy in schemes they thought would pay back by monopolizing future profits. > If the product is something else and cannot produce software gross margins then it needs to be valued like other similar businesses with similar margins, but maybe at some premium to recognize the leverage it can get through software.
  - gnopgnip 7y ago
    Most law firms will be limited liability partnerships these days, and will have professional liability insurance.
simonh 7y ago
I disagree with you, but don't understand the down-votes. It's a popular point of view with a long history and deserves to be addressed. You're quite right in that corporate structures do disperse liabilities. It's there in the name - limited liability company. However there are well established standard mechanisms for balancing out that real and tangible benefit, which are taxation and regulation. Public corporate ownership is all very well, I'm not in principle against it in certain areas. However what I suspect you are advocating is enforced public ownership, i.e. the prohibition of private companies and socialisation of the entire economy. That hits two big problems. The first problem is purely practical really - it doesn't work. It's been tried over and over again, and is a recipe for disaster. Now I'm not saying all public companies will fail, not at all it can work fine for some activities particularly utilities and social services. I'm saying that resorting to public ownership across whole economies fails. Every time. The second issue should really be the first in terms of priorities really. Forcing universal public ownership and prohibiting private enterprise is oppression, pure and simple. Capitalism is just the exercise of individual freedoms and rights of ownership over property and capital, and free association with others. That's it. That's all it is. You don't even really need limited liability, although I think that is a reasonable and well proven enhancement when balanced by appropriate regulation in the public interest.
- netfl0 7y ago
  > Public corporate ownership is all very well, I'm not in principle against it in certain areas. I assume you're not against the publicly traded stock market, just clarifying since others may interpret this as such. > However what I suspect you are advocating is enforced public ownership. This is not the conclusion I come to, I do not believe my original post suggests this. > Forcing universal public ownership and prohibiting private enterprise is oppression, pure and simple. This was not my viewpoint. I am imagining quite the opposite. If the liability is dispersed, so should ownership. If the ownership is private, the liability should be private. I believe both are critically necessary. These feels like a conservative(dictionary version) viewpoint.
  - simonh 7y ago
    Ok, that’s a terminology issue. The term public ownership generally means owned by the government, it’s public in the sense that it’s therefore owned by the people. See the Wikipedia article on public property. Dispersed private ownership is new to me. Huw would that work, mandatory dispersal of shares to all citizens? What happens for new citizens? How do citizens take advantage of their rights, just like any shareholder? What if the vast majority simply sell their shares? I’m not clear how this would all work. I also don’t see how this brings corporate behaviour under control, without taxes and regulation which we can do anyway.

by netfl0 7y ago

seibelj 7y ago

If the failure of a business means personal financial (and perhaps criminal, as history shows) ruin then very few people would start businesses. Limited Liability for both the managers and shareholders is absolutely critical, unless you want everything operated by the same people who run the DMV.

rdtwo 7y ago
Only large companies can be truly be limited liability enterprises. Small business have to give personal guarantees for everything and you can bet that small business owners will be prosecuted to the fullest extent of the law if they screw up llc or not. It’s only the big players that are really allowed to benefit from the corporate veil.
- snagglegaggle 7y ago
  It's possible to create a small LLC but there's a minefield of actions that could let a judge rule the LLC to be a "legal fiction" and to pop the bubble of limited liability. Such rulings are usually applied to small LLCs, and as far as I know to enforce debt. Why this bubble can not be popped in seemingly any other case, especially when criminal acts have been committed, is what GP is complaining about, and was the expected outcome by critics of limited corporations when they were introduced.
pjc50 7y ago
Limited liability is what allows "managers" and "shareholders" to be separated in the first place, and thereby allows the raising of huge amounts of capital. If liability is unlimited, would you really hand over unlimited liability to managers without extremely close oversight? No. So shareholders would have to directly run the business. Worse, would the shareholders hand over unlimited liability to a voting process in which they might lose to other shareholders? Conversely, it's both unfair and pointless to make the mere managers, who are staff and not contributors of capital, liable for the business operations. There are exceptions to this but they tend to be small to medium low-capital businesses. Accountancy and law firms often operate as partnerships, for example. No, the LLC is a primitive of operation on which the economy is built. It's not going anywhere. But if people start using it as an excuse to dump externalities on the public, there is going to be a policy response imposing some kind of "corporate social responsibility". But none of that is relevant here. This is the good old fashioned over-investment by the over-wealthy in schemes they thought would pay back by monopolizing future profits. > If the product is something else and cannot produce software gross margins then it needs to be valued like other similar businesses with similar margins, but maybe at some premium to recognize the leverage it can get through software.
- gnopgnip 7y ago
  Most law firms will be limited liability partnerships these days, and will have professional liability insurance.

simonh 7y ago

I disagree with you, but don't understand the down-votes. It's a popular point of view with a long history and deserves to be addressed. You're quite right in that corporate structures do disperse liabilities. It's there in the name - limited liability company. However there are well established standard mechanisms for balancing out that real and tangible benefit, which are taxation and regulation. Public corporate ownership is all very well, I'm not in principle against it in certain areas. However what I suspect you are advocating is enforced public ownership, i.e. the prohibition of private companies and socialisation of the entire economy. That hits two big problems. The first problem is purely practical really - it doesn't work. It's been tried over and over again, and is a recipe for disaster. Now I'm not saying all public companies will fail, not at all it can work fine for some activities particularly utilities and social services. I'm saying that resorting to public ownership across whole economies fails. Every time. The second issue should really be the first in terms of priorities really. Forcing universal public ownership and prohibiting private enterprise is oppression, pure and simple. Capitalism is just the exercise of individual freedoms and rights of ownership over property and capital, and free association with others. That's it. That's all it is. You don't even really need limited liability, although I think that is a reasonable and well proven enhancement when balanced by appropriate regulation in the public interest.

netfl0 7y ago
> Public corporate ownership is all very well, I'm not in principle against it in certain areas. I assume you're not against the publicly traded stock market, just clarifying since others may interpret this as such. > However what I suspect you are advocating is enforced public ownership. This is not the conclusion I come to, I do not believe my original post suggests this. > Forcing universal public ownership and prohibiting private enterprise is oppression, pure and simple. This was not my viewpoint. I am imagining quite the opposite. If the liability is dispersed, so should ownership. If the ownership is private, the liability should be private. I believe both are critically necessary. These feels like a conservative(dictionary version) viewpoint.
- simonh 7y ago
  Ok, that’s a terminology issue. The term public ownership generally means owned by the government, it’s public in the sense that it’s therefore owned by the people. See the Wikipedia article on public property. Dispersed private ownership is new to me. Huw would that work, mandatory dispersal of shares to all citizens? What happens for new citizens? How do citizens take advantage of their rights, just like any shareholder? What if the vast majority simply sell their shares? I’m not clear how this would all work. I also don’t see how this brings corporate behaviour under control, without taxes and regulation which we can do anyway.