3 ms·

But Boeing and Exxon both are still around and still profitable and did not need to fall back on the principle of limited liability to protect their shareholder

But Boeing and Exxon both are still around and still profitable and did not need to fall back on the principle of limited liability to protect their shareholders. So if anything that would indicate to me as a shareholder that both companies are not that bad at quantifying risk. Limited liability makes it less risky to invest in smaller, less established companies. Those with well established histories like Boeing and Exxon seem like they would actually be helped by eliminating limited liability as they have long histories of not needing to use it.

pmiller2 7y ago
You're missing the point. If I could suffer unlimited liability beyond my initial investment for things Exxon does, why would I invest? What would happen to Exxon if everyone thought that way?
- dahfizz 7y ago
  People would stop being able to retire because any and all investment has become infinitly risky. That's what would happen.
- voxic11 7y ago
  I need to invest my money in something[0]. If Exxon has a good track record of only incurring liabilities which they can cover using revenue (which they do) then I would invest with them over some other company without such a record. [0] https://meltingasphalt.com/wealth-the-toxic-byproduct/ https://meltingasphalt.com/wealth-the-toxic-byproduct/
- pjc50 7y ago
  If I could suffer unlimited liability for opening a restaurant, or even investing in my brother's restaurant, would I? If a staff member fails to wash their hands and kills a few people with a particularly disastrous food poisoning outbreak, who should lose their house, me (passive investor), or them (worker)? (Getting rid of limited liability also means the company is no longer necessarily a liability shield for its staff! People would likely fallback on not being a company, so either partnership arrangements or just a cloud of independent contractors)
  - pmiller2 7y ago
    If your argument were correct, sole proprietorships and non-LLP partnerships would not exist.
    - bpt3 7y ago
      Neither take on external investors, partnerships are rare and generally carry insurance as protection against their liability, and sole proprietorships only exist due to ignorance or laziness on the part of the business owner (in the US at least), so I'm not sure what your point is here.
- AnthonyMouse 7y ago
  > If I could suffer unlimited liability beyond my initial investment for things Exxon does, why would I invest? Because you expect to make more money than you expect to lose. The liability risk (or the cost of insuring against it) would just get priced into the stock price. > What would happen to Exxon if everyone thought that way? They would presumably consolidate even more than they already have, so that the total amount of corporate assets is greater, which reduces the probability that a liability could exceed them and cause the shareholders to lose more than they put in. Limited liability benefits small corporations far more than larger ones, because the risk of incurring a liability that exceeds the total value of the corporation is higher when the total value of the corporation is smaller.
hogFeast 7y ago
Because they do a ton of other stuff. There is a fundamental misunderstanding of the scale of these businesses...they pay out based on the cost determined by a third party but they are still profitable because they do a ton of other stuff. Eliminating limited liability would finish these businesses because it would require risk to be borne by employees and managers. They are not able to bear that risk...that is why we split ownership and management with limited liability...this has been thought out.
- voxic11 7y ago
  Limited liability has nothing to do with employees and managers, it applies only to shareholders. Shareholders and corporations would love to push more liability onto their employees, but it is labor law that prevents them from doing so, not the principle of limited liability.
  - AnthonyMouse 7y ago
    It's not so much labor law as that the employees have relatively little money. Having a contract that says your employee has to pay the corporation's billion dollar liability when the employee is negligent is little help to the corporation when the employee hasn't got a billion dollars.
  - hogFeast 7y ago
    No, it does. You don't think it does because you either haven't looked at what happens if limited liability doesn't exist or you are assuming that we can make these changes with no consequence. Well we can't just micromanage everything perfectly. If you change this, the liabilty doesn't just magically disappear. You will see firms collapse into themselves, and that risk will move to managers and employees. It moves to managers because they are the only ones who will take the risk (i.e. we have no principal/agent problem, everyone is a principal) and it moves to employees because that system is incapable of bearing the risk (do you understand that wage labour didn't exist until the late 19th century...before that point, you had union gangmasters who were paid by piece and putting out...again, what we would call employees today bore substantial risk). Again, it moves risk from those able to bear it to those who cannot (the system we have is enormously favourable to employees, and very disadvantageous for employers...the reason people think the opposite is because they don't know what the world was like before this). Srs, this site is one of the worst for people with no knowledge telling you something they have no understanding of with absolute authority. Read a book on pre-20th century economic history...there is a reason why we got here, it is called progress.

pmiller2 7y ago

You're missing the point. If I could suffer unlimited liability beyond my initial investment for things Exxon does, why would I invest? What would happen to Exxon if everyone thought that way?

dahfizz 7y ago
People would stop being able to retire because any and all investment has become infinitly risky. That's what would happen.
voxic11 7y ago
I need to invest my money in something[0]. If Exxon has a good track record of only incurring liabilities which they can cover using revenue (which they do) then I would invest with them over some other company without such a record. [0] https://meltingasphalt.com/wealth-the-toxic-byproduct/ https://meltingasphalt.com/wealth-the-toxic-byproduct/
pjc50 7y ago
If I could suffer unlimited liability for opening a restaurant, or even investing in my brother's restaurant, would I? If a staff member fails to wash their hands and kills a few people with a particularly disastrous food poisoning outbreak, who should lose their house, me (passive investor), or them (worker)? (Getting rid of limited liability also means the company is no longer necessarily a liability shield for its staff! People would likely fallback on not being a company, so either partnership arrangements or just a cloud of independent contractors)
- pmiller2 7y ago
  If your argument were correct, sole proprietorships and non-LLP partnerships would not exist.
  - bpt3 7y ago
    Neither take on external investors, partnerships are rare and generally carry insurance as protection against their liability, and sole proprietorships only exist due to ignorance or laziness on the part of the business owner (in the US at least), so I'm not sure what your point is here.
AnthonyMouse 7y ago
> If I could suffer unlimited liability beyond my initial investment for things Exxon does, why would I invest? Because you expect to make more money than you expect to lose. The liability risk (or the cost of insuring against it) would just get priced into the stock price. > What would happen to Exxon if everyone thought that way? They would presumably consolidate even more than they already have, so that the total amount of corporate assets is greater, which reduces the probability that a liability could exceed them and cause the shareholders to lose more than they put in. Limited liability benefits small corporations far more than larger ones, because the risk of incurring a liability that exceeds the total value of the corporation is higher when the total value of the corporation is smaller.

hogFeast 7y ago

Because they do a ton of other stuff. There is a fundamental misunderstanding of the scale of these businesses...they pay out based on the cost determined by a third party but they are still profitable because they do a ton of other stuff. Eliminating limited liability would finish these businesses because it would require risk to be borne by employees and managers. They are not able to bear that risk...that is why we split ownership and management with limited liability...this has been thought out.

voxic11 7y ago
Limited liability has nothing to do with employees and managers, it applies only to shareholders. Shareholders and corporations would love to push more liability onto their employees, but it is labor law that prevents them from doing so, not the principle of limited liability.
- AnthonyMouse 7y ago
  It's not so much labor law as that the employees have relatively little money. Having a contract that says your employee has to pay the corporation's billion dollar liability when the employee is negligent is little help to the corporation when the employee hasn't got a billion dollars.
- hogFeast 7y ago
  No, it does. You don't think it does because you either haven't looked at what happens if limited liability doesn't exist or you are assuming that we can make these changes with no consequence. Well we can't just micromanage everything perfectly. If you change this, the liabilty doesn't just magically disappear. You will see firms collapse into themselves, and that risk will move to managers and employees. It moves to managers because they are the only ones who will take the risk (i.e. we have no principal/agent problem, everyone is a principal) and it moves to employees because that system is incapable of bearing the risk (do you understand that wage labour didn't exist until the late 19th century...before that point, you had union gangmasters who were paid by piece and putting out...again, what we would call employees today bore substantial risk). Again, it moves risk from those able to bear it to those who cannot (the system we have is enormously favourable to employees, and very disadvantageous for employers...the reason people think the opposite is because they don't know what the world was like before this). Srs, this site is one of the worst for people with no knowledge telling you something they have no understanding of with absolute authority. Read a book on pre-20th century economic history...there is a reason why we got here, it is called progress.