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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
by 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 agoLimited 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 agoIt'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 agoNo, 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 agoLimited liability applies to both shareholders and directors of a company.
- pmiller2 7y agoIt's more like corporations know that regulators can't or don't assign meaningful fines. Look at Facebook and their recent $5 billion fine. That's a "cost of doing business" to them.