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The author seems confused or is deliberately straw-manning the issue: >[unlimited liability] would basically make the corporate form untenable. Imagine, if you

The author seems confused or is deliberately straw-manning the issue: >[unlimited liability] would basically make the corporate form untenable. Imagine, if you would, that by buying and holding the share of a firm for 10 minutes, you thereby subjected yourself to seizure of all your goods to satisfy potential lawsuit judgments Here, she is conflating ownership (of any type/duration) with the actual decisions made and actions taken by the company. The reality is that we know that common shareholders, for instance, are seldom involved with day-to-day or even long-term decision making of the type that frequently causes companies to incur liability. Are we really to believe that a court would sieze the assets of Joe Blow because he day-traded the stock of company X once upon a time? But, if a common shareholder, who happened to be holding voting-stock during a 10-minute interval, in which the company decided to hold a public vote on, say, whether to deny a recent study on asbestos health-effects, did vote in the affirmative, then perhaps he/she should be liable. But, such a scenario is ridiculous on its face for many obvious reasons. Not the least of these reasons is that the average shareholder is generally just as likely to be as duped by the company as the general public when it comes to issues of potential liability. Shareholders are effectively treated as customers too, with regard to the image the company wants to put forward, lest there be a devaluation of the stock. So, by conflating the shareholders with the actual decision makers in such a ridiculous way, the author uses FUD to provide cover for the true beneficiaries of limited liability: the board and executive leadership.

Bluestrike2 13y ago
In a world without limited liability, investor Joe Blow is absolutely liable for the corporation's debts (even if it's simply a proportionate liability) and all of his assets are fair game towards the collection of said debts. Joe Blow doesn't even have to be very sophisticated. He could be a mid-level (or any level) worker who works hard to sock money away in his 401k. Everything is going along fine, until one of the company's his managed 401k invested in gets hammered with a massive judgment in litigation. Now, he and everyone else who invested in that company regardless of their size or wealth, is on the hook. Even if the small size of his investment simply means that he's only liable for a few thousand dollars, that's still one hell of a hit. And that's not even touching the issue of smaller firms (such as family businesses, startups that issue their employees stock benefits, or employee-owned firms) where the potential risk per individual investor goes up significantly simply because they own a greater proportion of the company. Every time I stumble across people arguing about limited liability (or corporate personhood... oh boy, does it seem like people confuse personhood with citizenship), I walk away with the impression that those seeking to end it don't really understand what they're asking for. It's sort of like opening Pandora's Box, but without hope lingering at the bottom.

Bluestrike2 13y ago

In a world without limited liability, investor Joe Blow is absolutely liable for the corporation's debts (even if it's simply a proportionate liability) and all of his assets are fair game towards the collection of said debts. Joe Blow doesn't even have to be very sophisticated. He could be a mid-level (or any level) worker who works hard to sock money away in his 401k. Everything is going along fine, until one of the company's his managed 401k invested in gets hammered with a massive judgment in litigation. Now, he and everyone else who invested in that company regardless of their size or wealth, is on the hook. Even if the small size of his investment simply means that he's only liable for a few thousand dollars, that's still one hell of a hit. And that's not even touching the issue of smaller firms (such as family businesses, startups that issue their employees stock benefits, or employee-owned firms) where the potential risk per individual investor goes up significantly simply because they own a greater proportion of the company. Every time I stumble across people arguing about limited liability (or corporate personhood... oh boy, does it seem like people confuse personhood with citizenship), I walk away with the impression that those seeking to end it don't really understand what they're asking for. It's sort of like opening Pandora's Box, but without hope lingering at the bottom.