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Why should imposing shareholder liability work any better than removing depositor guarantees in the financial sector? Like depositors in a financial institution, common shareholders don't - indeed can't - have the necessary information to evaluate the internal operation of the firm. So as far as I can tell, all you'd achieve would be to make shareholders more panicky. And it's not like we need to add more instability to share prices...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 22nd, 2010 at 06:01:37 AM EST
[ Parent ]
Shareholder limitation from liability is to all intents and purposes a form of guarantee extended by the State to investors.

The problem is that investors are not giving anything directly in return for the privilege of that guarantee.

I advocate the abolition of corporation tax and VAT and their replacement by:

(a) Limited Liability Levy - collected on gross corporate revenues;

(b) IP Levy - essentially a levy/rental on the value of IP, Brand, and all other intangibles (collectively 'goodwill') which are enacapsulated with the 'wrapper' of the Corporation.

Both to be collected through the clearing mechanism.

These new levies could be revenue neutral. The real savings come from sweeping away the deadweight costs of the unproductive industries of public and private professionals involved in the current system.

This couldn't happen under current governance arrangements of course because privileged turkeys don't vote for Christmas. But there's more than one way to get feathers from the turkey.


"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat May 22nd, 2010 at 06:58:33 AM EST
[ Parent ]
"--privileged turkeys don't vote for Christmas.--"
Best laugh of the day.

ONLY laugh of the day.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Sun May 23rd, 2010 at 03:45:53 AM EST
[ Parent ]
There is no difference - absolutely none - between the threat of conventional financial loss and the threat of total loss through termination. The fact that investors can take a haircut at any time doesn't stop them investing.

If it came to that, the staff at the credit rating agencies ana analysis shops could be retrained to take an interest in corporate ethics and to report on the ethical standing and likely survivability of a corp.

Think of it as a new kind of sustainability.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun May 23rd, 2010 at 03:51:12 AM EST
[ Parent ]
There is no difference - absolutely none - between the threat of conventional financial loss and the threat of total loss through termination. The fact that investors can take a haircut at any time doesn't stop them investing.

No, there is a vast, vast gulf of difference between risking the money you paid for the shares and risking joint and several liability for the every company activity.

The difference can be summed up in one sentence: Don't buy stock for money you can't afford to not see again.

If liability isn't capped at some level - and the price of the stock is a convenient, albeit not necessarily optimal, level, the stockholder would potentially put his solvency on the line when buying shares. Making more ways to have economic actors go insolvent does not strike me as a good way to enhance the stability of the economic system.

If it came to that, the staff at the credit rating agencies and analysis shops could be retrained to take an interest in corporate ethics and to report on the ethical standing and likely survivability of a corp.

Just to be perfectly clear, these are the same rating agencies and analysis shops that slapped AAA ratings on leveraged CDO-cubed derivatives based on subprime collateral, right?

I'd rather use a magic 8-ball to guide my investment decisions. Magic 8-balls don't charge commissions.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun May 23rd, 2010 at 06:49:06 AM EST
[ Parent ]
JakeS:
Like depositors in a financial institution, common shareholders don't - indeed can't - have the necessary information to evaluate the internal operation of the firm.

and that's the wrinkle that makes me wonder if you could have an ethical stock market.

blind faith on 'systems guys', well, look where it's taking us!

what if the stocks and shares gam(bl)e were only sustainable in a growing economy, and i mean a really growing economy, not the distorted mirror version we have now?

what would the world lose without wall street, if they can't be trusted?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun May 23rd, 2010 at 10:40:34 AM EST
[ Parent ]
and that's the wrinkle that makes me wonder if you could have an ethical stock market.

In the absolute sense, I don't think it is.

The stock market is basically a con, on every level. On the micro level, it's a con because it's being flagrantly gamed by the big players. On the macro level, it's a con because it tries to make participants believe that their assets are more liquid than they really are.

I don't believe that you can make the micro-level con go away, and the macro-level con is the sum total of the economic justification for having a stock market in the first place.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun May 23rd, 2010 at 10:58:16 AM EST
[ Parent ]

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