Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
The problem lies both in the Limited Liability of directors and the non-liability of shareholders (limited to their investment).

If shareholders owning a significant proportion of a company (say over 10%) were required to co-sign (i.e. give personal guarantees of company debts) the entire corporate responsibility dynamic would change.

No matter that 'personal' would, in many cases, be a corporation - the same rules would apply within the investing corporate body, and so on ad infinitum.

You can't be me, I'm taken

by Sven Triloqvist on Mon Nov 14th, 2011 at 04:31:25 AM EST
And you've just completely broken the idea of a corporation.

Which is fine if that's what you want to do, but now  you're relying on government to run every detail of your industrial society. This is not obviously a good plan, any more than the current extremes are a good plan.

by Colman (colman at eurotrib.com) on Mon Nov 14th, 2011 at 04:47:18 AM EST
[ Parent ]
Co-signing is common for small companies (where directorship and ownership frequently coincide).

But how you make the leap to " government to run every detail of your industrial society" is beyond me.

You can't be me, I'm taken

by Sven Triloqvist on Mon Nov 14th, 2011 at 05:07:18 AM EST
[ Parent ]
Co-signing is common for small companies (where directorship and ownership frequently coincide).

Yeah, tell me about it.


But how you make the leap to " government to run every detail of your industrial society" is beyond me.


Because you've pretty much killed big companies.  It looks like you have everyone involved on the hook for everything if the company fucks up.

I don't know about other countries, but in Irish law, in theory, limited liability only applies if you're trading in good faith. Fraudulent trading, for instance, strips the liability and the directors are liable for the debts of the company.

The problem is not, in many cases, company law, the problem is company law enforcement. The US seems to need a revision to its legal system to properly codify legal personhood and limit it.

by Colman (colman at eurotrib.com) on Mon Nov 14th, 2011 at 05:13:56 AM EST
[ Parent ]
I don't know about other countries, but in Irish law, in theory, limited liability only applies if you're trading in good faith. Fraudulent trading, for instance, strips the liability and the directors are liable for the debts of the company.
Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed. Common law countries usually uphold this principle of separate personhood, but in exceptional situations may "pierce" or "lift" the corporate veil.


To err is of course human. But to mess things up spectacularly, we need an elite — Yanis Varoufakis
by Migeru (migeru at eurotrib dot com) on Mon Nov 14th, 2011 at 05:19:16 AM EST
[ Parent ]
You are only 'on the hook' if you own more than, say, 10%.

You can't be me, I'm taken
by Sven Triloqvist on Mon Nov 14th, 2011 at 05:27:29 AM EST
[ Parent ]
So nobody owns more than 10%? Jobs was Disney's biggest stockholder. At 7%. Gates owns about that of Microsoft.

How would that even help with the large corporate with spread out ownership?  

If your family of 9 owe 9% each are you ok?

Limited liability is not the problem here. Forgetting that it's a privilege we grant in order to make it possible for large corporations to function is the problem. When that privilege is abused, there should be consequences: you lose the protection of the limited liability and the investors lose their stake.

by Colman (colman at eurotrib.com) on Mon Nov 14th, 2011 at 05:38:24 AM EST
[ Parent ]
Because you've pretty much killed big companies.

You say that like it would be a bad thing.

Fraudulent trading, for instance, strips the liability and the directors are liable for the debts of the company.

In which jurisdiction? And when was the last time this law was applied to any PLC (or the Irish equivalent)?

Limited liability is a small part of the issue. The other elements are:

  1. A revolving door between corporate management and government. Too often you get the same people doing both. Where you don't, you get close personal and financial connections between the people involved.

  2. Transnational tax evasion.

  3. The primary responsibility of corporations to create shareholder value, irrespective of social and ecological costs. (The fact the social and ecological costs are excluded from accounting practice makes this an unfair fight.)

  4. Massive near-Pharaonic power differentials between CEOs and board members and most workers.

  5. Internal power structures that reward sociopathy and punish social responsibility and ethical behaviour.

Fixing limited liability on its own won't fix these other issues.

What's needed is a total overhaul of the idea of a corporation as a collective enterprise. There are better and more democratic collective participatory models, but they're not being used.

There's nothing wrong in principle with the idea of collective effort. But current practice and law are literally feudal and medieval throwbacks, with features that date back to the time when monopolies in useful goods and services were granted as an aristocratic boon by a monarch.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Nov 14th, 2011 at 05:50:00 AM EST
[ Parent ]
A revolving door between corporate management and government. Too often you get the same people doing both. Where you don't, you get close personal and financial connections between the people involved.

Transnational tax evasion.

The primary responsibility of corporations to create shareholder value, irrespective of social and ecological costs. (The fact the social and ecological costs are excluded from accounting practice makes this an unfair fight.)

Massive near-Pharaonic power differentials between CEOs and board members and most workers.

Internal power structures that reward sociopathy and punish social responsibility and ethical behaviour.

Yes. Those would be a lot of the real problems.

Add to that the problems that investors have with corporate governance - too many companies are not run in the best interests of the investors for instance.

by Colman (colman at eurotrib.com) on Mon Nov 14th, 2011 at 05:54:21 AM EST
[ Parent ]
The issue of the alignment between shareholder interests and company interests is a tough one.

On the one hand, management paying itself insane bonuses is obviously not in the greater benefits of the shareholders.

On the other hand, an excessive focus on shareholder value has a tendency to force the worst kind of short-sighted, extractive decisions on the company, because selling everything off now will always be more profitable, now, then slowly building it over the next ten years.

by Zwackus on Mon Nov 14th, 2011 at 07:58:45 AM EST
[ Parent ]
The problem is not, in many cases, company law, the problem is company law enforcement. The US seems to need a revision to its legal system to properly codify legal personhood and limit it.

The failure of enforcement is a pressing issue.  However, the keys to solving that lie in an entirely different direction.  As you pointed out, the US has serious problems regarding the legal nature of the corporation and the laws regarding its governance, and the responsibilities involved in that governance.

Fixing the laws will, obviously, never have an effect if those laws are not enforced.  It's worth thinking about what the laws should be, though, and if they should be made easier to enforce.

by Zwackus on Mon Nov 14th, 2011 at 08:04:04 AM EST
[ Parent ]
It is, but it's a secondary issue. As usual, the primary problem is political - corporations have vast political power, and so does the investor and CEO class.

Comparatively, everyone else has very little.

It's not all that difficult to imagine improved social enterprises, But they will never happen until power is distributed in a more balanced way.

The checks and balances model has potential, but it needs to include checks and balances against corporations, corporate lobbyists and investors.

Currently they have almost unlimited influence and negligible democratic accountability.

Internal democratic accountability is possibly the simplest and most effective way to change that. But you're still stuck with the problem that you can't enforce internal accountability from the outside when lawmakers will never vote against the interests of the corporations who own them.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Nov 14th, 2011 at 08:24:13 AM EST
[ Parent ]
Yes, that's why I figure something along these lines is but one brick in a comprehensive wall of social and economic reform.

Getting active and effective legal enforcers on the beat is one task, and giving them laws with serious teeth to work with is another.  Lowering the bar for what counts as criminal misconduct makes it more likely that cases will be considered worth pursuing, and thus reduces the level of regulatory vigor necessary to pursue enforcement.  I think it's a good idea, but alone I acknowledge it to be insufficient.

And, in truth, I think that encouraging regulatory activism and lowering the bar for regulatory bite via new laws and criminal sanctions would be a much more approachable task than the creation of a democratic corporate form.  

by Zwackus on Mon Nov 14th, 2011 at 08:30:53 AM EST
[ Parent ]
Until we have economic democracy, especially in the workplace, what democracy we have is always limited and at risk. Unfortunately, given the vulnerability of public opinion to manipulation, even the fact of economic democracy would be vulnerable to popular overthrow in favor of some smiling sociopath.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Nov 14th, 2011 at 09:29:01 AM EST
[ Parent ]

Display:

Occasional Series