Thursday, March 08, 2007

Limited Liability

Via Brittney Gilbert I discovered an impassioned argument in favor of private property rights from Glen Dean:

Civil Rights Act, A Disgraceful Infringement On Private Property Rights

If you have ever had the misfortune to hear Sean Hannity speak, then you have probably heard him brag about how Republicans pushed the 1964 Civil Rights Act through Congress. The very fact that he would brag about this infringement on private property rights proves that he and many more like him are much more Republican than they are conservative.
. . .
But how can you support a federal government that has the power to tell a property owner or an employer who he or she should do business with? The whole idea completely runs opposite of the concept of liberty. . .
I'm not without sympathy to this line of argument, but there is a flaw in Dean's reasoning: Walgreens isn't a privately owned business, it's a corporation. Corporations have numerous legal privileges, but the most important is the doctrine of limited liability, which allows ownership of a corporation to be anonymous and transitory.

I used to be a docrinare libertarian -- I worked for Liberty magazine for seven years -- but when I started to think of the problem of the corporation, my beliefs began to unravel. A while back, I quoted Wendell Berry on the subject:
You would find that these organizations are organized expressly for the evasion of responsibility. They are structures in which, as my brother says, "the buck never stops." The buck is processed up the hierarchy until finally it is passed to "the shareholders," who characteristically are too widely dispersed, too poorly informed, and too unconcerned to be responsible for anything.

Limited Liability, and other privileges granted to corporations, amounts to a huge intervention in the economy. In fact, it makes the modern economy possible. It also makes corporation very powerful compared to an individual employee or customer. I think there is room for reform of our civil rights laws, but I don't see anything wrong with the government evening the odds on occasion.


Anonymous said...

Ive been preaching about the limited liability of a corporation is a ticket to malfeasance for years.

Let me tell you about one case right off the top of my head. A local factory in town has an employee recieve a head injury (details are going to be sketchy, as Ive heard this from my uncle second hand), he is "woosy" on his feet. The company wont pay for him to see a doc for three weeks, hoping he will spring for it himself (they are in trouble with the state as TOO MANY people apparently get hurt at their workplace). He gets WORSE, so the finally relent. Doc says "you need an MRI (or whatever), but the company stonewalls two more weeks.

He gets the MRI, and he is screwed up much worse than even he has imagined, and needs surgery. This was a head wound. The doc told him not to do ANYTHING for eight months and not to even walk unless absolutely necessary. The company tries to "punish" the employee and sticks him doing some sort of clean up work, despite the fact he is complaining of numbness down one arm, bad motor coordination, dizziness, and his eyes were rolling around in his head (several people told my uncle this). He gets operated on, and is told not to go back to work, and to convalesce at home. The company still insists he come to work, and makes him work with nauseating chemicals to boot.

He goes into a coma at home. He is on life support, and cannot even breathe on his own. He is not able to see supposedly (I have no idea how they know that). He is, in short, fighting for his life, and may have brain damage. He was pretty darn healthy just a month and a half ago.

The decision to make him work was passed through personnell, who dont want to have many more employees out for injuries, because the company is in trouble for too many injuries with the state. Somebody, somewhere however, DID MAKE THE DECISION to ignore the doctors ORDERS to make this man rest for 8 months off his feet due to some sort of brain injury. He very well might die.

Who is going to pay for this. In my opinion, if he dies, he was practically murdered, but even if he lives, he will probably be a shell of a human being with brain damage and perhaps blindness. Somebody ought to pay with many, many years in prison for this, but that will of course not happen.

His ability to sue may or may not be compromised and capped legally. That is still up in the air.

When companies do things like make bad tires that collapse and kill people, put waste into groundwater, make defective or cancerous products, who pays? If some CEO had to do state time with hard core inmates just once, companines would not be so legally aggressive. Companies have done a great job in the media with their PR departments portraying themselves as "victims", but often a company will let one employee fuck them over so they can document it and tell the whole world about it so they (the compnay) can put the screws to hundreds of other employees and customers.

The legal advantages of a corporation makes it advantageous for too many business concerns to "go public". It removes genuine itegrity and business citizenship from the modus operandi and makes the business utterly profit oriented to the max. I wish congress would reign in corporations and take their legal advantages over partnerships and proprietorships away, but the elite have their money in corporations, so thats not giong to happen.

I dont think Adam Smith forsaw the modern corporation and what it is capable of in this legal environment.

Glen Dean said...

Clark, your argument is valid. But generally speaking, do you think that Title VII is good law? If we were talking about a sole proprietorship, would you feel differently? Thanks.

tvoh said...

Years ago, in a debate, I heard a libertarian congressional candidate speak against limited liability and as he made the argument, I realized I could not come up with a disagreement. So at least one libertarian feels that is sound lib thought.

Vaguely, I remember reading that corporations gained limited liability by giving or selling cheap shares to the sovereign and when sued, got the king to make it so the corporation could avoid court action so he could as well. That is hardly anything a libertarian could regard as libertarian.

Timo V said...

As I understand limited liability, what's limited is the liability to shareholders. If this became unlimited, one means of investment would go down the tubes, and we would be left with bankers. Now, a banker lending money to a business has never been -- nor could conceivably be -- responsible for the misdeeds of the business. So, if we made stockholders liable beyond the value of their stock, and were left with banking as the chief form of capital accumulation, we would achieve no more legal responsibility than we have now.

Am I wrong? Is limited liability about something more than stockholder liability?

From what I understood of limited liability, all this other talk of business malfeasance is just the same as talk about bureaucratic malfeasance: people in groups can be nasty, and try not to go bankrupt.

And as for the "local factory" mentioned by "anonymous," what can I say? The man should have got what doctoring he needed and then sued his health care insurance -- and possibly his company.

Only fools leave their health care insurance and savings to businesses.

Of course, most of us are fools. No doubt about that.

And of course, as more and more people are beginning to realize, this folly was encouraged by government regulation and tax policies, and, in its early days, by corporations trying to get around the bad results of same. But that's another story.

Clark said...

Glen: Yes, I would treat what I consider a genuinely private business differently than a corporation.
Timo: The point I'm making about LL and Libertarians is that it is an intervention in the marketplace that Libs never seem to criticize or even acknowledge as such.

tvoh said...

"got the king to make it so the corporation could avoid court action"

I meant shareholders not corporation.

mea culpa.

Steve Sailer said...

To paraphrase Mao, property rights come from the barrel of a gun.

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