On Monday, September 04, 2000 7:07 AM James Daugherty daugh@home.msen.com
wrote:
> > Actually, corporations receive limitations on their liability. So if,
> > for example, a simple business partnership up the block from me
> > accidentally causes my house to be blown up, I might be able to
> > successfully sue the business owners to recover damages. But if the
> > very same people have organized the otherwise identical business as a
> > corporation and do the very same thing, due to their magical limited
> > liability, the corporation must pay but the stockholders do not, since
> > their liability is limited. Now, perhaps the corporation does not
> > possess the resources to pay, but the stockholders do. In that case I
> > believe I would be out of luck. Of course there are sometimes ways to
> > "pierce the corporate veil" (sounds exciting doesn't it?). And
> > different standards of liability apply in different cases. IANAL.
> > But still, people incorporate for the liability limitations.
> >
> > The only difference in the two instances could be that in the first
> > case the business might be a simple partnership, and in the second
> > case it was a corporation, having duly filed "articles of
> > incorporation" with the secretary of state of the state of
> > Massachusetts. And therefore in one case I can recover damages from
> > the business owners and in the other case I might not. This strikes
> > me as something which materially affects me to which I never agreed.
>
> Nonsense! Why should passive investors be responsible
> for you house blowing-up. What about the officers of the
> Corporation or the employees actually responsible for the
> error?
This issue comes up time and again in libertarian and free market circles.
It's almost like our version of the abortion debate -- or the identity
debate that flares up among cryonicists and uploaders.
While I doubt anything said here will convince anyone, much less settle the
matter, James above comments seem only to matter if the partnership or other
unincorporated business is run like an ownership. I mean, why should
corporate investors get off if partners don't? The matter seems to be one
of managerial responsibility. Corporate investors, in a sense, hire a board
to manage the corporation, but partners and sole owners generally run it
themselves.
But that said, shouldn't this be decided on what is actually the case rather
than the labels attached? I mean if you agree that managers should be held
responsible -- or more responsible for day to day mistakes -- than
investors, shouldn't this same logic be applied elsewhere? A partner who
merely puts his money into, say, a oil well but does not otherwise manage it
should not, by this logic, be held responsible for that well blowing up and
destroying several nearby buildings. Ditto for sole proprietorships where
the sole proprietor hires a manager to run things. If you don't agree, what
gives corporations special status here?
(I'm not arguing for or against corporations, just trying to deal with an
inconsistency I see here. Or am I wrong?)
Cheers!
Daniel Ust
http://uweb.superlink.net/neptune/
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