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"Hired Feet" Protest Low Wages—For Low Wages
Unions hire homeless to do their picketing for them--for 8 bucks and hour with no benefits:
The picketers marching in a circle in front of a downtown Washington office building chanting about low wages do not seem fully focused on their message.
Many have arrived with large suitcases or bags holding their belongings, which they keep in sight. Several are smoking cigarettes. One works a crossword puzzle. Another bangs a tambourine, while several drum on large white buckets. Some of the men walking the line call out to passing women, "Hey, baby." A few picketers gyrate and dance while chanting: "What do we want? Fair wages. When do we want them? Now."
Although their placards identify the picketers as being with the Mid-Atlantic Regional Council of Carpenters, they are not union members.
They're hired feet, or, as the union calls them, temporary workers, paid $8 an hour to picket. Many were recruited from homeless shelters or transitional houses. Several have recently been released from prison. Others are between jobs.
"It's about the cash," said Tina Shaw, 44, who lives in a House of Ruth women's shelter and has walked the line at various sites. "We're against low wages, but I'm here for the cash."
But don't worry. The union helped at least one person get a decent job:
William R. Strange, 41, said he started working as a for-hire picket two years ago when he lived in a homeless shelter on New York Avenue. He is now paid $12 an hour because he plays the buckets during the demonstrations.
A few months ago, after a day's picketing across from the National Geographic Society at 17th and M streets NW, Strange went inside and filled out a job application. He now loads trucks for National Geographic's warehouse at night. He still pickets during the day.
Germans have been renting protesters for a while now.
Via Marginal Revolution 's Markets in Everything series.
|7.25.07 @ 1:05PM|#
If the union members don't care enough about the issue-of-the-moment to picket themselves, then why should I care either?
|7.25.07 @ 1:08PM|#
At the end of Animal Farm you couldn't tell the difference between the pigs and the men. It's not at all surprising that the scabs and the goons look alike too.
Edward|7.25.07 @ 1:12PM|#
No benefits. That's amazing. Unionized workers at GM get such good benefits that someone has described GM as a small welfare state that makes cars on the side. I guess that's why big business is pushing for universal healthcare. Why can't we just accept the notion that the fortunate and the well-off get to be healthy and losers get zip? Then GM could afford to compete with Asian makers, and we wouldn't have to unload the cost of healthcare onto the nanny state. But wait. Does GM need healthy workers? hmmm.
|7.25.07 @ 1:12PM|#
Hmm, not sure how a union employing the unemployable is hypocritically anti-union, unless this is just meant to be one of those snarky superficial things that doesn't really mean much. Oh, is $8 an hour not enough for a homeless person? Or should the unions be advocating homeless salaries on par with their trained workers?
|7.25.07 @ 1:13PM|#
I should have added:
You are confusing the cumulative effect of unions with the goals of
individual unions.
Rhywun|7.25.07 @ 1:14PM|#
Eight dollars an hour to stand around and pretend to be a person pretending to be gainfully employed? Where do I sign up?!
Edward|7.25.07 @ 1:18PM|#
Lamar
If we wipe out the cumulative effect of unions, who takes up the
slack?
|7.25.07 @ 1:19PM|#
Edward,
Something most of the prez candidates (and you) seem to have
missed: "Healthcare" does not equal "Health." Just ask Tammy Faye
Makeup lady.
|7.25.07 @ 1:21PM|#
In Illinois picketers must be union members. Our business was being picketed and all we had to do to make them go away was to ask to see their union card
|7.25.07 @ 1:22PM|#
If we wipe out the cumulative effect of unions, who takes up
the slack?
Who picks up the slack? Unions are slack-makers. They are notorious
for their make-work measures. The slack goes away simply because of
the lack of labor cartels.
JimL|7.25.07 @ 1:23PM|#
Oh, blessed irony:
"Carpenters unions in Indianapolis, Atlanta, Baltimore, Miami, San
Diego and Columbus, Ohio, also hire picketers, including the
homeless, largely because the union members are busy working and
aren't able to leave job sites, he said."
fyodor|7.25.07 @ 1:27PM|#
Oh, is $8 an hour not enough for a homeless person? Or
should the unions be advocating homeless salaries on par with their
trained workers?
If they claim that receiving a certain level of renumerance is a
moral issue or right, then yes, it's hypocritical. If they (or you)
are saying what you get depends on what the market bears for your
level of skill, then they (and you?) would be agreeing with
us!!
FWIW, I certainly don't begrudge union members doing what they can
(ethically) to put more money in their pockets. That's what we all
do. When they claim moral superiority over it, they shouldn't be
taken seriously at best, and their ethics should be questioned at
worst. And then there's the whole issue of law that supports their
activities....
|7.25.07 @ 1:28PM|#
It's always good to RTFA - here's the part that KMW left out
while trying to paint all unions with a broad brush:
The United Brotherhood of Carpenters is the only union that
routinely hires homeless people for its picket lines, union leaders
and labor scholars say.
Now, one would think that a magazine interested in liberty would
not be anti-union. But it's becoming increasingly clear to me that
Reason is not libertarian, just pro-big business.
|7.25.07 @ 1:28PM|#
In Illinois picketers must be union members.
Oh that's bullshit too. Hiring someone to do your picketing for you
is bogus, but it shouldn't be a crime. Hiring someone to represent
you is part of the American way of life. Just think of all the
lawyers and models that would be out of work.
|7.25.07 @ 1:29PM|#
At least they're hiring American! Do you know how bloody cheap it would be to hire picketers in Calcutta?
|7.25.07 @ 1:31PM|#
Now, one would think that a magazine interested in liberty
would not be anti-union.
Why would one think that?
|7.25.07 @ 1:33PM|#
If they (or you) are saying what you get depends on what the
market bears for your level of skill, then they (and you?) would be
agreeing with us!!
I never got the impression that unions were arguing against the
idea that what you should get is commensurate with
your skill/productivity. I thought they argue that they don't get
compensation commensurate with their skill because employers have
monopsony power (http://en.wikipedia.org/wiki/Monopsony), so try to
counteract that through collective bargaining.
|7.25.07 @ 1:33PM|#
"Now, one would think that a magazine interested in liberty
would not be anti-union."
One would think that if one never thought for five minutes about
the implications of 'fair' labor laws. Or if one had never seen the
cumpulsory nature of union negotiations cost the national economy
nearly a trillion dollars when the longshoremen protested the
advent of bar code technology on the west coast.
No, no one can see any reason at all to think that labor laws as
currently written have nothing to do with liberty at all.
|7.25.07 @ 1:34PM|#
Nasikabatrachus | July 25, 2007, 1:31pm | #
Now, one would think that a magazine interested in liberty would
not be anti-union.
Why would one think that?
Freedom of assembly.
Edward|7.25.07 @ 1:37PM|#
"Something most of the prez candidates (and you) seem to have
missed: "Healthcare" does not equal "Health." Just ask Tammy Faye
Makeup lady."
Something most right-wing morons (and you) miss is that the absence
of healthcare does not equal "health." Just ask the millions of
uninsured Americans.
thoreau|7.25.07 @ 1:37PM|#
No benefits?
The homeless people should unionize and demand better benefits for
picketing. If they need to pad their protests, they can hire
illegal immigrants under the table to carry signs.
|7.25.07 @ 1:38PM|#
JasonL
Or if one had never seen the cumpulsory nature of union
negotiations cost the national economy nearly a trillion dollars
when the longshoremen protested the advent of bar code technology
on the west coast.
The conservative argument is that unions are bad because they have
monopoly power and are therefore compulsory, so their harmful
effects should be mitigated via such methods of right-to-work
laws.
Wouldn't this also apply to other monopolies as well though
(natural or otherwise), such as power companies?
|7.25.07 @ 1:38PM|#
Why would one think that?
Because banding together to gain leverage via collective bargaining
isn't un-libertarian?
Because unions sit down and negotiate contracts for their workers
with the employer -- and libertarians believe contracts are the
proper way to settle those types of disputes?
I guess the question should be, why wouldn't one think that.
DanT does have a point when he accuses Reason (and by extension
many though not all libertarians) are really pro-corporate rather
than pro-liberty.
|7.25.07 @ 1:40PM|#
Nasikabatrachus
Freedom of assembly.
And that has what to do with labor cartels?
Freedom to assemble a cartel? *shrug*
I'm not a big fan of unions, just like I'm not a big fan of other
monopolies like utilities. I just find it hypocritical that people
both on the left and right support one and oppose the other, even
though they're really the same type of beast.
|7.25.07 @ 1:40PM|#
One would think that if one never thought for five minutes
about the implications of 'fair' labor laws. Or if one had never
seen the cumpulsory nature of union negotiations cost the national
economy nearly a trillion dollars when the longshoremen protested
the advent of bar code technology on the west coast.
Right and corporations don't do this all the time? Corporations
don't lobby for laws and regulations to protect their current
business models and revenue streams and to protect against
technology that might make their current business obsolete?
Or that purely the domain of unions?
Edward|7.25.07 @ 1:41PM|#
The past gains of the labor movement are the only reason many dull normals now have access to computers to spew anti-union rhetoric. The upside is that as those gains are eroded, the dull normals will slip into the silence nature intended for them.
|7.25.07 @ 1:42PM|#
I guess the question should be, why wouldn't one think
that.
I've never heard or read any libertarian say that labor unions per
se are bad, only that state-mandated labor cartels are bad. Nothing
in KMW's post suggested that she sympathized with the former
position.
|7.25.07 @ 1:43PM|#
Something most right-wing morons (and you) miss is that the
absence of healthcare does not equal "health." Just ask the
millions of uninsured Americans.
I don't recall claiming that it does, but perhaps you need to go
back and read your own post.
|7.25.07 @ 1:45PM|#
brian:
Labor can organize until the cows come home. If they get a
monopoly, more power to them. Businesses should have the option to
deal with unionized labor or not. THAT is where things go off
kilter.
|7.25.07 @ 1:45PM|#
DanT does have a point when he accuses Reason (and by
extension many though not all libertarians) are really
pro-corporate rather than pro-liberty.
Or at the very least, Reason tends include in its definition of
liberty the "right of the powerful to be unencumbered in their
ability to exercise that power". In Reason's collective mind, laws
that exist to balance the interests of two groups are unfair to the
group that otherwise would be able to take advantage of the
other.
|7.25.07 @ 1:45PM|#
that state-mandated labor cartels are bad.
Honest question: there are state-mandated labor cartels? I really
don't know what you're talking about.
The only state-sponsored monopolies I know of are the post office
and (some) utilities.
|7.25.07 @ 1:45PM|#
The past gains of the labor movement are the only reason
many dull normals now have access to computers to spew anti-union
rhetoric. The upside is that as those gains are eroded, the dull
normals will slip into the silence nature intended for
them.
Not really. Wages rise plenty without unions: labor cartels only
serve the interests of their members, and they do so to the
detriment of the wider labor market.
See here
for more.
|7.25.07 @ 1:47PM|#
JasonL
Businesses should have the option to deal with unionized labor or
not. THAT is where things go off kilter.
But they do have that option. So what's all the complaining
about?
|7.25.07 @ 1:48PM|#
Honest question: there are state-mandated labor cartels? I
really don't know what you're talking about.
Not precisely. Most unions aren't formed by the state, but there
are various laws such as the Norris-LaGuardia Act that was passed
in the mid 30's that force companies to deal with labor unions. See
the link in my previous post for more.
|7.25.07 @ 1:49PM|#
Brian,
Uh, no they don't. I own a company, my labor organizes, I fire them
all. What happens to me?
fyodor|7.25.07 @ 1:50PM|#
A few people here, including myself, have clearly stated how unionization can comport with libertarian principles but how it doesn't as it's currently practiced in the U.S. And then others go blabbing on as if none of this was ever stated. Ah, humans....
|7.25.07 @ 1:53PM|#
Nasikabatrachus | July 25, 2007, 1:48pm | #
Honest question: there are state-mandated labor cartels? I really
don't know what you're talking about.
Not precisely. Most unions aren't formed by the state, but there
are various laws such as the Norris-LaGuardia Act that was passed
in the mid 30's that force companies to deal with labor unions. See
the link in my previous post for more.
From your link: "The [Norris-LaGuardia Act] made "yellow dog"
contracts - in which an employee could be required to promise to
refrain from union activity as a condition of employment -
unenforceable in the courts."
It's true that this restricted freedom of contract, but it hardly
forced companies to deal with unions. Companies still could have
simply fired anyone who joined a union without these yellow dog
provisions.
|7.25.07 @ 1:53PM|#
Or at the very least, Reason tends include in its definition
of liberty the "right of the powerful to be unencumbered in their
ability to exercise that power". In Reason's collective mind, laws
that exist to balance the interests of two groups are unfair to the
group that otherwise would be able to take advantage of the
other.
So a free market in labor is exploitation? Laws that prevent union
members from being prosecuted for violent acts during strikes are
just balancing the interests of the various parties?
|7.25.07 @ 1:54PM|#
The corporate form is an ingenious device to provide for the
amalgamation of capital while limiting risk to each individual
investor.
Yes, corporations do shitty things from time to time. But it galls
me when folks equate corporations with unbridled avarice while they
rush to check their 401(k) gains each month when the statement
comes in the mail.
|7.25.07 @ 1:54PM|#
JasonL | July 25, 2007, 1:49pm | #
Brian,
Uh, no they don't. I own a company, my labor organizes, I fire them
all. What happens to me?
You hire people who aren't unionized? The whole market/freedom
thing.
|7.25.07 @ 1:55PM|#
So a free market in labor is exploitation? Laws that prevent
union members from being prosecuted for violent acts during strikes
are just balancing the interests of the various parties?
Just let me know when Reason runs a piece on the injustice of
limited liability.
|7.25.07 @ 1:57PM|#
Just let me know when Reason runs a piece on the injustice
of limited liability.
And let me know you're sorry when you realize that Reason does not
have a collective mind.
|7.25.07 @ 1:58PM|#
From your link: "The [Norris-LaGuardia Act] made "yellow
dog" contracts - in which an employee could be required to promise
to refrain from union activity as a condition of employment -
unenforceable in the courts."
There's also the Wagner act. To quote the article:
The Wagner Act also forced employers to bargain "in good faith"
with unions that were established by a majority of workers. Whether
an employer had complied with the vague instruction to bargain "in
good faith" would be determined by the all-powerful National Labor
Relations Board.
|7.25.07 @ 1:59PM|#
And let me know you're sorry when you realize that Reason
does not have a collective mind.
But they do. Everything is collective.
|7.25.07 @ 2:00PM|#
Nasikabatrachus
Just let me know when Reason runs a piece on the injustice of
limited liability.
And let me know you're sorry when you realize that Reason does not
have a collective mind.
It has a collective magazine, which represents many minds in one
monthly issue.
|7.25.07 @ 2:00PM|#
The corporate form is an ingenious device to provide for the
amalgamation of capital while limiting risk to each individual
investor.
Right - the shareholders get the returns, non-shareholders shoulder
the risk. For some reason libertarians don't mind.
|7.25.07 @ 2:01PM|#
Nasikabatrachus
The Wagner Act also forced employers to bargain "in good faith"
with unions that were established by a majority of workers. Whether
an employer had complied with the vague instruction to bargain "in
good faith" would be determined by the all-powerful National Labor
Relations Board.
Ah, that sucks. But that's not the union doing it-that's the
government.
|7.25.07 @ 2:01PM|#
The limited liability refers to the amount of capital
contributed by each individual investor. that means if I buy a
stock for $10, I can only lose my $10.
I think Dan T. needs to understand the language of the debate:
corporations get sued all the time and pay big time. It is an
uninformed lefty myth that corporations are not liable for
damages.
As far as injustice goes, I believe it would be unjust to eliminate
poor slobs like me from the market simply because there is no
vehicle for me to invest my lousy $10.
|7.25.07 @ 2:02PM|#
Dan T.
The corporate form is an ingenious device to provide for the
amalgamation of capital while limiting risk to each individual
investor.
Right - the shareholders get the returns, non-shareholders shoulder
the risk. For some reason libertarians don't mind.
Shareholders get the returns because they risk their money. That's
what stocks are really. More risk-->more return.
|7.25.07 @ 2:03PM|#
One more time-Dan T.: the shareholders get the return because they took the risk.
|7.25.07 @ 2:04PM|#
Further, labor unions in the US have at the end of the day
contributed to a bunch of unemployable people more than any other
factor I can think of.
They insist that value to the company has nothing whatsoever to do
with compensation, so they fight every piece of technology that
comes along. They could have been organizations that help labor
become more valuable and thereby higher compensated, but nooo. They
instead acted as though there could never be a machine or a cheaper
laborer anywhere else, and in fact minimized the value of their
laborers.
A lot of people are paying the price for putting their faith in
union snake oil.
|7.25.07 @ 2:07PM|#
Ah, that sucks. But that's not the union doing it-that's the
government.
True, unions can't pass legislation (technically speaking, though
they lobby quite a bit and it's safe to say they influenced the
passage of the original legislation). That's why I drew the
distinction between labor unions per se and the
state-backed labor cartels we know as unions today.
|7.25.07 @ 2:08PM|#
"Ah, that sucks. But that's not the union doing it-that's the
government."
That is the idea, yes. There is nothing wrong with organized labor
in the abstract, but there is a problem with US labor laws.
I would go on, as above, to indict US labor unions themselves for
gross negligence.
|7.25.07 @ 2:09PM|#
Well said JasonL.
Carpenters Unions don't want talented people with a vision of the
future or even the slightest understanding of modern mangement
concepts pounding nails.
They hire dimwits who don't mind forking over 20% of their pay for
dues.
In Oregon, unions routinely subsidize employers by kicking dues
back to employers to pay back in wages. That way the dolts they
hire can crow about making $25/hour without realizing that they are
victims of a Ponzi scheme whereby the only true wealth is created
at the upper echelons of union power structures.
|7.25.07 @ 2:09PM|#
Dan T has a retirement plan. I take all the risk and he gets all the benefit of those investments. Where's my cut Dan T?
|7.25.07 @ 2:12PM|#
One more time-Dan T.: the shareholders get the return
because they took the risk.
I guess what I should have said is that they get all the return but
do not shoulder all the risk.
As you point out, if you invest $10 you can only lose $10. But if
you started a sole propriatorship for $10 and it lost $50, you'd be
on the hook for that $40.
|7.25.07 @ 2:14PM|#
I think you're getting Dan T. You have just pointed out the
magic of the corporate form.
We'd all still be driving wagons made by the local wagon-smith if
the only way to manage risk was to stick your own neck out.
|7.25.07 @ 2:15PM|#
Oh and Dan T.,
Though many libertarians forget that businesses are not necessarily
victims, they do understand it when they get to it
|7.25.07 @ 2:21PM|#
I think you're getting Dan T. You have just pointed out the
magic of the corporate form.
We'd all still be driving wagons made by the local wagon-smith if
the only way to manage risk was to stick your own neck
out.
I agree. So I guess the free market doesn't work?
|7.25.07 @ 2:23PM|#
$8 an hour with no benefits is 36% higher than the minimum wage was until yesterday.
|7.25.07 @ 2:28PM|#
Dan T.'s got a point folks. The corporate form, and all forms of limited liability, are essentially gov't created risk subsidies. Let's at least recognize that gov't is doing more than merely protecting corporate property when it limits the liability of a corporation. I think corporate forms are useful, but to assume that libertarians can't be skeptical of corporate power misunderstands where that corporate power came from in the first place.
|7.25.07 @ 2:32PM|#
As far as injustice goes, I believe it would be unjust to
eliminate poor slobs like me from the market simply because there
is no vehicle for me to invest my lousy $10.
It's actually even worse for poor slobs...
If corporate shareholders have unlimited liability, and the
corporation does everything in its power to prevent an employee
from committing some horrible mistake or offense -- such as, say,
opening the wrong valve in a chemical plant -- then that
employee is entirely responsible for that event. There is no
corporation to bail him out. There is no corporation to pay the
costs to the larger society. The employee is ruined. The society is
uncompensated.
Without limited liability protecting shareholders' wealth beyond
the company, there is no way they could or would trust employees.
Most firms simply could not function.
|7.25.07 @ 2:33PM|#
I like the way libertarians switch back and forth between "corporations are distinct from individual management/shareholders" and "corporations are the same as management/shareholders" depending on whether the subject is legal liability or capital gains taxes.
|7.25.07 @ 2:34PM|#
I think corporate forms are useful, but to assume that
libertarians can't be skeptical of corporate power misunderstands
where that corporate power came from in the first place.
How does limited liability produce or induce any more "corporate
power" than unlimited liability?
|7.25.07 @ 2:36PM|#
Without limited liability protecting shareholders' wealth
beyond the company, there is no way they could or would trust
employees. Most firms simply could not function.
So the free market doesn't really work?
|7.25.07 @ 2:37PM|#
limited liability of a corporation does not mean a corporation
does not pay for its sins.
think about it this way:
Your neighbor builds you a wagon. It is a piece of shit. You break
your leg. The liability of your neighbor is LIMITED by how much
wealth he has.
What is the difference?
|7.25.07 @ 2:37PM|#
How does limited liability produce or induce any more
"corporate power" than unlimited liability?
Mike, you just wrote yourself that without limited liability most
corporations could not function at all.
thoreau|7.25.07 @ 2:39PM|#
This is a fair comment on the debate tactics, if not necessarily
a refutation of any particular points:
joe | July 25, 2007, 2:33pm | #
I like the way libertarians switch back and forth between "corporations are distinct from individual management/shareholders" and "corporations are the same as management/shareholders" depending on whether the subject is legal liability or capital gains taxes.
And while there is much to be said for the benefits of limited
liability, Dan T. is right to call out MikeP for this
statement:
Without limited liability protecting shareholders' wealth beyond the company, there is no way they could or would trust employees. Most firms simply could not function.
I think the reality is probably a bit more complicated than
that.
|7.25.07 @ 2:39PM|#
Your neighbor builds you a wagon. It is a piece of shit. You
break your leg. The liability of your neighbor is LIMITED by how
much wealth he has.
No, in that scenario if my leg costs $100 to fix and my neighbor
only has $90, he'd still owe me $10 as a debt.
In a limited liability situation the only loss my neighbor would
have to worry about is whatever he paid to build the wagon, even if
he was a millionaire.
|7.25.07 @ 2:40PM|#
Dan T.,
Do you think there would or would not be limited liability
corporations in an anarchy? Unless you can present a reasonable
argument that there would not be, please stop pretending that
limited liability is either not free market or is exclusively a
construction of government.
johnathon|7.25.07 @ 2:41PM|#
I think it's cute how trusting Dan T is. The part of the article
that he mentioned:
The United Brotherhood of Carpenters is the only union that
routinely hires homeless people for its picket lines, union leaders
and labor scholars say.
Of course they are the only union that hires homeless people! The
union leaders say so!
As for "labor scholars", that is pretty ambiguous.
thoreau|7.25.07 @ 2:42PM|#
I'm fine with limiting liability, since it means that you can
lose nothing more than what you put into the organization. This
seems to lead to more economic activity in practice, more
innovation, etc.
The question is whether bankruptcy protection is then needed for
corporations. Not knowing much about bankruptcy, I can only opine
that limited liability and bankruptcy seem to serve overlapping and
redundant purposes. But I don't know much about how it shakes out
in practice, and whether there are distinct economic functions of
each arrangement.
|7.25.07 @ 2:43PM|#
No, the limited liability would be capped at what your neighbor
had invested in his wagon factory.
Better yet, just forget it Dan T.
Hope you enjoy the gains made by your retirement/investment
accounts that have accrued out of thin air (by the miracle of the
free market) while you have wasted our time here
|7.25.07 @ 2:43PM|#
The Carptenter's Union is the only one that gave more money to
Republicans than Democrats in the 2000 election cycle.
While we're discussing the unique political behavior of this
organization.
thoreau|7.25.07 @ 2:44PM|#
Do you think there would or would not be limited liability
corporations in an anarchy?
Well, if one wants to talk about anarcho-capitalism, where you
still have organizations enforcing contracts and providing
security, some of those organizations could promise their customers
to never hold them liable for more than their stake in whatever
enterprises they form.
|7.25.07 @ 2:46PM|#
Dan T.,
Do you think there would or would not be limited liability
corporations in an anarchy? Unless you can present a reasonable
argument that there would not be, please stop pretending that
limited liability is either not free market or is exclusively a
construction of government.
Since there's no such thing as true anarchy, that's a tough one to
answer.
Perhaps you could say that limited liability is not a construction
of the government but rather the government not applying the
construction of the enforcement of debt towards certain groups. The
government can force me to pay back $1000 if I borrow it personally
but if I own a share of a corporation that borrows it they cannot
force me to pay back my share.
Gus|7.25.07 @ 2:47PM|#
Forgive me fi I've missed something, but do the folks arguing
against limited liability think people should should be able to sue
the banks who gave loans to the people to whom they lost money?
People run up huge debts and declare bankruptcy every day. How is a
corporation being able to do this any different?
If corporate law didn't exist wouldn't folks still be able to grab
a homeless guy with nothing else to lose off the street, pool their
money into into his bank account via small loans and write the
terms of those loans so they are functionally equivalent to stock.
What would be the difference? People would still be able to accrue
more debt than they have assets.
|7.25.07 @ 2:47PM|#
thoreau: that is pretty much what we've got isn't it?
Bankruptcy is indeed a whole 'nother story in my book. I don't know
enough about it to really say, but I am convinced that there are
abuses.
|7.25.07 @ 2:49PM|#
Hope you enjoy the gains made by your retirement/investment
accounts that have accrued out of thin air (by the miracle of the
free market) while you have wasted our time here
But once again, I'm not criticizing LL as a concept. It seems to
work pretty well, in fact.
What I am pointing out is how pro-corporate Reason and Reasonoids
are when you'll rationalize the government giving advantages to
corporations while disparaging workers who want to improve their
bargaining power by unionizing.
|7.25.07 @ 2:50PM|#
Gus,
I'm not against limited corporate liability. I just don't believe
in free lunches.
I do think it was a mistake for the courts to declare corporations
"persons" before the law, but that's a different matter.
|7.25.07 @ 2:51PM|#
Without limited liability protecting shareholders' wealth
beyond the company, there is no way they could or would trust
employees. Most firms simply could not function.
Okay, let me rephrase...
Most firms as we know them today simply could not function. I think
there would be two mechanisms for this. First, it is unlikely that
firms would get to such a size that the shareholders did not know
the employees. And second, higher risk firms such as chemical
plants or the like would not form in any event.
I may in fact be wrong. Perhaps shareholders could produce
a bulletproof enough legal foundation and management structure in
an unlimited liability corporation that their assets are protected
from employee error. Perhaps employees wouldn't have a
problem signing an employment contract that puts all liability for
their mistakes on them.
It is a different world. It wouldn't be the first time that a
different world that looked impossible in the context of the
current world actually turned out to be a better world.
thoreau|7.25.07 @ 2:52PM|#
Bankruptcy is indeed a whole 'nother story in my book. I
don't know enough about it to really say, but I am convinced that
there are abuses.
I suspect that the airline industry has been shielded from a
certain amount of creative destruction, enabling inefficient firms
to maintain large industry shares rather than going under. I don't
claim to know what would emerge into the vacuum, but you can only
bail out the airlines so many times before concluding that it's
better to see what else might come down the pike.
Then again, I realize that airline survival has not been entirely a
matter of corporate bankruptcy law.
thoreau|7.25.07 @ 2:55PM|#
MikeP-
What about liability insurance in lieu of limited liability? Every
time I get into my car I run the risk of harming somebody to the
point where his medical bills exceed my net worth, yet I drive
anyway because I have insurance.
Mind you, I think limited liability is a fine way to go, and we
might as well stick with it since we have it. But I'm not convinced
that it's the only way to go.
A.G. Pym|7.25.07 @ 3:00PM|#
In the 1970's, here in south-central Washington State, the Hanford building boom brought thousands of union construction workers to the area, and their fondness for labor actions at the drop of a hat. They not wanting to give up their high-wage featherbedded jobs, when they'd go out on strike, they'd most of 'em just move down the road to another locale, while the local picketer's union (yes, there was such a thing) supplied "feet" such as these. I was still in Jr. High & High School, but I seem to remember that this union was registered with the state and everything - and they even went out on strike once. *sigh* I think they departed with the Owl Party ("Throw the rascals out!"), though.
|7.25.07 @ 3:01PM|#
"How does limited liability produce or induce any more
'corporate power' than unlimited liability?"
Liability is an important factor in a corporation's ability to
attract capital. The more you limit liability, the easier it is to
attract capital. The more capitalized a corporation is, the more
powerful it will potentially be. I don't think anybody disputes the
idea that limiting a corporation's liability gives it more
power.
|7.25.07 @ 3:08PM|#
This practice of hiring the homeless or others in sheltered
living situations is not limited to unions. I volunteered for a
non-profit organization that I think was doing excellent work
benefitting people truly in need. At one point, I paid $25 for a
seat on a bus they had chartered to take people to the state
capital to lobby in favor of good legislation (reforming health
care in prison).
It turned out that many others on the bus hadn't paid to join the
trip--in fact, they were being paid a "stipend" plus a "per diem"
for meals on the o ne-day trip. I don't have much of a problem with
this if it allows poor people to make a trip to the capitol and
meeting their representatives that they couldn't otherwise afford.
But I got more cynical when, on the day of the trip, half of our
riders swtiched to another bus rented by a different non-profit
that was offering a better deal.
|7.25.07 @ 3:15PM|#
thoreau,
Corporate liability insurance is an excellent idea. It is actually
better than limited liability because it would be priced
commensurately with the risks.
To those willingly dealing with the corporation, the insurance is
essentially passed through to them as a cost since they are the
ones being protected from holding the bag in a bankruptcy. The
actual beneficiaries of such insurance are third parties: liability
insurance could in fact be required to allow risky activities in
third parties' neighborhoods.
Remember, though... If limited liability corporations do not appear
in the fabric of society, the insurance companies themselves are
unlimited liability corporations. That's a lot of liability falling
into few laps!
|7.25.07 @ 3:20PM|#
I don't think anybody disputes the idea that limiting a
corporation's liability gives it more power.
That's a fair point, though I would still point out that the
"power" you speak of is actually government power.
To argue against your point, limited liability offers a more
diverse and less wealthy shareholder base which should distribute
the "corporate power" better into the society.
And to further play devil's advocate... In an unlimited liability
corporation -- where there is so much more to lose -- the
shareholders are more likely to seek and hold much more political
power to see that the government runs in their favor.
Sandy|7.25.07 @ 3:45PM|#
A union where I temped was the largest customer of the temp
agency I worked for. Fully a third of the staff at any time were
temporary workers.
You see, they had such generous leave benefits that they couldn't
keep the placed fully staffed. So rather than hire extra workers
with expensive benefits, they paid $20/hour for temps (of which the
temps received $10-11) with no...wait for it...benefits or
leave.
|7.25.07 @ 4:58PM|#
MikeP: The power to which I refer is called market power, and it
isn't the power of the market, it is the ability of a single
corporation to manipulate the market. The more capital a
corporation has relative to its competitors, the more ability it
has to influence and control the market in which it operates.
"limited liability offers a more diverse and less wealthy
shareholder base which should distribute the "corporate power"
better into the society."
No, the corporate structure owes a duty to its shareholders to make
money, regardless of whether the shareholder is wealthy or poor.
There may be a few actions in which a shareholder vote could
influence the decisions of a company, but given that mutual funds
are the primary investors in corporations that are able to exert
market power, this idea that a broad base of shareholders will act
in the public interest is incorrect.
"In an unlimited liability corporation -- where there is so
much more to lose -- the shareholders are more likely to seek and
hold much more political power to see that the government runs in
their favor."
There will always be an incentive to be corrupt,
regardless of how business is done. Aside from that reality,
there's really nothing to suggest that having "more to lose" would
cause anything other than higher prices to account for the
risk.
I'm not sure what you're arguing against. I'm not against the
limitation of liability, at least when it's reasonable. I just want
libertarians to understand that corporations are able to accumulate
the power they have because the government limits the downside. All
in all, it's a pretty good system, but don't give me this free
market crap about how government has no ability to question
corporations when government gave them the tools to make it so
big.
|7.25.07 @ 5:34PM|#
I'm not sure what you're arguing against.
I am arguing that the limited liability corporation is not a
construction of government, and that arguments based on that
presumption are not well-founded.
Limited liability corporations in an anarchy would look very much
like they do today. They are a product of a legal system of
contract, debt, and liability. The fact that today the government
runs the legal system in no way implies that the government
supports corporations to the detriment of some better form of
organization more amenable to liberty or free markets.
|7.25.07 @ 5:42PM|#
To preempt someone's having to look up the relevant USC
title...
I am arguing that the limited liability corporation is not a
construction exclusively of government.
|7.25.07 @ 5:45PM|#
The corporation itself is a legal construct and wouldn't exist
without gov't creating it. 'nuff said. Argument over. You get
nothing! You lose! Good day sir!
"Limited liability corporations in an anarchy would look very
much like they do today"
Except that they wouldn't exist. Methinks you've hit the bottle a
little early, know what I'm sayin'?
|7.25.07 @ 5:48PM|#
The USC is only one source of corporate law (yes, you're arguing that corporate law defines an entity that not created by law.......hmmmmmm, how's that again?). Besides, state law, especially Delaware, is where corporate law is found.
|7.25.07 @ 5:49PM|#
"I am arguing that the limited liability corporation is not
a construction of government."
You're arguing that it is a construction of ________________?
|7.25.07 @ 5:51PM|#
You're arguing that it is a construction of
________________?
...a legal system of contract, debt, and liability. The fact that
today the government runs the legal system in no way implies that
the government supports corporations to the detriment of some
better form of organization more amenable to liberty or free
markets.
|7.25.07 @ 6:09PM|#
"The fact that today the government runs the legal
system...."
Always has, and always will, except maybe like Iceland in the 13th
century. I didn't realize we were arguing about your Star Trek
fantasy world. My bad.
You are arguing that governments don't create the legal entity we
call corporations, and instead, you argue, that corporations are
created by a "legal system of" contract etc. Then you admit that
the government controls the legal system (always has in modern
times). The government creates the legal system, which creates the
legal entity that is then governed by the government, and yet
nothing in this chain of creation and control "implies" that
governments support corporations?
Since I need a drink I'll go ahead and say, for a person posting at
a magazine called Reason....
|7.25.07 @ 6:23PM|#
Fair enough, Lamar.
I think it is interesting to figure out which elements of
government authority encode social order that would otherwise exist
and which are constructed out of whole cloth. I find that approach
offers great insight into right and wrong, freedom and
tyranny.
I understand if that's not your bag. Enjoy your drink.
Ooooh, I can't resist...
and yet nothing in this chain of creation and control "implies"
that governments support corporations?
...to the detriment of some better form of organization more
amenable to liberty or free markets.
In other words, if there weren't limited liability corporations,
there would be something else serving a similar purpose. I know of
nothing else that would fill the vacuum. I know of nothing in a
free society that would prevent limited liability corporations from
filling that vacuum.
|7.25.07 @ 7:54PM|#
The idea of corporate personhood is not meaningful in any real
sense. Limited liability is one of a few ways you can regulate
pools of money.
The argument that allowing more people to pool money, including the
holders of all retirement accounts and anyone else with $10
invested is somehow a huge advantage to corporations at the expense
of everyone else is absurd.
Where do you think labor is going to work if you don't allow pools
of money to be invested? Labor benefits AT LEAST as much as
corporations from the current arrangement.
Also lost in this is that the ability for Everyman to purchase
shares is one of the greatest sources of wealth democritization
this country has ever seen. Can you imagine what it would look like
if only already wealthy people could start businesses, and ONLY
those people could benefit from gains?
Corporate personhood and limited liability are not favors done to
corporations at the expense of everyone else, such that corporate
investors have to pay for their lunch elsewhere. Look around and
figure out what your working class would look like and through what
mechanism class mobility would occur in thier absence.
|7.25.07 @ 10:01PM|#
lamar-
Dan T.'s got a point folks. The corporate form, and all forms
of limited liability, are essentially gov't created risk
subsidies.
IOW, directly analogous to "bankruptcy" for the individual?
|7.25.07 @ 10:09PM|#
joe-
$8 an hour with no benefits is 36% higher than the minimum wage
was until yesterday.
How many low wage workers do you think will lose their (already
meager) health benefits next year due to the increased
costs of hiring/training/replacing workers?
|7.26.07 @ 12:05AM|#
How many low wage workers do you think will lose their
(already meager) health benefits next year due to the increased
costs of hiring/training/replacing workers?
we could go to actual studies on this one, or we could just parrot
the ECON 79 line that a raising of the minimum wage always
increases unemployment.
VM, wanna handle this one?
|7.26.07 @ 9:19AM|#
anon: Re: "IOW, directly analogous to "bankruptcy" for the
individual?"
Except that they're totally different, with different purposes,
philosophical underpinnings, historical antecedents, societal
effects and arguments for and against, sure they're similar or
not.
Corporate Lawyer|7.26.07 @ 11:11AM|#
I'm quite late to the thread, but I think it's important to
point out a few things. Of course, let me acknowledge my biases - I
am a corporate lawyer and do think corporations are generally a
good thing.
1) There is still a great deal of argument about the underpinnings
of corporate law by academics such as Bebchuk, Lopucki, Romano,
Woodward, etc., etc.... However, as a practitioner, my humble
opinion is that limited liability and the other trappings of
corporate forms primarily function to increase efficiency. I could
craft contracts among all of the parties in a corporate
relationship that would create everything associated with
corporations. It would take a very long time and cost a lot of
money, but it can be done. Having a corporate code simply reduces
the need for lots and lots of clauses that would say what is
otherwise already in the law.
2) Limited liability is also not the bogeyman some people make it
out to be. Corporation A and Individual B both have $50. Both are
free to contract with you to limit their liability in your dealings
with them to $50. If you agree to deal with a corporation, you
accept that their liability is limited, and if you're worried about
their assets you do your due diligence.
3)What if you never agree to deal with a corp, and it injures you?
Well, you still have a right to file a tort claim. What if the corp
doesn't have sufficient funds to pay you? Sometimes you could
pierce the corporate veil and get to the shareholders. Otherwise,
does it really matter to you if you are injured in the amount of
$50 and you are dealing with a corp with $25 instead of an
individual with $25?
4) Given that, how is limited liability a government created risk
subsidy? By dealing with a corp, you accept their liability will be
limited, so you are "subsidizing" their risk. If you don't deal
with a corp, but are still injured, there is a chance to get around
the limited liability. Any subsidies in that case result from the
extent to which piercing the corporate veil is allowed, not in the
limited liability itself is allowed.
|7.26.07 @ 11:13AM|#
anon,
Zero, or something close to zero, if past studies of the minimum
wage's effect on employment are predictive of the future. Which
they probably are.
|7.26.07 @ 11:49AM|#
CorpLawyer: I understand your biases, and I agree that corporate
law is generally a good method of establishing certainty and
efficiency. Of course, limited liability is only a portion of
corporate law and should be addressed separately:
(1) You could draft contracts all day long, and even brilliant
sections on enforcement, but without any force of law, I would
laugh at them because you can't enforce them. There's always the
Nigerian model of contract enforcement.... Sure, eventually my
credibility would be shot, but I'd just change my name to Ginsu XIX
or something and start over.
(2) I agree that limited liability is not usually a bogeyman, and
when it is, those are the corporate veil cases. I am merely
acknowledging that the government's limitation of liability creates
value for the entity and hence an incentive to engage in such
business.
(3) Your tort argument is rather poor since you are saying, what
the hell, at least you didn't get injured by an even poorer
individual, and piercing the corporate veil has nothing to do with
the amount of damages, you know as well as I that it has to do with
how the corporation is run.
(4) You should be ashamed that your argument is "by dealing with a
corp, you accept their limited liability," especially since you
recognize that people don't always 'choose' to deal with a
corporation. You make it sound like everybody runs around with a
copy of Moody's to see which corporations they can deal with on a
day-to-day basis. Not only is that argument wrong because the
liability is limited in many instances where a choice was not made
(that's enough to sink your argument right there), but practically
speaking, why the hell would the government limit liability in the
first place if it wasn't to provide a certain value to the
corporate structure? For their goddam health or something?
Scooby|7.26.07 @ 12:28PM|#
Lamar,
(1) You could draft contracts assess and/or allege
liabilities all day long, and even brilliant sections on
enforcement, but without any force of law, I would laugh at
them because you can't enforce them.
Assuming the absence of a legal framework for enforcing contracts,
why would "liability" be a word with any meaning whatsoever?
Corporate Lawyer|7.26.07 @ 1:07PM|#
1) I agree, but I don't see what this has to do with
corporations. There always has to be some enforcement mechanism for
contracts. In the American system, we use courts and the police,
but it is not inconcievable to envision some cyberpunk future where
corporations provide their own enforcement through private security
organizations. My point is that corporations are generally not
treated better than individuals, partnerships, etc. in contract law
(I can't think of any examples off the top of my head, but I
suppose there might be some.) Indeed, you could argue that is some
areas, such as adhesion, corporations could be treated worse.
Corporations do rely on government power, but there is nothing
inherent in the corporate form that requires unequal treatment by a
government. Considering corporate law in the US is a mess of 50+
different systems, I don't want to get into the nitty-gritty, but
if you'd like to discuss actual implementation of state laws, we
can do that (I'm most familiar with Virginia and Delaware,
FWIW).
2)As a practical matter, I'm not sure why it matters that the
government creates the limited liability through statute, rather
than the the corporation imposing it through contract. Limited
liability for torts may need to be rebalanced to prevent government
subsidization of risk, but it does not inherently subsidize
risk.
3) I'm not sure what your point is. Are you saying that limited
liability encourages shareholders to invest in risky businesses?
What are the risks you are concerned about? I can think of at least
two - 1) financial risk: ex. Shareholders are free to invest in
firms that try and find the holy grail. When the business fails,
should we punish them by extracting more money than they invested?
2) tort risk: a corporation is undercapitalized and does not have
sufficient funds to pay those it injures or is involved in
dangerous activities. In these situations, i can see the point of
properly balancing the piercing of the veil.
4) Why yes, I am ashamed. Mostly that you didn't understand my
argument. I am more concerned with notice, than with consent. If I
am a small business owner who wants to sell services or goods to
others, I am almost certainly going to being dealing with
corporations and will be "forced" to accept their limited
liability. Again, does it matter if the coercion is in codification
of limited liability or in its imposition through contracts? At
least you are aware of the limited liability either way and can
make the appropriate adjustment in the way you deal wit that
business. In a freemarket economy, "stronger" (larger, more
profitable, better negotiator, whatever) businesses will impose
terms on "weaker" businesses. I don't see how this is a problem
inherent in corporations. (I do give some weight to the argument
that corporations are able to grow much larger than other business
entities, but there are still huge partnerships. Furthermore, there
are advantages to huge organizations, and that may be more worthy
of another cost benefit analysis)
Finally, I don't know why you are acting like limited liabilty is a
unique feature of corporations. Every rational entity seeks to
limit its own liability (or the other entities that make it up).
Corporations happen to have it codified, but it could just as well
be contractually imposed. One of the major reasons for including
limited liability in a corporate code is so that it does not have
to be inefficiently included in every single contract made by an
entity. We can argue about the merits of allowing two parties to
contract to limit liabilty, but this is not a problem with the
corporate structure. Like I said before, it would take a while, but
under general contract law, you could create an entity much like a
corporation. Why does it matter if "ACME Corp" is a group of
business people bound together by unwieldy but effective contracts,
or one with a default set of rules codified by statute?
Scooby|7.26.07 @ 1:18PM|#
Lamar,
The
corporationconcept of liability itself is a legal construct and wouldn't exist without gov't creating it. 'nuff said. Argument over. You get nothing! You lose! Good day sir!
"Limitedliabilitycorporationsin an anarchy would look very much liketheyit does today"
Except thattheyit wouldn't exist. Methinks you've hit the bottle a little early, know what I'm sayin'?
"Liability" is a government risk subsidy to the demand side of the
market. In an anarchy, "liability" doesn't exist, therefore any
argument about "limited liability" would be moot.
I'm not sure what any of that has to do with the hypocrisy of
certain labor unions when they become employ labor. I hope you've
enjoyed the troll chow.
Scooby|7.26.07 @ 1:58PM|#
I'm back from lunch to see the monstrosity that is the second to last sentence of my post. Strike "become".
|7.26.07 @ 1:59PM|#
Corporate Lawyer: I'm a lawyer and I do the same thing. Instead
of addressing the other guy's argument (i.e., that the limitation
of liability creates value, and why gov'ts limit liability in the
first place) I just restate what I said before with a feigned naive
look on my face. At least you agree that corporations are able to
exist owing to the rule of law provided by gov'ts, but why deny
that limited liability is a benefit bestowed by that same gov't to
provide certain incentives? The incentives are to invest, not
necessarily in risky businesses, but in businesses in general. It's
sort of the foundation for corporate law.
You're not sure why corporations can't limit their liability
through contract? Simple: if they could, they would, but they
can't, so they don't. Is there any inherent reason to form a
corporation other than the liability aspect, and perhaps certain
tax reasons? The certainty of Delaware law?! Surely you know that
there is a major disincentive to invest in a corporation if you
know that your house is on the line.
Scooby: Let's just admit that nobody has any idea what would happen
"In an anarchy." Until it actually happens, let's stick to the real
world.
|7.26.07 @ 2:20PM|#
You're not sure why corporations can't limit their liability
through contract? Simple: if they could, they would, but they
can't, so they don't.
Lamar, they don't limit liability through contract because it is
fabulously less efficient in their dealings than simply letting
standing corporate law imply their liability.
You have established that the "in an anarchy" argument doesn't work
for you. What about the "common law" argument? Do you think that,
absent statute, there would be limited liability corporations or
not?
Also, you keep saying that the government is limiting liability.
Isn't it more accurate to say that the corporation is limiting
liability, and that the government is simply standardizing the
rules?
Scooby|7.26.07 @ 2:51PM|#
Sorry, Lamar. I was just following the red herring that you and
Dan T. dragged across the thread.
Carry on with the 'jack.
Corporate Lawyer|7.26.07 @ 2:56PM|#
Scooby:Excellent points.
Lamar: So we're both lawyers, and apparently we're both ignoring
the other person's arguments. Realistically, I should argue against
corporate codes. Without corporations, I could call myself a
business entity lawyer and spend all day drafting contracts to
achieve what can be done in mere minutes with a corporate
filing.
You _can_ create contractual limited liability with contract law.
Imagine a two person business, called ACME . They have a contract
that says that they have contributed $50 each to their business and
that neither is obligated to contribute any more funds to the
business for any reason. The contract spells out their other rights
and responsibilities. This language is often found in partnership
agreements. Then, any time ACME enters a contract with another
entity, they insist on limiting their liability for any breach of
the contract. The amount limited would be the current value of the
business. How is this not the functional equivalent of a
corporation?
Limited liability for tort is tougher. There is no privity, so it
cannot be imposed by contract. Assuming a world without
corporations, it could be approximated by liability insurance. When
the government imposes limited liability for torts, it could be
seen as providing a benefit, by allowing substitution of statutory
protects for the payment of insurance premiums. However, I
acknowledged this before and noted that it could be minimized or
eliminated by requiring adequate capitalization and/or deciding
when veil piercing is appropriate.
There are many reasons other than limited liability for
corporations: it's easier to pool capital, it is easier to make
decisions, it makes certain assets easier to transfer, it allows
for more efficient management of unrelated businesses, just to name
a few off the top of my head.
To avoid any further charges of avoiding your arguement, here
goes:
"Limitation of liability creates value" - Yes it does, which is why
it is done in private contracts all the time. My point is that the
government is not preventing partnerships/individuals, etc. from
limiting their own liability contractually. My argument is that
entities can do this anyway, but corporate codes make it easier. If
corporate codes disappeared, "corporate" attorneys would get even
richer drafting agreements to managing entities. The value _for
corporations_ does not come from the limitation of liability, but
from the efficiency gains. Limitation of tort liability does
provide value not available to most other entities, but the excess
value can be offset in other ways - higher tax rates, large capital
requirements, and/or corporate veil piercing. I do not know if any
state sets the right balance to avoid subsidizing corporations, as
I have not studied the economics of these codes. But I do know that
it is possible, and I am arguing about corporate forms in
general.
"Why governments limit liability in the first place." I admit this
is a harder question - there are a lot of theories, and I am not an
expert on the historical development of corporations. Certainly the
incentive to invest is one reason. However, there is the idea that
the corporation is owned by the shareholder, but that because it is
managed by others, they are often in a better position to bear some
of the risks. Finally, limited liability has not always been a
feature of the corporations, although it is true that it was an
essential feature in the development of truly private corporations,
at least in American law.
|7.26.07 @ 3:04PM|#
How about Chief Justice John Marshall's definition: "A
corporation is an artificial being, invisible, intangible, and
existing only in the contemplation of the law." Check that quote
out, it's one of the first cases to separate corporations from
gov't control (Dartmouth) in 1819. It wasn't until the late 1800's
and the rise of railroads that limited liability became a mainstay
of corporate law. Corporations were born under the auspices of
gov't control, the word franchise comes from the French root
meaning privilege. Don't tell me that corporations existed in some
vague time and place where they had nothing to do with government.
The concept was created by governments and corporate
privileges continue to be granted by governments.
You ask about common law? Aren't you forgetting that the first
modern corporations were chartered by the crown, if not a part of
the crown itself? Think of the early East India companies.
|7.26.07 @ 3:19PM|#
Perhaps I am viewing this from a historical perspective, while
others are viewing it from a more speculative perspective (i.e.,
that K law could approximate limited liability). I'm having a hard
time defeating the argument that private contracts could
approximate much of the corporate limitation of liability
(recognizing that gov't enforcement of a contract is not the same
as gov't granting a right). By contrast, my opponents in this
polemic cannot get around the fact that corporations have
historically been entities created or chartered by governments, and
today's corporate law reflects that fact. Otherwise we may indeed
have a system of private contract law limiting liability. What we
have is a government granted privilege to do business, and part of
the granted privilege is the limitation of liability. Each
privilege represents value. All in all, it's a good thing. However,
just as we can imagine a world of private contracts limiting
liability, we can just as easily imagine a world of government
mandating liability (like treble damages laws). This isn't
a counterexample, just something to show it isn't that
farfetched.
Please patronize my new venture, Lamar Consulting ELC (Extra
Liability Corporation....)
|7.26.07 @ 3:43PM|#
Lamar,
I am indeed viewing the issue more speculatively. As has been
admitted numerous times by people on all sides, limited liability
corporations are significantly more economically efficient than
alternative forms of organization of many classes of firms. Now
that this fact has been recognized over the last 150 years, it is
hard to imagine that limited liability corporations would not exist
regardless of the particulars of the legal system. Nay, it would
require egregious force from a government to prevent
them.
In small willful dealings with such companies, the issue of limited
liability never comes up because the likelihood that a company will
be in hock without a contract to an individual and to an extent
that the corporation can't cover it is minuscule. In larger
dealings, contracts can be signed, insurance can be bought by
either side, or the limited liability and chance of bankruptcy can
simply be accepted as a risk -- whatever is efficient. On the issue
of third party or tort liabilities, there is certainly room for
debate on government subsidy, and you are likely to find agreement
among many here that corporations may be overly protected in such
cases.
So it is hard to say that the codification of limited liability
into corporate law by government is providing a subsidy peculiar to
corporations. It is simply codifying what would be there if nothing
were codified.
Corporate Lawyer|7.26.07 @ 3:53PM|#
I generally agree with Lamar's 3:19 pm statement. I think we've reached a point where we would just argue past each other - I disagree that limited liability is truly a grant of government power. I would argue that it is an acknowledgment that people could basically do the same things with contract law, and that a corporate code simply makes it easier to achieve the same thing. Yes, corporations are government created entities, but so are limited partnerships and other more esoteric organizations. I might be concerned if corporations were the only entities that were allowed to limit their liability and it was a right that came out of nowhere. Yes, the government can change the liability scheme around. However, it has always had that power. There are limits to limited liability in any context (based on contract law and public policy concerns). What I don't understand is why some people single corporations out as if they are the product of some government conspiracy to screw the common man (not that Lamar is saying this, just that I've seen it on H&R before).
Corporate Lawyer|7.26.07 @ 4:01PM|#
MikeP's 3:43 statement is excellent and I agree with everything he said. I'll also add that corporate codes probably benefit small business and entrepeneurs the most by allowing them to take advantage of many of the same protections that big business have. Here's more speculation, but if the corporate form disappeared tomorrow, Apple and Halliburton and Walmart would still be around. They'd have to pay more to lawyers and would be less efficient, but the people most directly harmed would be the innovators and the small businesses.
|7.26.07 @ 5:10PM|#
No argument here about the benefits of limited liability. Generally positive for all.
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