The Concept of the Corporation

[Christopher]

Endlessly within Objectivism, we as a group assert that corporations should be treated with respect to the rights of the individual. For example, a corporation should have the right to spend money on political campaigns because such a right is justified under personal property rights.

In reflecting on this consistent assertion that corporations are representative of personal property, what is consistently neglected is the fact that corporations are lawfully divorced from personal liability... corporations are "special."

http://en.wikipedia.org/wiki/Corporation

A corporation is an institution that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members.[1] There are many different forms of corporations, most of which are used to conduct business...

An important feature of corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment, and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors.

Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like actual people. Corporations can exercise human rights against real individuals and the state,[2] and they may be responsible for human rights violations.[3] Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they lose money into insolvency. Corporations can even be convicted of criminal offences, such as fraud and manslaughter.[4]

If individuals can act through corporations in ways that protect the individual from liability concerning the actions of that corporation, then it is inconsistent to assert that corporate assets should be treated with respect to individual property rights. You cannot have personal property without personal liability. You cannot at once claim that corporate money is personal property but that corporate debt is not personal liability. If a man has the freedom to dispose of corporate money at his whim, he must also with his entire personal financials be liable for any debt incurred by that corporation.

Incorporation is a modern wonder and leads to much business creation, but strictly speaking - I believe it is unethical.

Christopher

[Michael Stuart Kelly]

Christopher,

I'm more worried about corporations that get fat government contracts contributing to political campaigns than, say, something like McDonald's (which has had a political presence policy as far back as I can remember).

In theory, though, if a board of directors votes for funds to go to a political campaign, it's their money. Or at least money under their control by proxy. So they literally and legally represent those who own the money.

Michael

[Selene]

Christopher:

That is not how I state it. The linkage that you assert is inconsistent to my understanding of the corporation as a legal entity.

Yes it does receive a charter because it is a legal entity created by law. It acts as a "legal individual" in most respects.

Endlessly within Objectivism, we as a group assert that corporations should be treated with respect to the rights of the individual. For example, a corporation should have the right to spend money on political campaigns because such a right is justified under personal property rights.

The ruling last week does not make any linkage between the corporate right to "spend money on political campaigns." That is not what the case was about.

Property rights never entered into this case. The issue was the First Amendment and the right to freely advocate under that amendment.

The facts of the case were about the right of an individual, in this case a corporation to fund an advocacy ad.

Hope that helps clarify the important, but narrow issue that the Court decided.

Adam

[merjet]

what is consistently neglected is the fact that corporations are lawfully divorced from personal liability... corporations are "special."

They are not so divorceed. It is non-employee, non-director stockholders who are not personally liable. Officers and directors are not exempt from personal liability. If they were, then there would be no need for directors and officers liability insurance.

[Selene]

what is consistently neglected is the fact that corporations are lawfully divorced from personal liability... corporations are "special."

They are not so divorceed. It is non-employee, non-director stockholders who are not personally liable. Officers and directors are not exempt from personal liability. If they were, then there would be no need for directors and officers liability insurance.

Merlin:

Correct. Additionally, the amount of the liability is not capped in law as far as I know. One of the problems in the tort reform debate is where is a reasonable cap. Moreover, the cap is clearly a state right issue under comity.

A federal tort reform act would have to be very carefully written to not intrude on the states responsibilities of licensing corporations.

Interesting, but dry area of the law.

Welcome back from the Coventry of limited post land!

Adam

Edited January 31, 2010 by Selene

[Christopher]

Merlin,

That was an interesting link, although I am not exactly clear on the scope of liability executives assume when acting in the capacity of their roles. It is clear that when executives act in ways inconsistent with their roles (e.g. Enron), those individuals are liable for personal crimes. If a corporation moves forward on a business-oriented decision that ends up infringing on the rights of a person, I wonder to what degree an executive can be held responsible for the rights violation.

Adam, it's not about the specifics of the Supreme Court Case per se. I am more interested in focusing on the Objectivist ethical stance taken that : corporate assets should have the same freedom to be used as personal assets. This is simply not ethical.

It seems reasonable to me that if corporate liability is restricted specifically to the domain of business, then so must usage of corporate funding (even for 100% shareholders). In other words, it is not an appropriate argument to state that a majority stockholder has the right to distribute corporate money as if that money were a personal asset (example: towards a personally-favored political candidate). I don't agree with this type of usage at all. I believe the best (and only) argument for usage of corporate funding is towards business-specific goals.

Christopher

[merjet]

If a corporation moves forward on a business-oriented decision that ends up infringing on the rights of a person, I wonder to what degree an executive can be held responsible for the rights violation.

I do, too. Generally, the larger a corporation is, the harder it is to determine who and to what extent an individual is responsible for corporate damages.

It seems reasonable to me that if corporate liability is restricted specifically to the domain of business, then so must usage of corporate funding (even for 100% shareholders). In other words, it is not an appropriate argument to state that a majority stockholder has the right to distribute corporate money as if that money were a personal asset (example: towards a personally-favored political candidate). I don't agree with this type of usage at all. I believe the best (and only) argument for usage of corporate funding is towards business-specific goals.

I agree in principle, but it can be a tough issue. When regs or laws are being considered that have a direct impact on the corporation's business, it seems legitimate to me to pay lobbyists who might influence what regs or laws get passed. I limit that to keeping a level playing field or defense, not to get regs or laws passed that unfairly benefit the corporation. If the issue is making campaign contributions to people running for political office, it gets touchier.

Regarding a corporation giving financial support to get candidates elected, I believe the specific corporate interest matters. If the corporate interest cannot be well identified, it seems technically feasible today that a corporation give individual shareholders an option about corporate funds supporting political candidates. If a shareholder rejects such funding, then the corporation could pay the shareholder a "dividend" of a suitable amount rather than giving the money to support a political candidate. In other words, the corporation could propose to give $X per share to support candidates, and let individual shareholders decide to give $X on his/her behalf or to receive a "dividend".

[Selene]

Gentlemen:

I must be further out of the orthodox Objectivist loop that I realized.

Where is this position about corporate assets being able to be used as:

"...corporate assets should have the same freedom to be used as personal assets."

Adam

[Steve Gagne]

Endlessly within Objectivism, we as a group assert that corporations should be treated with respect to the rights of the individual. For example, a corporation should have the right to spend money on political campaigns because such a right is justified under personal property rights.

In reflecting on this consistent assertion that corporations are representative of personal property, what is consistently neglected is the fact that corporations are lawfully divorced from personal liability... corporations are "special."

http://en.wikipedia.org/wiki/Corporation

A corporation is an institution that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members.[1] There are many different forms of corporations, most of which are used to conduct business...

An important feature of corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment, and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors.

Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like actual people. Corporations can exercise human rights against real individuals and the state,[2] and they may be responsible for human rights violations.[3] Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they lose money into insolvency. Corporations can even be convicted of criminal offences, such as fraud and manslaughter.[4]

If individuals can act through corporations in ways that protect the individual from liability concerning the actions of that corporation, then it is inconsistent to assert that corporate assets should be treated with respect to individual property rights. You cannot have personal property without personal liability. You cannot at once claim that corporate money is personal property but that corporate debt is not personal liability. If a man has the freedom to dispose of corporate money at his whim, he must also with his entire personal financials be liable for any debt incurred by that corporation.

Incorporation is a modern wonder and leads to much business creation, but strictly speaking - I believe it is unethical.

Christopher

Christopher

Merlin and I have crossed swords before on this topic -- I found his argument that I am some kind of an idiot really convincing -- so I have to say that simply, I tend to agree with you.

Reason why? A [limited liability] corporation is created by an act of a governmental authority, so corporate contributions to political campaigns means government-authorized interference in the electoral process. Within that context, restrictions on corporate contributions make sense. If we don't need the restrictions, why don't we just have government thugs tell us who to vote for, and beat us to death if we don't? Oh, that's right. We don't need to. We got Diebold rigging the freakin' elections by reprogramming the voting machines. The vote turns out the way they're bought anyway.

[Selene]

Steve:

You have something more than paranoid plot syndrome [PPS] DSM 3.27 © to base that statement on...right?

We got Diebold rigging the freakin' elections by reprogramming the voting machines. The vote turns out the way they're bought anyway.

Adam

[Steve Gagne]

Steve:

You have something more than paranoid plot syndrome [PPS] DSM 3.27 © to base that statement on...right?

We got Diebold rigging the freakin' elections by reprogramming the voting machines. The vote turns out the way they're bought anyway.

Adam

Adam -

More others' testimony (quoted here 3 years ago) rather than the two experiences I've had with it...but then, no guarantees about THEIR "sanity".

BTW...3.27?????? What's wrong with IV??????

steve