From: GBurch1@aol.com
Date: Sun Dec 20 1998 - 14:41:09 MST
In a message dated 98-12-14 10:34:34 EST, Mike Lorrey wrote:
> > Consider
> > that shareholder limited liability is one of the key elements supporting
a
> > secondary market for widely-held equity investment. Who will buy the
stock
> >of
> > ABC Corp. on the secondary market if before they do they have to engage
in
> > a
> > complete program of due diligence to be sure that they're not buying into
> > personal liability for some then-well-hidden corporate policy? I know I
> > wouldn't. Allowing corporations to be sued as legal persons actually
> > benefits
> > the plaintiff as much as limited liability benefits the shareholders: I
> > only
> > have to sue ABC Corp., not track down all of its (possibly millions of)
> > shareholder.
>
> Since a shareholder, when not prevented by the government, has the right to
> examine all corporate documents, then current technology allows for
software
> driven complete due diligence if all company records are digitized (which
> can
> easily be made a standard by PPA polices). Granted that it was much easier
> in the
> past for a corporation to hide things, but this is no longer the case.
With all due respect, this doesn't even come close to addressing the issues I
raised. Saying that it's easier now to determine what a company's policies
are than it used to be doesn't mean it's a good idea to make shareholders
liable for a company's wrongs. Imagine that I had instantaneous, searchable
electronic access right here in my study to every single record kept by
General Motors for the last twenty years. Now, say you get a judgment against
GM next year based on a defectively designed airbag that failed to deploy in
an accident and you come looking to execute that judgment on my personal
assets. Was I -- a non-engineer -- supposed to identify the records
documenting that defect before I bought some GM stock this afternoon? If that
were the law, believe me that I would never put another dime into the equity
market and I would advise my clients to also refrain from doing it.
And you haven't addressed the cost to you as a judgment creditor of chasing
me, as a stockholder, to get your money. Oh, and am I, as a stockholder,
supposed to defend myself personally in your airbag case? If that's the law
-- even if I genuinely believed that GM would never make a design mistake -- I
would never buy their stock.
> > A corporation's liability is reflected in its share price, so the market
> > does
> > act to discipline equity holders. And intentionally inadequately
> > capitalized
> > corporations can lead to "piercing the corporate veil" and thence to
> > personal
> > shareholder liability, so shareholders have a keen interest in seeing to
> > it
> > that a corporation is sufficiently capitalized to satisfy judgments
> > against
> > it. I don't see anything at all inconsistent with radical anarcho-
> > capitalism
> > in allowing corporate limited liability and corporate legal personhood.
>
> A corporation's liability is only reflected in its share price insofar as
to
> estimate the outcome of a legal action given that the corporation can
afford
> squads of high priced lawyers and the plaintiff usually can't, thus the
> estimated
> outcome is on average going to be in the corporation's favor, thus the true
> market
> liability is undervalued in the stock price. Corporate person fiction
> sheilds the
> investor from the risk which equates to the returns they are expecting,
thus
> improperly inflating the value of the stock, thus the investors costs are
> being
> externalized onto potential plaintiffs against the corporation.
Some of the best lawyers in the world are plaintiffs lawyers who work on a
contingency fee basis. One thing that study of anarcho-capitalist legal
theory has made me do is change my mind about contingency fees: I used to be
opposed to them; now I favor them.
Greg Burch <GBurch1@aol.com>----<burchg@liddellsapp.com>
Attorney ::: Director, Extropy Institute ::: Wilderness Guide
http://users.aol.com/gburch1 -or- http://members.aol.com/gburch1
"Good ideas are not adopted automatically. They must
be driven into practice with courageous impatience."
-- Admiral Hyman G. Rickover
This archive was generated by hypermail 2.1.5 : Fri Nov 01 2002 - 14:50:04 MST