Tuesday, February 07, 2006

Morality Monday, Part II

The thing about the Corporate form is that it really can't, by itself, be the root of anything. The corporation is merely a tool that allows "evils" to be carried out more efficiently and without exposing the real actors to any personal liability (except in the rare case when the corporate veil is pierced). So the corporation is just a tool. But perhaps eliminating the coporate form is a first step to exposing the atmosphere of corruption and selfishness that seems to pervade America.

As a starting point, the corporate form seems to take from society without necessarily giving back. It does this in two ways. First, shareholders and members of the corp are sheltered from liability for their actions. This disconnect between personal action and personal responsibility should be alarming to more people. If I ran my car up onto your porch and destroyed the front of your house, and then I told you that I was acting in a corporate capacity so that it wasn't really me that damaged your property but the corporation, you might be a little sceptical. And when you tried to sue me to recover for the damage I caused, but the court said that your qualm actually WAS with my corporate personality, you might be a little confused. And when you sued the corporation and a jury rendered judgment in your favor for the cost of repairs, but you couldn't collect because the corporation doesn't have enough capital to cover the judgment even though they aren't legally undercapitalized so as to warrant piercing the corporate veil, you might be a little pissed. And then when you saw me, the actual person who ruined your house, living in my own luxury mansion swimming in my vault of hundred dollar bills which is totally sheltered from your legal calim, you might feel a little pissed on.

Secondly, the corporation is able to raise massive amounts of capital very quickly through the issuing of ownership shares. I'm not going to go into this point right now, though.

Admittedly, the corporation does not get these benefits for free. Because income is taxed both to the corporation as an entity when earned and also to the shareholders on distribution, the government gets two bites at the apple. However this (extremely fair) double tax treatment has been extremely mitigated by Bush's tax cuts, part of which reduced tax on dividends (which are the distributions to shareholders) to 15%. That's the same rate as we give capital gains (something about which I will complain on a Tax Tuesday sometime)!!!!!

Society is giving up a lot to accomodate this fairly strange business form, and it's not getting a whole lot in return. I think its high time that we stop coddling these barons of industry.

And don't get me started on LLCs!
Admittedly, the corporation does not get this for free


Blogger Xeno said...

Ahhh, but changes would have to be made from government. To get into government you need to campain. To campain you need money. Corps have money.....

9:55 AM  
Blogger Fishfrog said...

A discussion over lunch today convinced me that the limited liability aspect of corps is not necessarily a bad thing. The real problem with corporations then, stems from the natural reprecussions of capitalism; too much money and power landing in the hands of too few people. Corps act as upward funnels, taking money from the masses and depositing it in the hands of shareholders and directors. This argument has been made many times before by more thoughtful people than me, though, so I'll leave it at that.

3:04 PM  

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