Corporations as a Person

Yeah. It's stupid because they get to act like a person when it is benificial to them, but they don't have to face the music when it isn't.

If they really were people, the BP corporation would be facing time in a Federal Prison.

Also, I saw somewhere several years ago where a psychiatrist actually analyzed the behavior of a handful of corporations as if they really were individuals. In almost every case, the corporate "individual" has a remarkable propensity for acting like a complete and total sociopath.

 

Yes, but do you think this is a problem with the corporation or is this a problam with the law?

If you allow a person to do things without accountability, aren't you fostering a certain type of behavior in that person?

 

That was this 2003 documentary, perhaps.

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

Yes, if you are an individual who has a monolithic drive for your own welfare and no regard for the welfare of others, you are a sociopath. Or that's my understanding. Stockholders rightly push corporations to focus on profits and growth and nothing else. Since corporations are entities, under our laws, they are then sociopathic almost by definition, if they are successful.

 

Why is that right of stockholders? I would argue that stockholders have an obligation to insist on ethical practices.

 

Without the limited liability from corporate structure, business growth would be severely limited and the economy would suffer. Would YOU invest your 401K in stocks if you could be sued for your investments? (i.e. some of your money is in BP). Would you want to work for a corporation if you could be sued for being employed? (i.e. you happen to be a BP employee)

I saw The Corporation documentary and it is totally overblown how corporations are individual entities like "people". The creation of corporations was not to skirt the law and to do evil without consequences. There is a very real economic benefit to how corporations are structured. Unfortunately, some people try to find loopholes and take advantage of the situation, in which case, regulation needs to be improved.

 

The idea of corporate growth at all costs doesn't stand scrutiny. For instance, if we make it legal for tourists to forcibly sodomize all American women, then we will undoubtedly have an unprecedented rise in the growth of tourism. This will be a total boon to the corporate growth of American tourism related industries, like the Hilton Corporation.

However, when we practically measure the results of having to tell your sister that she was sodomized and raped for the good of America, we deem that some corporate growth measures are inappropriate.

Similarly, if the cost of Corporate growth is sodomizing our shoreline, or a Bhopal disaster, then 100 times out of 100 I will vote in favor of the good of the nation over the good of the stock market.

If it will prevent another massive disaster, then I think it is entirely appropriate for investors to have to worry about criminal consequences. I certainly assure you if that was the case, then you wouldn't have BP cutting corners on safety to save a couple of cents. The investors wouldn't stand for it.

And ultimately, that outcome - where investors demand that the management of the corporation take appropriate measures to protect the investors from criminal prosecution - would have been better for the country.

If you can't do business without being sure that your don't destroy the coastlines of half the nation, then you damn well should look for another line of work.

 

Well, sure... in happy happy land. Stockholders want their investment to prosper, so I said "right," as in that's about the best we can expect in reality. The fact is you set up a corporation and it can only be a sociopath.

 

This doesn't make any sense. If I have an IRA and buy 2 shares of BP stock, I'm now responsible for them violating safety rules? How am I possibly supposed to know that a rig in middle of the Gulf of Mexico had employees doing things they shouldn't have been in? I don't have access to that kind of information - even if I was interested in knowing that stuff, I couldn't just call up the rig and say "I own 2 shares - I want to inspect you!". That's an impossible standard that just means no one should own any stocks.

That standard would pretty much shut down every major high-risk business in the country. Airlines can't 100% ensure all their planes won't collapse one day and cause thousands of deaths. No nuclear plant can 100% ensure they will not have a meltdown. The US military can't 100% guarantee a nuke won't be stolen and used against us.

We can all take reasonable measures, but there's no way to being sure of these things. In the case of BP, there will be an investigation. If anything criminal was done, the company will suffer consequences. If its negligence, it will probably be in the form of monetary damages, just as personal negligence would probably be (thought a civil suit). If it's fraudulent, it will likely be jail time (see Enron), just as personal fraud would be. Other companies like Massey Energy are also under criminal investigation for their coal mine disaster.

 

Clearly there is a difference between an investor being liable and an employee / the corporation itself. And that's what we are talking about.

It's not that the owners should be personally liable or face jail time...but incorporating doesn't protect the corporation itself from liability. BP is still responsible. The owners are not.

Now, as for an employee - being an employee of BP doesn't mean you can break the law in the name of the company. If the company tells you to kill someone for the sake of BP, and you go do it - are you supposed to be protected? Of course not.

Being an employee never grants you protection. Incorporating protects the OWNERS from liability, but only if there are not INDIVIDUALLY breaking the law.

If one employee breaks the law, others within the organization are protected, but not if themselves broke the law as well.

If a BP employee was negligent and broke laws than they are indeed liable. If they were told by their supervisor, than that supervisor is liable and so on, all the way to the top.

 

If you're really interested in the subject, there's a book that came out not too long ago--which I haven't read--that might be useful. It apparently alleges that the whole "corporate personhood" notion derives from a willfully misstated headnote put on a Supreme Court decision (Santa Clara County v. Southern Pacific Railroad) by a court reporter named John Chandler Bancroft Davis, a former railroad company president. This was in 1886.

I think it's probably a fascinating history. Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights, by Thom Hartmann.

Davis, for the record, was also the court reporter responsible for writing a headnote (a different one) that the Supreme Court later disclaimed as any sort of binding precedent when a lawyer tried to cite it, which is why there's always that disclaimer at the top of opinions about the headnotes constituting no part of the opinion of the Court. Maybe he was just really bad at his job.

 

If I buy a horse, and the horse mauls someone, I am liable. If I buy a car, and the car goes out of control, I'm liable.

If I own 2 shares out of 20,000,000,000 shares of BP, then I should be libel for 1/10,000,000,000 of the damage. Makes perfect sense to me. The idea that you are indemnified against the malfeasance of something you own would be considered ridiculous in every other example in human history.

Ownership has responsibility. Unless it is a corporation, in which case you can pocket the profits, but get the rest of the world to accept responsibility for that company's mistakes.

The idea that you think it is silly to be responsible for damaged caused by things you own shows me exactly how twisted up and backward and in need of a major overhaul the current configuration is.

The problem is the fact that negligence led it to happen. If an airline does all the proper maintanance, funds studies, and generally stays on top of making sure that things are as safe as possible, and a plane crashes, they are not liable, just as a doctor is not liable if a patient dies despite the best available care. It is only when malpractice occurs that liability accrues. If a doctor drinks a fifth of scotch and takes a few bumps of cocaine before a surgery, then the doctor most definitely is liable (as is the hospital that employs him by extension) when the patient dies.

Tell me this, if shareholders were responsible for criminal liability, do you think they would elect a CEO who allowed half-assed attempts to cut corners in pursuit of profit? Do you think that BP would have come up with a mandated safety plan that basically was invented out of think air and had no basis in reality?

Or, if shareholders were liable, do you think they might have a CEO might have mandated that they follow all religiously, and make extra, super sure that the POB was both of an effective design and in good working order?

The company has been fined for more safety violations in recent history than all other major oil companies combined. In a rational system, where the people making the profits would also feel the pain, that would not occur unless the shareholders were simply stupid. Right now PB gets fined, but their unsafe behavior reduces cost more. Dangerous behavior by PB results in rewards for shareholders. Why on earth would they fix problems under that arrangement?

Right now, the shareholders privatize the profits and socialize the risks. That would be the completely unworkable system, as we have seen these last several months. It boggles my mind that people want to defend a process that systematically ensures that companies act in a reckless manor.

And if risks are too much, you probably should buy bonds and CD's, and stay out of the market. Read a book about stock markets in the 18th century. People who owned stock actually had ownership in companies. Currently, the stock market is little more than a legalized form of gambling for people between trips to Las Vegas. You could completely decouple the markets from the companies, and 99% of people wouldn't know the difference.

 

I believe that's from the documentary The Corporation. Very informative movie.

 

Its not a question of folks should pay a price or not...the do...they lose value in the shares they own. And for folks that have net worth tied up in these investments, they have a lot to lose in these investments, so the incentive to have a good CEO/good practices is there. Telling them they could lose everything they own b/c someone has something catastrophic happen would mean that no one would ever own any public company. Plus its just not practical - what happens if you owned a BP share 2 years ago and made money off of it - do you get a letter demanding payment?

If your horse gets out, it is your direct negligence, so I think its very different.

The more practical solution is to make sure that penalties are meaningful when companies do break rules. Regulation is not contrary to capitalism and way too many folks are at ends of the spectrum on these things. You have to regulate better, regardless of what the special interests/business lobbyists say...

 

Unless you did something wrong in maintaining it, you're not liable if you're not the one riding the horse or driving the car at the time. If you own the car, but I'm driving it and run over someone, I'm going to be the own in trouble - not you. If you rent an apartment and run a drug house from there, you're the one that's going to get in trouble - not the apartment complex owner.

Not true at all - see my examples above.

No - you suffer the losses too. If I buy own $100 of the company, that's my liability. If the company screws up and goes bankrupt, I take that loss. BP will pay the cost of the oil spill, so its owners are the ones picking up the tab.

No, I don't think it would be any different. People already had risk - people risked $100 billion (or whatever the market cap was) and had that outstanding risk and still allowed it to happen. Tens of millions of different people own stock in the company - how do you propose they each individually ensure that nowhere within the company is anyone doing anything illegal? What you're proposing is an impossible standard.

That's not true at all. BP is paying the cost - that's privatizing the costs too. This would have been no different if BP was a privately owned company.

In the 18th century, you didn't have global corporations. Today, in the small business world, you still have stock also and those people hold ownership in those companies like you're describing.

Maybe to you - but in reality, the stock market does have a correlation to the real world. That's why a buggy horse company's stock will go to zero, while Apple will go up.

 

To further this example, the owners of the runaway Toyotas weren't held liable for crashing them. They weren't expected to be masters of every detail of the product they owned. In that case, the people that built the thing are held responsible. The liability falls to where the mistake occurred - not to who happens to own the thing.

 

If the corporation hires someone to do that, the persons making the decision would be held criminally liable...but if you own a share, how can you be held liable for someone else's negligible act...kind of like someone borrowing your car to mow folks down...its criminal, so its black and white that the folks who committed the crime are held liable...if the corporation did something as an organization, they would be held liable..but you can't sentence 2 million shareholders to jail b/c a few folks broke a law...

 

That isn't a "price". That is a normal market fluctuation. I bought a ****-ton of Merck right after the Vioxx scandal. Within 6 months that share price was back above where it was the day before. Merck's malfeasance in hiding data and killing hundreds of people from undisclosed cardiac risk resulted in a profit of upwards of $20k for me. If Merck would kill a bunch more people, I'd make a bunch of profit off that too. In what kind of world does that make sense?

A "price" would make people actually afraid of allowing their company to act the same way in the future. A "price" would have people paying others to take the stock off their hands and assume their liability.

I guarantee you tons of investors were licking their lips at buying PB at a deep discount when they heard about the blowout. Many of them right here on Clutchfans.