On 4/13/2023 at 6:51 PM, tadmjones said:
I’m starting to think western culture needs to reconsider the idea of corporations and corporate governance.
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The corporate structure is a fantastic mechanism for raising and organizing capital, but it seems it also works to shield individuals from responsibility associated with things like known harms and or fraud.
I’m not persuaded that any culture needs to reconsider the concept of corporations, but rational discussion is always a good thing. The standard left-wing “argument” against corporations is that it encourages people to operate businesses at a profit and not for the benefit of the workers (what laborers receive is not called “profit”). I find it to be pointless to discuss the merits of corporations with communists. The only argument of merit against corporations that I have ever heard is exactly based on the problem of shielding individuals from the legal consequences of their actions. Hence the second quote is essential to this question.
One problem with the claim is that it isn’t exactly true, indeed there is a name for it when you go after evil corporate miscreants – piercing the corporate veil. But don’t go there yet, the first question should be ‘what should happen if a business markets a product “known” to cause harm?’ (I said business, not corporation). Under the current regime, the business gets sued, and if found liable damages may be awarded. I should point out that under an Objectivist regime, a company will not be held liable for marketing a product that can be argued to have some detectable relation to “harm”. A company that sells cyanide capsules as cyanide capsules should not be held liable, even though the company should know of the potential for harm. Caveat emptor! When they sell cyanide as ibuprofen, that’s where true liability arises.
Cyanide as ibuprofen is exactly the kind of case where the corporate veil will be pierced, and where criminal prosecution will arise. The question is, which persons should be held personally liable? Some candidates are “the CEO”, “the board of directors”, “the manager in charge of product development”, “the employees of the company” and “everybody with a direct or indirect interest in the company” (such as a bank which makes loans to the business, or your grandmother whose retirement plan invested in the company).
In the case of criminal prosecution, the law already has an answer, because you don’t prosecute people for bad outcomes, you prosecute them for evil actions – knowingly violating the rights of another. Whether or not the CEO, board of directors, or guy on the assembly line is held criminally responsible, and sent to jail, depends on that person’s knowledge state and the nature of their actions. One does not gain immunity from prosecution from the fact that you work for a corporation.
Unlike criminal law, civil liability for damages is not centered around a person’s mental state, and to the extent that mental state enters into the equation, it is often very subjective – was the person negligent in their actions? There is a venerable but questionable legal doctrine, respondeat superior, which says that an employee is not to be held responsible for their actions in the course of the job, responsibility shifts to the boss. Why in the world should an employee be sheltered from responsibility for their actions? The two main reasons are philosophically repugnant: that with great power comes create responsibility, and that inferiors in a business context are mindless drones, lacking free will. Rather than determining liability based on analysis in terms of power relations, liability should be based on individual knowledge and actions – one’s choices.
Corporate structure is pretty much orthogonal to these notions of responsibility, except when it comes to determining whose pockets to pick in awarding damages. The corporate veil means that a plaintiff can only go after the assets of the corporation, and not the assets of the individuals who make up the corporation. Therefore, if Dow Corporation negligently harms a half million people, claims against the corporation are limited to the corporation but not the managers, supervisors, line-employees or shareholders who directly or indirectly bought an interest in the company.
If the corporate entity is not recognized as a separate legal entity, your grandmother qua part-owner of the company would be held personally responsible for those actions. I conclude that whatever problem exists, it’s not about corporations, it’s about “responsibility”. Who should be held responsible for what choices? Why should an employee be relieved of responsibility, and why should a CEO be assigned all of the liability?