Monday, December 12, 2011

The Corporations Complaint

I have a final in a couple of days on business law, so, I'm posting here. Makes sense, right?

I've seen a number of people post things on Facebook regarding companies and corporations, etc. Most of these friends are OWS proponents and rather intelligent people; people for whom I generally have a good deal of respect. But the posts tend toward - how to say this politely - the naive. The two that I can think of are the photo that has circulated stating "I will believe corporations are people when Texas executes one" and the sentiment that, if a corporation is legally a person, the corporation should face criminal penalties for its acts. The second is in the context of a West Virginia mining company and the death of 29 miners.

My response is twofold: First, how can you criminally punish a company? Jail it? And second, stating that a company is legally a person is not analogous to the way a human being is a legal person. Saying that it is the same shows a gross misunderstanding of the law, at best, or deliberate manipulation of the language, at worst.

Now, to the first point. Saying that a corporation even can be criminally punished is laughable. There are several reasons I say this. First, the corporate officers are the ones who took any illegal action. Sure, they took the action on behalf of the company and in the role as corporate agents, but the corporation is legally only able to take lawful actions. So, any action by a corporate agent that is unlawful is the unlawful (and unauthorized) act of that specific person. That just means that, while you may not be able to hold the company criminally liable, there is no reason that you can't criminally prosecute the corporate officers. Second, what punishment can be assessed to a company? You can't throw it in jail and you can't throw all the employees in jail without it being a gross violation of civil rights. All you can really do is fine the company, and that is a civil punishment, not criminal.

And the second point. The legal fiction of corporate personhood. I know a number of people who would be happy to do away with that particular fiction. I say, "That's a really bad idea." There is a business form that does dispense with the corporate person, the partnership (ok, and the sole proprietorship... but close enough for government work). Without that fiction, the partners (or the owner) are personally liable for all business debts.

Ok, so you might say "Personal liability is a good thing. It'll keep those nasty business owners in line." Umm, you do realize that "business owner" would mean anyone who has invested in a company, right? So those 401k accounts, IRAs, any money market savings account you have mean you have money invested in companies. If you take away the limited liability of the corporate form, remember the form that has the legal fiction of personhood, then you are a partner in that company. So, that company does something wrong and you could be liable for the entire debt. Just for being smart about your retirement funds.

Wait, what? These evil business structures that allow companies to not be criminally liable are the same ones that allow our economy to thrive by reducing the risk of investing. So, go ahead, take away the legal corporate protections. Just be prepared to not have retirement because all investments are too risky to participate in due to your personal liability.

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