Corporation
What is a corporation?
Under capitalism: a corporation is a group of individuals organized in a specific legal form, just like a society is
nothing more then a sum of individuals organized in a specific form, or a
marriage is a group of individuals (a man and a woman) organized in a specific
form. A marriage may have a legal framework behind it: this does not make it fictional. The
same applies to the concept society. The same goes for a corporation where real individuals
organize together under a "fictional" (i.e. made up name).
Isn't a corporation a " legal fiction" created by government?
That depends on what you mean by "legal fiction"; as typically used the claim that a corporation is a "legal fiction" is itself a fiction.
As the term is conventionally used, it is construed to mean
that the owners and managers of a corporation become rightless serfs once they have assumed
corporate status.
How are the laws governing corporations formed under capitalism?
The laws underlying
corporations are based on objective facts. That is, the basis of a corporation are the rights of the individuals who form
it. Rights are not fictional; and neither are the laws that a corporation must abide by.
These laws are neither intrinsic in reality, nor are they subjective and a matter of
whim: they are objective facts that must be discovered (deduced from the basic
principles while inducing the new relevant facts) within a framework of rights.
The laws governing a corporation are simply the standardization and explicit recognition
of the application of individual rights by the government, i.e. the laws
protecting the right to free speech are not "legal fictions" created
by the government, but are laws based on the this right. For example, if I can
sell you a good, under the condition of "limited liability" -- well so
can a corporation. If it is illegal for me to pollute your home (pollution being a violation
of rights), then so it it illegal for the corporation.
Isn't the right to form a corporation, really a "privilege" that can be
revoked at whim by the state?
The basis of treating a group of individuals who form a corporation as a
single entity are the rights of the individuals who make up the corporation, i.e. the rights of the shareholders, the rights of the corporate officers,
the rights of the employees (management, etc.), and the rights of all
individuals who choose to trade with that corporation under the terms of the
corporate agreement. The right to form a corporation is not
a "privilege" as socialists
allege, but is an inalienable right.
The definition of a corporation as
"An artificial person or legal entity created by or under the authority
of the laws of a state" (Blacks Law Dictionary) is only valid when
one understands that the laws of any proper state are based on the principle
of rights. The point is that the state has no authority to violate
rights.
But how can you treat a
group of producers and traders as a single entity?
The same way you treat a husband and wife as a single entity, as in a marriage. Or, the same way that
you can treat a group of men (gender neutral usage) as a single entity called "society".
The point to keep in mind is that all laws under capitalism are the
application of the principle of individual rights to various circumstances
(see Dr. Harry Binswanger's article on Objective Law).
What is the foundation of a corporation?
The foundation of a corporation are the rights of its members: specifically, the
right to state that one is entering trade agreements under the presumption of limited
liability (for the shareholders), and under a "fictional" corporate "assumed" name. All the
rights of a corporation are derived from those of its individual members; as such an
individual neither gains nor loses rights in their capacity as members of a corporation.
What is government's role in regards to corporations?
Government's job is not to regulate corporations and manage their affairs, but to
protect
their rights, just as they would any other member of society. Government's job is to treat a
corporation no different than any other citizen, granting it no special favors
(corporate welfare is just as wrong as non-corporate welfare).
My concern, loudly echoed by the left, is that limiting liability is to
limit responsibility?
The limits of liability are to not hold shareholders (who have no
control over the actions of the company) liable for acts of company
employees -- other then for what they invested into the company.
Limited liability means that only the assets of the corporation are held up as
"collateral" for its liabilities.
It would be
ludicrous to hold all the savings of an 80 year grand mother who invested $100
in a badly run corporation-which would be the case if she were in a
partnership. Limited liability means that only that $100 of the grandmother is
liable; and all her other assets not invested in that corporation qua
shareholder are not held liable.
Limited liability means that the
shareholders are not responsible for the decisions that they do not make -- only
corporate officers, managers, and employees are liable to the extent that they
make them.
What are the problems in
the legal framework of today's corporations?
There are some problems with corporations -- the idea that they are
government created "fictional" entities (as opposed to the application of individual
rights to an agreement between a group of individuals who decide to do
business as a single entity, i.e. 'trust' -- in the personal realm of affairs
this is what a marriage is). Essentially the problem -- like everything else -- is
the philosophical foundation underlying corporations. Corporations are privately created entities.
Suggested Reading:
America's Persecuted Minority: Big Business and What
is Capitalism? by Ayn Rand
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