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Saturday, November 21, 2009

Re: Public Feedback - Plank 2.6

Our platform from 1990 (or maybe 1988) to 2004 said "we would eliminate special limits on the liability of corporations for damages caused in non-contractual transactions".  A PlatCom consolidation proposal accepted in 2006 replaced this with language saying corporations "must enjoy no state-sponsored advantage".  My problem with the 2004 language was that it suggested we opposed limited liability for shareholders and limited partners.  However, I share Marc's concern.  I could live with the vague 2006 language, or I could support something like this:
"We defend the right of individuals to form corporations, cooperatives and other types of companies based on voluntary association, as long as ultimate responsibility for each non-contractual liability of the firm is accepted by at least one of the individuals in it."
As far as I can tell, a corporation is fundamentally just a scaled-up limited partnership that has no general partners. The crucial question is: would capital formation be threatened by a requirement for each corporation to have at least one liable general partner? I suspect that it wouldn't. If corporations are equivalent to scaled-up limited partnerships, then the traditional leftist argument against limited shareholder liability evaporates -- unless they are against limited liability for limited partners. I don't see how they could be, since that in turn seems equivalent to a transferable contract that pays a share of firm income and is a particular sort of claim against the firm's assets upon liquidation. There's nothing wrong with that under libertarian theory.