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Author Topic: Corporate Limitation Amendment
starLisa
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So over on the Thoughts on the Election thread, we got to talking about corporatism, and what could be done about it.

So I wanted to start this thread to discuss what we might want to put into a possible Constitutional amendment.

I'm very serious about trying to start a grass roots push to get this amendment passed, because as Adam said in the other thread, "Honestly, its very close to the *only* issue of consequence right now, because until it is solved (or, at least, mitigated), no other issues can really be addressed."

I couldn't agree more.

The two major directions I've seen with this sort of thing are the moderate and comprehensive solutions. A moderate solution is one which leaves corporations alone and focuses on making a fence (so to speak) between corporations and politics. A comprehensive solution is one which tackles corporations themselves, as legal entities.

I'm open to discussing either of these, or others, but I have to say that my inclination is to go for a comprehensive solution. I just can't make myself believe that a moderate solution can be found which corporations won't be able to evade.

So... I think we need to start with the core of the problem, which is the determination that corporations are "legal persons", which are covered under the 14th Amendment's equal protection clause. Here's a Wikilink on that subject. Despite the fact that this determination was never really made by SCOTUS, it's since been assumed to be the law, and there's little that can be done about it short of a Constitutional amendment.

Also, it turns out, at least based on Wikipedia, that corporatism refers to something other than corporate capitalism, which is, I think, what we want to fix.

There were companies long before there were corporations. Companies could be owned by a single person or by multiple people in partnership. The idea of a corporation is to create a framework which protects investors from liability. This protection from liability created an atmosphere that allowed for enormous investment, much of which might not have happened, at least not as quickly as it did, had the liability of investors not been limited to their investments.

So putting a crimp in this concept will, almost certainly, reduce investment, and consequently industry as a whole. The question is, is that a risk worth taking? Is it possible that the gains stemming from limiting corporations could outweigh any loss due to the reduction in investment? Or is it possible that a different model could be found to continue investment at modern levels?

There are a few ideas that I want to float. Some of which are more extreme (excuse me, comprehensive) than others, but that's just my thing. I'm eager to brainstorm on this with you all.
  • One idea might be to state explicitly that corporations are not to be considered persons under the law.
  • One idea might be to state that corporations cannot sue or be sued. That only persons can.
  • One idea might be to state that corporations cannot own property. That owning property, too, is something only persons can do, singly and in the aggregate.
Thoughts?
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LetterRip
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quote:
* One idea might be to state explicitly that corporations are not to be considered persons under the law.
I think that is reasonable.

quote:
* One idea might be to state that corporations cannot sue or be sued. That only persons can.
Could you expand on this? Would shareholders and executives be directly liable?

quote:
One idea might be to state that corporations cannot own property. That owning property, too, is something only persons can do, singly and in the aggregate.
Certainly a possibility. Are you refering to only capitialist corporations, or non profit, public benefit, etc. Ie churches and other NGOs.
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Pyrtolin
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quote:
The idea of a corporation is to create a framework which protects investors from liability. This protection from liability created an atmosphere that allowed for enormous investment, much of which might not have happened, at least not as quickly as it did, had the liability of investors not been limited to their investments.
That's not even remotely accurate at all. Limited Liability is a far more recent concept, from the mid 1800's. The original point of corporations was to pool investments from multiple people to fund ventures that no one of them could afford on their own.

Here are my thoughts-
* Clarify that corporations are not entitled to any constitutional protections; that "personhood" is a legal formality for the sake of expedience.

* Reduce limited liability protection to shareholders that either explicitly opt at share purchase not to never exercise the votes that their shares entitle them to (this to protect neutral investment funds that have an upfront policy to not vote; I know Fidelity, for example, holds such a position, I'm sure others do as well) and those that voted against whatever decision led to or failed to prevent the action in question. Allow shareholders to be held responsible regardless of whether or not they still actually hold the shares, so long as the statute of limitations applies.

* Require all corporate charters to state an explicit business purpose and allow them to be liquidated if they stray from that purpose or achieve it

* Only corporations whose express purpose is to lobby for a specific objective may participate in lobbying.

* No public official can work for any lobbying corporation or any corporation which they were involved in any way with regulating for at least 5 years after leaving office.

* Require all corporate charters to be renewed every 5 years

* Require corporations to register in any state they wish to do business in. Require that all business done in that state must comply with that state's regulations and be subject to that state's tax policies, as well as those of the state that it's based in. Where regulations overlap, the corporation can be held responsible for the more restrictive one.

* Any corporate copyrights automatically go into the public domain 20 years after they are first registered.

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Ben
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Pete, aside from possibly stating that corporations are not persons, do your thoughts or suggestions have any issues that prevent them from simply being enacted into law rather than by constitutional amendment, and what do you think might actually require incorporation into an amendment?
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Ben
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Pyrtolin, not Pete. Sorry about the mix-up in the comment Above. I'd been reading another thread he was on.
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Pyrtolin
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quote:
Originally posted by Ben:
Pete, aside from possibly stating that corporations are not persons, do your thoughts or suggestions have any issues that prevent them from simply being enacted into law rather than by constitutional amendment, and what do you think might actually require incorporation into an amendment?

If they're law the amount of money that it takes to undermine them (or ideological shift in the courts) is much lower. See, for example, the Citizens United case which just tossed out legislation and a century worth of precedent on a matter that till them seemed pretty solidly decided.

It's similar to the need for the 16th amendment to override the Supreme Court when it tried to knock out the income tax; adding it as an amendment gives much more staying power, for better or for worse.

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KidTokyo
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I completely agree that corporations need to be reigned in, but focusing on "personhood" is actually a bit of a non-sequitur. You're getting distracted by the term. Corporate personhood has never been legally the same as person-personhood.

Revoking or limiting "personhood" is not going to limit the corporation. Corporations have the power they do because their managers and directors are extremely wealthy. They are wealthy because, in America, and unlike most other countries, they have tremendous freedom to self-modify, to write by-laws and so forth regarding their own governance. In most other industrial countries, corporate governance is more strictly regulated.

America got into this mess because we incorporate at the state rather than federal level. States have competed to support the greatest contractual freedom, and thereby attract the most corporations and therefore the most corporate income tax. This is a system with corporate favoritism built into it as a form of unavoidable economic coercion.

What we need are federalized laws of incorporation -- just like the rest of the world has. These would clearly define things like when and how boards of directors are elected, what rights shareholders have, and so forth. In other words, the corporate form needs to be standardized.

Many don't like this proposition because it sounds too "big government." But the opposite is true. The more formal complexity and variety the government allows (i.e. supports) the more the government (through state court systems and legislatures) must be involved in contract litigation.

[ November 08, 2010, 11:43 AM: Message edited by: KidTokyo ]

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JWatts
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quote:
Originally posted by KidTokyo:
What we need are federalized laws of incorporation -- just like the rest of the world has. These would clearly define things like when and how boards of directors are elected, what rights shareholders have, and so forth. In other words, the corporate form needs to be standardized.

Many don't like this proposition because it sounds too "big government." But the opposite is true. The more formal complexity and variety the government allows (i.e. supports) the more the government (through state court systems and legislatures) must be involved in contract litigation.

Standardization of corporate bodies in the US would probably be a good idea in abstract. I have no idea of what the details would entail.
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KidTokyo
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quote:
Standardization of corporate bodies in the US would probably be a good idea in abstract. I have no idea of what the details would entail.
Actually establishing exclusively federalized incorporation would be too difficult for a host of reasons. But you could accomplish much the same effect by creating a regulatory base-line at the federal level. This could be a law passed by congress. You establish the standard baseline, and require that states regulate "this much or more, if they so choose." This would essentially federalize the process without the complete upheaval of the state courts and legislatures.

EDITED TO ADD: I suggest this method because it is easier to accomplish - and likely more effective - than a Constitutional Amendment. Amendments have a way of producing extremely unexpected results when judges get a hold of them.

[ November 08, 2010, 12:19 PM: Message edited by: KidTokyo ]

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starLisa
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Why not go all the way and say that the law only recognizes people. That a person or persons can enter into an agreement with another person or persons in a corporate framework, but that as far as the law is concerned, it's no different than any other contractual relationship. The corporation, as such, cannot own things, cannot bring suit, cannot be sued, cannot be taxed. That only the owners of the corporation can own things.

And more than anything, a corporation cannot own another corporation. That may be the single biggest problem.

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KidTokyo
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quote:
Why not go all the way and say that the law only recognizes people. That a person or persons can enter into an agreement with another person or persons in a corporate framework, but that as far as the law is concerned, it's no different than any other contractual relationship. The corporation, as such, cannot own things, cannot bring suit, cannot be sued, cannot be taxed. That only the owners of the corporation can own things.
In other words, make corporations illegal? There is no "corporate framework" if you rescind all those rights. And frankly, we need corporations. Industrial society depends on them.

Besides, what if a company pollutes your water supply? Do you want to have to sue a bunch of individual directors, all of whom are going to be pointing the finger at one another? Aren't you better off being able to sue the company as a whole?

quote:
And more than anything, a corporation cannot own another corporation. That may be the single biggest problem.
Well, no. That really isn't the problem. If corporations cannot buy other corporations you will have a very inefficient economy.

The problem is that corporations are unaccountable to the public. They enjoy too much legal privilege. Limits need to be placed on CEO salaries, for instance, and BoD elections need to be truly democratic (as opposed to 10 candidates for 10 seats).

Py mentioned limiting "business purposes" to one or several explicitly stated in the charter, and discontinuing charter immortality. These are both good suggestions (and, ironically, used to be part of normal corporate law in the 19th century, when corporations were more heavily regulated, believe it or not).

[ November 08, 2010, 12:35 PM: Message edited by: KidTokyo ]

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JWatts
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quote:
Originally posted by KidTokyo:
Limits need to be placed on CEO salaries, for instance, and BoD elections need to be truly democratic (as opposed to 10 candidates for 10 seats).

I think direct limits on CEO salaries would be a very bad idea. However, I would support legal changes to make mandatory yearly share holder voting on CEO (and other high corporate positions) total compensation packages.

The majority of share holders should be able to directly dictate the costs involved with high level compensation, instead of the current system which is far too easy to manipulate and allows high level executives to vote to pay each other large amounts of money without providing any kind of provable worth.

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G2
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quote:
Originally posted by KidTokyo:
The problem is that corporations are unaccountable to the public.

That's not really true. The public can punish a corporation by refusing to purchase whatever good or service the corporation provides. Boycotts, unfavorable press coverage, pressure from political interested (e.g. Rainbow Coalition) etc all have an effect. Corporations may not be 100% fully accountable but they are more accountable than, say, a Congressman or Senator.
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KidTokyo
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JW,

quote:
I think direct limits on CEO salaries would be a very bad idea. However, I would support legal changes to make mandatory yearly share holder voting on CEO (and other high corporate positions) total compensation packages.

The majority of share holders should be able to directly dictate the costs involved with high level compensation, instead of the current system which is far too easy to manipulate and allows high level executives to vote to pay each other large amounts of money without providing any kind of provable worth.

That's really the sort of thing I'm talking about. Not direct limits, but structural changes which allow shareholders and "the people" to apply the brakes.

G2,

quote:
That's not really true. The public can punish a corporation by refusing to purchase whatever good or service the corporation provides. Boycotts, unfavorable press coverage, pressure from political interested (e.g. Rainbow Coalition) etc all have an effect. Corporations may not be 100% fully accountable but they are more accountable than, say, a Congressman or Senator.
I don't agree. Corporations exist at the expense of everyone, not just people who purchase their products. And boycotts are only effective in exceptional circumstances. There need to be checks and balances in place as a matter of routine, not just as an occasional protest for publicly-exposed offenders.

[ November 08, 2010, 07:39 PM: Message edited by: KidTokyo ]

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