They don't bleed when you cut them

Economic power is concentrated in the hands of a few giant multi-national corporations. Apologies for no attribution but I can't remember where I found this diagram.
It's a strange world, and getting stranger by the minute. If you're not part of the solution you're part of the problem.

I don't know what the solution is, but we all know what the problems are. And if people of goodwill and strong will put their heads and hearts and hands together, we can help steer the doomed Titanic of human culture out of the path of the iceberg of human greed and selfishness.

IMHO many of the problems are the direct result of the actions of large corporations, especially 'multi-nationals’.

I think the following two actions would help address many of the problems we face (and have caused). To implement either or both will be very difficult, but game-changing if done successfully.

  1. Remove the protection corporations enjoy as 'legal persons'. A legal person can “…sue and be sued, enter contracts, incur debt, and own property” (Wikipedia 22 July 2016).
  2. Remove the protection of limited liability for shareholders, partners and directors. Under limited liability, “a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership” (Wikipedia 22 July 2016).

It's not a god-given right of a corporation to be treated as a legal person. No, in fact the opposite. It's a get-out-of-jail-free card that flesh-and-blood people gave to corporations roughly three hundred years ago. Legal personhood enables corporations to enjoy the benefits of being a flesh-and-blood person, with few of the responsibilities or accountabilities.

Corporations have the right to sue other corporations and flesh-and-blood people. If the corporation wins the legal battle, it wins. But if it loses, it's only a draw not a loss, thanks to limited liability. And conversely, if a corporation is sued, and loses, and damages are awarded by the Court, shareholders pay the damages. But each shareholder's liability is limited to the value of their investment, which for each shareholder is much less than the total value of the damages.

Here’s an example. Say you buy two shares in an oil-prospecting company. The share price is $10, so the value of your shareholding is $20. The total market value of the company -- its “market capitalisation” -- is $10 billion.

One day the directors decide to drill for oil in an area known to be geologically unstable. The directors instruct management to implement the decision. Management supervises the employees who do the work to implement the decision. Sadly, the drilling results in a terrible accident that damages the environment to the tune of $50 billion.

The company is sued, and loses the case. The Court finds the company liable for damages in the amount of $50 billion. The company’s share price plummets to $1 per share, so the value of your shareholding is now $2. The market capitalisation of the company plummets to $1 billion. The company goes out of business. Liquidating the company yields $1 billion.

As a shareholder, your exposure to the liability is limited to the value of your investment. So you lose $2 (arguably $20, but the amount doesn’t matter in the context of this example).

The directors who don’t own shares lose nothing. The liability of the directors who do own shares is limited to the value of their shares.

Most of the managers who supervised the drilling lose nothing financially. The liability of the managers who own shares in the company is limited to the value of their shares. All managers lose their jobs.

Most of the employees who performed the drilling lose nothing financially. The liability of employees who own shares in the company is limited to the value of their shares. All employees lose their jobs.

The community loses $50 billion.

I find it strange that ethical people with high standards and strong values do things as employees that they wouldn’t do in their personal capacity. People seem to check in their personal values at the door, when they arrive at work each morning.

Actually it’s not that strange. Fear is a powerful motivator.


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mgeorge said...

The main problems: (1) The basis of the principal, global religion - capitalism - is exploitation of people, exponential growth and limited vision (expecting no surprises) (2) We are inextricably restricted to the planet we have managed to wreck; the most demented, fundamentalist nightmares are coming true (3) Conditions will be nightmarish for centuries before they get better; however, the more sudden and extensive the cull, the better the survivors' chances.

The main changes that would have helped: (1) Destroying fascism and making governments serve the public (2) Localisation, applicable to trade, ownership, governance (3) Frugality and limits to wealth (4) Sustainable livelihood and industry (5) Public access to the commons (water and land to grow or extrat food) as an alternative to universal income (5) The precautionary principle.

masterymistery said...

Hi mgeorge
A comprehensive if depressing overview. I note "would have helped" as pointing to those that got away!
Thanks for your comments.