Stephan Kinsella, “The Role of the Corporation and Limited Liability In a Free Society” (PFS 2013)

by Stephan Kinsella
Stephan Kinsella, “The Role of the Corporation and Limited Liability In a Free Society” (PFS 2013)

Stephan Kinsella’s speech for the 2013 Annual Meeting is now available (see below). For others, see the links in the Program, or the PFS Vimeo channel. Other speeches will be uploaded presently.

Kinsella’s talk is podcast on the Kinsella on Liberty Podcast, Episode 100. The video and slides are below. I will post the Q&A panel later, which contains several interchanges between me and Sean Gabb about this issue. See also Sean Gabb’s article Stephan Kinsella on Limited Liability: Notes of a Speech Made to the 2013 Meeting in Bodrum of the Property and Freedom Society, to which I intend to reply at a later time.

For background, see:

Stephan Kinsella, “The Role of the Corporation and Limited Liability In a Free Society” from Property & Freedom Society on Vimeo.

One comment

  1. Limited liability and the idea of a corporate body is an ancient concept – going back to Roman burial clubs and so on.

    It was extensively developed by Church Law in the Middle Ages – dealing with such things as charities and so on. But there had always been for-profit examples (and not just trading monastic bodies and so on). Merchants who formed an association with a common “trading pot” risked the money they put into the venture (not the shirt on their backs) and people who choose to trade with this body corporate knew they could take legal action against its assets (not the total assets of all the individual members). If they wanted to trade with a merchant who was risking the shirt on his back then they could – it was their choice (the choice of the customers and suppliers).

    Just as today one can (for example) go to Lloyds “names” for unlimited liability insurance if one really hates the limited liability concept (but, please remember, one must pay people to risk the shirts on the backs – one can not demand unlimited liability and also demand the same prices that limited liability enterprises charge).

    However, that does not mean that the present position regarding “Corporations” is perfect – it is far from perfect.

    The vast web of regulations that has developed from the modest start of 19th century statutes, has progressively chipped away at share holder (owner) control of corporate managers – the Financial Times newspaper things that having control of a productive enterprise taken away from the owners of that enterprise is a jolly good thing, but (as usual.) the “FT” is wrong.

    Also there is the undermining of ownership itself

    Tax law (specifically inheritance tax “Death Duties”, high rates of individual income tax, and Capital Gains Tax) have transformed ownership.

    As recently as the early 1960s in the United Kingdom most shares were still owned by individuals – now only a small fraction of shares are.

    To be blunt most large corporations in Britain now have no real owners – they are groups of hired managers responsible to other hired managers (in Pension Funds and so) with no real owners “in the loop”. And this is not a healthy position – not a healthy position at all.

    “What should be done?”

    An end to inheritance tax and “Progressive” income tax, and an end to Capital Gains Tax – plus an end to the “cheap money”. “low interest rate” policy (which benefits large connected enterprises).

    Over time this would see a rise in both owner-manager enterprises and family firms (the norm before the First World War) and where corporations continued they would be more like German corporations – or would be if the web of pro manager (anti owner) regulations were removed. Compare what a German corporate manager tends to get paid with what a British or American corporate managers tend to get (that indicates who has the powerful position – the hired managers or the owners).

    Of course there is another approach – smother the corporations with taxes and regulations, as seems to be happening in the United States.

    I do not favour this approach – but it is interesting that the United States (which the “libertarian” left pretends is controlled by corporations) actually has some of the highest corporate taxes and most extensive sets of regulations in the Western World.

    And it is having an effect – more and more American enterprises are individually owned (filing under the income tax rather than the corporation tax – although the recent increase in the top rate of Federal Income Tax to 39% may change that).

    And. for those who seek forms of limited liability without becoming a “Corporation” (and risking prison for clerical errors – under the demented regulations for corporations that the United States has) forms of partnership are becoming more popular.

    The wheel goes full circle………

    As for the question of legal liability for wicked deeds – there is often misunderstanding of this.

    Whether you are an individual owner, a shareholder or a partner, or a manager – if you personally gave an order that damaged the body or goods of someone else you remain PERSONALLY liable.

    Not just the money you put in the “trading pot” – but the shirt on your back also.

    This has always been case – but many people are under the false impression that being part of a body corporate protects them. In the case of a personal order from them – it does not.

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