I believe the judicial system does do the fine as you mentioned, but the prosecutors have to be realistic and settle out of court at the risk a skeptical judge/jury.
Without LLC laws, you could go after personal ownership too. Privately owned company means there is a few billionaires to have their wealth confiscated. Publicly, our 401ks empty + risk of losing our homes.
Isn't that insane to think about? What would a world look like if that was the case. Would companies be incredibly responsible? Would investors be incredibly responsible?
I don't claim to say this is the best economic system, but it might solve our climate crisis by forcing people to be liable for themselves and what they own.
I think it's the fact that you can get a company incorporated to do pretty much a vague _anything_ is the problem. There should be an ounce of thought by the State as to if what the person wants a company for is actually useful for society before granting them immunity.
The second major issue is that the State is never willing to dissolve a company once it reaches some size no matter how much wrong doing it does. Like Walls Fargo willfully creating fake accounts to charge consumers money should've just be an instant disqualification for a banking license.
Second, incorporation does not protect the business, it protects investors. Without it, investors would be general partners and would be personally liable for anything the business does, including all debts and torts, even if they had no active role in running the business.
Third, where owners of a corporation or LLC do participate in running a business, they often can be held personally liable for the debts and torts of the business. This is called “piercing the corporate veil” and happens all the time in lawsuits against small businesses.
The problem is not that a corporation can do something that an individual can't. It's that you can't punish a corporation the same way you can an individual. Corporations cannot sit in a jail cell.
> Second, incorporation does not protect the business
Your Third point kinda disproves this. You have to "pierce the corporate veil" in order to hold individuals of the LLC liable and this is generally w.r.t. an LLC commingling its funds with the owners funds. Not to do with an Owner doing an undesirable/illegal act (say fraud).
> Third, ... happens all the time in lawsuits against small businesses.
I'm not really sure any of these points counter-act anything I wrote. I explicitly called out Wells Fargo and you responded that small business routinely get attacked. Wells Fargo is not a small business.
Veil-piercing is relevant when the business is insolvent or can’t pay the judgment. So the corporate entity isn’t protecting the business in that case.
Re Wells Fargo, would you hold ordinary shareholders who do not participate in the management of the business liable for debts of or crimes committed by Wells Fargo?
I think it would be a better world if investors were held responsible for the wrongdoings of the businesses they finance.
IMO, what really needs to be reigned in is this blanket extension of natural/individual rights to synthetic entities that receive limited liability protection. That government-granted charter with limited liability means that they're not merely groups of people exercising individual rights collectively, as the supreme council has decreed.
So, no more Kevlar for police protection? The problem with the idea of a corporate death penalty is that it would shutter the corporation, shock the supply chain for critical materials, terminate the employment of thousands of people, and devastate their communities (e.g. because employees have families and those families consume food and stuff from the local economy which, in turn, supports other families).
It's obvious why we haven't adopted it as a viable punishment.
You forgot 'think about the children' part, but in this case, it actually goes against that fucked up corporations. We may have to see half of our kids infertile in a decade or two and shitload of birth defects that can bankrupt any health services (in case of US rather half of population), no amount of thinking about Kevlar or Goretex (for which there are tons of great alternatives too and I stopped using their stuff in mountains long time ago) is going to fix that
A Chapter 11 would allow the same staff who caused the problems to join the new companies. Unless the people who caused the problems are personally & criminally held liable, nothing would change.
I'd prefer we do both. Hold the actual bad actors accountable AND also kill the company and hurt the shareholders. Anybody involved needs to have incentive to stop the bad behavior.
I'm tired of people using corporate shells as a get-out-of-jail card when they do things that are illegal and/or knowingly bad for society/environment.
I sympathize with your frustration, but this statement implies a Minority Report level of knowledge of the future. What happens when executives become negligent after being hired? Are shareholders still to blame? What happens when some activity that wasn't known to be unacceptable becomes known to be unacceptable?
The shareholders willingly take a financial risk in pursuit of wealth. The people in the public harmed by the corporate actions did not willingly accept the risk to their health. The public people harmed were victimized by the corporation & the people involved with the corporation. If the shareholders have skin in the game, they will be more motivated to ensure that the corporation does not endanger the public in any way. The officers' fiduciary duty becomes aligned with public safety as well.
If the shareholders are simply chasing the bottom line without regard to the consequences of the company they invested in, there is no incentive to maintain public safety. History has shown what happens...companies repeatedly harm the public with a relatively minor punishment which is less than the money they made off of harming the public, if the company is punished at all.
Corporations are chartered for the betterment of society. If a corporation is harmful to society, anyone involved with those actions should be aggressively removed from society under criminal statute, with even greater fervor then prosecuting a murderer, rapist, or any other criminal who impacts less people than corporate criminals.
True. They're just bankrolling it. I think it's totally fair to hold them responsible as well. Perhaps it would make investors pay more attention to what they're really supporting with their investment money.
But we did. It used to be a tool that was implemented when a corporation behaved egregiously badly. At some point, though, we stopped (I think it was in the 40s, but I'm not sure).
We really, really need to bring it back. There is no other way to hold them in check.
They're basically getting off scott free, and they made tens of billions of dollars in profit for only having to pay 1 billion in damages.