I’ve been in D.C. the last few days, and I’ve been chatting about this issue with a number of people. I think it might make for an interesting conversation here.
We libertarians are regularly accused of being corporatists, despite a wealth of evidence to the contrary. But what are the arguments in favor of keeping the legal protections that define corporations?
It seems to me that there are a number reasons libertarians might support doing away with them. The most obvious is that corporations aren’t remotely free market, and there’s really no incentive for them to be. If your sole duty is to your shareholders, rent seeking—using your political influence to get the government to pass laws that restrict competition and hurt your competitors—isn’t just a good business strategy, it’s really an obligation. Same with other issues like the use of eminent domain.
Just from observation, it seems to me that the kinds of people who rise up to lead publicly-held corporations tend take a pretty namby-pamby, go-along-to-get-along approach to free markets. You rarely see a corporate executive angrily stand up to politicians or regulators who abuse their power. There’s very little to be gained from it. In my experience, the hardcore free market types in the business world tend to be people who have started their own businesses, and they tend to be partnerships or sole proprietorships. Which makes some sense. When you don’t have shareholders to report to, there’s more room to act on your principles. There also seems to be something inherently wrong with a legal structure that shields people from any personal financial ramifications for the decisions they make. We libertarians understand the problems that stem from shielding government actors from any real repercussion for their actions. Seems like the same would apply to corporations, and explain some of the pretty awful things we find corporations doing from time to time.
But I’ll confess that this is well outside my area of expertise. So I hand the question over to you. Should we do away with corporations? If not, why not? If so, what sort of legal/organizational structure should replace them?
It’s obviously never going to happen. But I think it’s an interesting question.