Monday, March 14, 2011
The Trib and Bill Morem

By Gordon Mullin

It’s interesting to see how two people, with roughly the same experience, education and background can come to different conclusions concerning one of the foundation institutions of our world- companies.

Our own Bill Morem in a recent column in the Trib (Revolutionary solutions to battle ‘corporatocracy- March 10) obviously doesn’t like corporations and if his proposals for dealing with these malfeasants come to fruition, it would end civilization as we know it. I reach too far you say, let’s see.

It’s clear that Mr. Morem (and many others) view corporate interests to be opposed to ours, the rest of us folks. I don’t. I see corporate interests as aligned with mine and yours; we’re on the same team. When corporations as a whole win, we win. When corporations lose, we lose.

Let’s step back and get a picture of what a corporation, or a company, actually is. It’s a legal entity that has all the rights and responsibilities of individuals. It can enter into contracts, buy and sell property and do fairly much as we citizens can do. Yet like a church, a non-profit, or a social club, it’s not human. It’s an entity that exists to serve a purpose- just like a church, etc.

And it’s purpose is to create products and services, income, jobs and wealth. What’s not to like here?

And it can do this only because of the existence of one of the cornerstone ideas of our modern world- limited liability.   This allows people who never met each other, acting as investors, to pool capital collectively and organize management systems all for the purpose of creating products and services the sale of which will (hopefully) produce a profit which will be shared by the owners of the stock. Yet, and here’s the key point of the ‘limited liability’ system, the shareholders’ potential liability does not extend beyond the company itself. In bankruptcy or, for example, environmental regulatory fines, the company’s assets and income are at risk but not the shareholders’ personal assets and income. Hence the shareholders’ liability is limited to that which is invested.

Imagine who would invest in a company if this were not the case; if each shareholder were potentially liable for the debts, fines, and actions of management. Answer-no one. No investors, no company, no goods and services, no jobs, no income, no wealth creation- you get the picture.

When Mr. Morem advocates ending “corporate citizenship by stripping corporations of the right to exist as people” he is asking for the end of the free market and the destruction of the greatest wealth creating machine in history.

Hands up anyone who doesn’t currently reap the rewards of this world wide system and I’ll show you someone who does not understand the world as it is. And by the way, as an incident of this, it creates jobs hence income and wealth from which we pay taxes. No companies, no jobs, no taxes, unless you’d like to go back to the feudal system of lords and serfs when taxation was substantially more painful.   And let me remind government employees- no taxes, no government, no jobs for you either.

The mistake that Mr. Morem makes is confusing humans’ bad behavior when acting in this sector of our world  and thinking that it is a characteristic of the sector itself when, I submit, it is human bad behavior acting out while in the corporate world. There’s a difference. We all know of situations when people act badly, witness the on-going scandal of the Catholic church concerning the cover-up of sexual abuse by priests. Should we then call for the elimination of the existence of churches? Strip all religious institutions of their right to exist as separate legal entities because of the actions of a few? No we should not.

Mr. Morem further advocates, like many others, that companies should be restricted in circumstances in which he presumably feels other entities can operate. I disagree. In situations where I as a citizen can act, so should a company be able to, or for that matter, a union, a church or the Lawn and Garden club.

But let me support wholeheartedly his call to reduce corporate welfare. I too would like to see the end of handouts, subsidies, tax breaks and preferences, but ended for all. Too big to fail?- let them fail.

I frequently read similar sentiments concerning companies in the press, on the web and elsewhere. At base, the underlying premise of those who bemoan the excesses of the malevolent corporation do not view companies as I do. I see them as flow-through entities. If a company makes a pot full of money, that does not make me worse off; it makes me better off. It sold a product or service with such efficiency to sufficient number of people, all voluntarily on both sides note, that they made a huge profit- I say great. Let’s have more of it.

And while we’re here, let me point out the obvious that it is the free market, acting through the corporate sector that creates jobs. Want more jobs? Want us to climb out of this recession? Then unburden free markets, lighten regulation and drop corporate taxes just as low as possible, zero is a good number, and let companies do what only they can do- create jobs and income.
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