So many things to say. The only argument offered why the corporation is more than a sum of contracts is limited tort liability. But as I said, that assumes that there is some inherent "LAW" that says the principal employer should be strictly liable for the torts of the agent, and that is simply not the case. Respondeat superior is a state imposed liability imposed for policy reasons. I am very surprised that members of this list would act as if there is an objective Platonic law and limited liability is a deviation from that law.
Second, I think the argument that limited liability is the primary benefit of the corporation is simply incorrect. If limited liability were removed from corporations, there would be a massive shift from equity financing to debt financing. In other words, investors will call themselves creditors and not shareholders. The line between equity and subordinated debt is very close, but the courts have no problem calling one equity and one debt. Are you going to take the position that creditors should be strictly responsible for the tortious acts of their borrowers (assuming they do not control the acts of the borrower)? However, corporations would continue because of transaction cost advantages over partnerships and joint ventures. Jim Devine's insistence that limited liability permits shareholders to ignore external costs is simply not realistic. It ignores that the corporation remains liability for its tortious conduct, and shareholders care about their investments. To the extent that the corporation itself is not responsible for externalities, that is a different issue entirely unrelated to limited liability. I have been accused of being "reductionist." According to dictionary.com, reductionsist means: "An attempt or tendency to explain a complex set of facts, entities, phenomena, or structures by another, simpler set: 'for the last 400 years science has advanced by reductionism... The idea is that you could understand the world, all of nature, by examining smaller and smaller pieces of it. When assembled, the small pieces would explain the whole' (John Holland)." Based upon that definition, I accept the label. It is better than being "wrong." What really are we fighting about? David Shemano
