Executing Corporations

[drplokta]

Theres a meme going round "I'll believe that corporations are people when Texas executes one". But Texas "executes" hundreds or thousands of corporations per year, most famously Enron. Bankruptcy is the exact equivalent of execution for corporations -- it's the state exerting its power and causing the corporation to cease to exist. So I guess that corporations are people.

Comments

[pnh.livejournal.com]

Actually, at least in the US, what we call bankruptcy is a poor parallel to the execution of individuals. Lots of companies go through bankruptcy and emerge re-organized and with a second chance, just like individuals. I suspect the term you actually want is "liquidation," the state-administered selling off of the assets of an enterprise that has failed beyond beyond the ability of any state-supervised reorganization to revive it.

[autopope.livejournal.com]

As I understand it, there's a lot more scope for bankruptcy protection and reorganization in the US legal system than in the UK -- it's pretty rare for a company to go bankrupt over here and not be broken up for spare parts/liquidated.

(This is, incidentally, one area where I wish the UK would adopt US practice -- up to a point: obviously it can be abused, but giving large companies that have just encountered a cash flow pinch or a temporary obstacle some breathing room would be hugely beneficial to our industrial competitiveness. Unfortunately for the past 30 years or so UK economic policy has been geared towards satisfying investors rather than makers, so I don't expect that change to happen any time soon ...)

[flick.livejournal.com]

In England, at least (not sure about Scotland), there are provisions for companies that are just having a cash flow pinch and wish to avoid their creditors instigating insolvency proceedings while the problem is sorted out. They include both formal and informal voluntary agreements, but actually this is entirely the wished-for aim of many companies going into administration, and is worked towards by the administrators: liquidation is the next step, not the same thing.

[del-c.livejournal.com]

Execution of a corporation would be the destruction of one that still has a vital force, but has committed such acts against the rest of society that the state condemns it to be destroyed against its will. What you've described, in "corporation as person" terms, is suicide or starvation, when the corporation has lost the will or means to live. The state just agrees to the "do not feed" and "do not resuscitate" orders.

But because corporations are not people, what the state is doing here is not allowing anything to die, it's just allowing the "company", in the old sense of a group of investors in an enterprise, to dissolve and walk away, as individuals, from the debts they have run up.

[purplecthulhu.livejournal.com]

Indeed. The full analogy would be the closure of a company that is fit and healthy in business terms but whose actions have been such as to require punishment. The typical punishment for a business is a fine, but that doesn't work so well if the company has a lot of money or political influence (see eg. BP or Exon).

Corporate execution would be the forcible closure of a business that's still making money.

Quite what the middle ground between fine and execution, corporate imprisonment, might be is an interesting question...

[autopope.livejournal.com]

Yes, but where do we draw the line? What acts should require a corporate death penalty?

Here's my take, bearing in mind that:

* It is [arguably] legal and legitimate to make products that are intended to kill people -- guns, bombs.

* It is legal to make products that can kill their operators if the operators are inattentive (automobiles, airliners).

* It is legal to make products that sometimes kill their users, and in so doing impose externalities on the rest of society (cigarettes, booze).

So the place we should draw the line is:

* Where a company exists solely or primarily as a cover for breaking the law. (e.g. a Mafia money-laundering front.)

* Where a company produces a potentially lethal product and deliberately attempts to conceal or deny its lethality (Taser International, I'm looking at you) -- NB: demonstrating due diligence in acting to reduce the risk to the public should be an absolute defense.[*] (We don't want to shut down Boeing the first time an airliner crashes due to a broken component -- unless Boeing systematically deny it and try to cover it up in the full knowledge that further incidents are likely.)

* Where a company funnels resources to third parties with the goal of evading, diverting, or co-opting a regulatory framework. This is not limited to companies that produce dangerous products. RIAA, tobacco lobby, Goldman Sachs: I'm looking at you. The products the RIAA represents (music) don't kill, but their attempts to capture the governmental regulation of copyright is profoundly toxic to the public interest. It's also implicitly an enabler for, for example, Big Coal's attempts to capture environmental legislation or regulators (which will result in massive damage if it isn't stamped out). Bluntly, former employees of corporations should be barred from employment by government regulators, and vice versa. (Yes, this makes the regulator's job harder because they lack inside experience. On the other hand, it makes regulatory capture less likely.)

Have I missed anything? Can I have my pony, now?


[*] And a defense against lawsuits alleging negligence, too, otherwise this can't work.

[del-c.livejournal.com]

Why kill profitable enterprises at all? Because they aren't built like humans, we have options available to us that aren't options for human killers or thieves, outside science fiction.

For instance, mindwipe and return to society as a productive "citizen". Cancel all the shares, sack all the officers, and take the company into administration. After appointing new officers, either run the company as a state-owned enterprise or, for the less socialist among us, sell it or its fully-working autonomous parts as going concerns to new owners.

"Execution" returns only the book value of the company to the market, if the state sells off the office chairs, etc. Sale as a going concern returns both the book value and the goodwill, which, if we believe the market, was something of real worth.

[autopope.livejournal.com]

Well, for start with the pernicious doctrine (in US law) of corporate "personhood" is a huge problem. Ditch that and we can treat them as non-human entities -- without, for example, the right to political free speech (which is used as a shield for lobbying activities).

But a more serious issue is: the enterprise may be profitable, but is its continued existence beneficial to society at large? Consider the whole investment banking/subprime/CDS/CDO mess. Clearly it was beneficial to the participating organizations -- until it all collapsed in a heap -- but as far as civilization in general was concerned, it's hard to see what it produced that was of value. Again: cigarette manufacturers?

I can create lots of economic activity (and profitable activity at that!) by throwing bricks through windows (thus giving glaziers and insurance companies a lot of exercise). But that doesn't mean that doing so is good for the public commonweal. I submit that there are corporations whose business model is the equivalent of brick-throwing, i.e. it generates lots of turnover but is actively damaging to the public interest. And we don't want to turn them around and set them back up on their feet: we want to shut such activities down, permanently.

[del-c.livejournal.com]

Trying and executing corporations is the answer to a different problem than "is this sector of the economy a toxic mess?", and the answer to that problem is something other than trying and executing corporations. If a bank is a bad bank, it can be a good bank, and rehabilitation can set it on the road to being one. If an entity just shouldn't exist at all, but does thanks to the incentives in the environment, then you've changed the subject to one different from the one under discussion.

To stretch the people analogy again, you're looking at incarceration and lethal injection as if it were a good way of cleaning up a bad neighbourhood, when maybe employment and infrastructure investment would be more to the purpose.

[watervole.livejournal.com]

Bankruptcy can be used to a company's advantage.

Carry out massively environmentally damaging operation. Grab the profits, pay massive dividend and bonus and sell anything useful to another company you own. Declare bankruptcy and escape paying for the environmental clean up afterwards.

It's quite a popular stunt.

[autopope.livejournal.com]

Also: Phoenix companies -- do business, get suppliers used to you paying on 30 or 60 or 90 day terms ... declare bankruptcy, sell your assets to a shell company for a nominal fee, and resume doing business without actually being under any obligation to pay your suppliers. If your suppliers are interchangeable, this works like a dream.

Yes, I've been bitten by that one (during my freelance computer journalism days).

[watervole.livejournal.com]

Nasty. I've heard of several cases of that in the building industry.

[incy.livejournal.com]

But corporations are not people.

[voidampersand.livejournal.com]

Actually, bankruptcy for corporations is the exact equivalent of bankruptcy for individuals. People don't get executed for their debts.

There is no exact equivalent to execution for corporations. The closest is anti-trust. But the breakup of AT&T did not convince me that AT&T is a person.