American Consequences - August 2017

You need to get to know the "legal person" that you're dealing with. " WHAT ARE CORPORATIONS FOR?

And then what would we have had? Thousands upon thousands of Cadillacs, Buicks, Chevies, Saturns, and Pontiacs rusting away in prison, rioting for better gasoline, and trying to get parole to sit on used-car lots. (With the Pontiac Aztek in solitary for its own protection so that the other vehicles didn’t beat it into scrap metal for having such ridiculous styling.) But there is another, more serious, aspect to the “legal person” status of corporations. This issue of American Consequences is devoted to examining the fact that corporations, as “legal people,” turn out to have personalities , just like flesh-and-blood people do. Corporations take on a life of their own. Depending on how corporations are managed, a corporation can be as likely as the next person to do you dirt. Or, as likely to be corporation, there’s more to the decision than numbers on a spreadsheet. Especially if you’re buying the shares as a long-term hold. You need to get to know the “legal person” that you’re dealing with. The purpose of a corporation – with its aggregation of resources, limited liability, and independent legal standing – is to watch your back. Make sure it’s not back there picking your pocket. caring, sharing, and benevolent. When deciding to buy shares in a

Real corporations don’t come back into existence until the British Parliament’s Limited Liability Act of 1855 and Joint Stock Companies Act of 1856 . And corporations don’t take their true contemporary form until the House of Lords decided the Salomon v. Salomon & Co. Ltd. case in 1896. The Salomon v. Salomon ruling confirmed that corporations are “legal persons.” Otherwise corporations wouldn’t have legal standing in court. You’d own shares in something that was imaginary – shares in flying ponies and candy-flavored rainbows. (Not that this can’t happen anyway. For instance, if you bought Snapchat stock.) Corporations have property rights. Corporations can make binding contracts. Corporations can sue and be sued. Corporations can be convicted of serious crimes... And here is where “legal person” does get a little silly. I guess a corporation can, metaphorically speaking, be strapped to the lethal injection gurney. But how do you put a corporation in jail? During the 2009 General Motors (GM) bankruptcy, some of us would have liked to see GM sent to the slammer. But taxpayers would have had to build some enormous new federal correctional facilities to lock up GM’s $82 billion in assets.

90 | August 2017

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