[quote=harvey][quote=CA renter]If a person wants to be protected by limited liability laws, and if they want to put other people’s money at risk, then their compensation should reflect that. IMO, the top pay of an owner/executive in a limited liability corporation should be tied to the compensation of the lowest-paid person at the company. One could also include the compensation and security of shareholders and creditors. There are many possible ways to go about balancing risks and rewards.[/quote]
Wow.
Corporate limited liability protects shareholders. It means that shareholders can lose up to 100% of their investment, but not more.
You are a shareholder. Your pension fund is a shareholder. Millions of ordinary Americans are shareholders. Limited liability applies to all shareholders.
You are protected by limited liability because you cannot lose more than what you invested. If one of your investments fails, no one can sue you and ask for more money. If a CalPERS manager chooses a losing stock, nobody will come after you for compensation. That’s a good thing.
This sentence:
[quote]If a person wants to be protected by limited liability laws, and if they want to put other people’s money at risk […][/quote]
…is complete gibberish.
The person protected by limited liability IS the “other” person providing money.
[quote]IMO, the top pay of an owner/executive in a limited liability corporation should be tied to the compensation of the lowest-paid person at the company.[/quote]
Oh, so now I’m seeing where the gibberish originates. Of course, it’s your disdain for CEOs. Except that limited liability laws have nothing to do with executives or employees. They don’t protect executives from anything.
Yes, there are laws that protect managers from liability, but those aren’t what is called limited liability. These laws protect managers from shareholder lawsuits. They protect managers from being sued when businesses don’t do as well as expected. They free managers from the fear of making mistakes.
You once said that you are a manager. That means the shareholders have agreed to compensate you for services and have entrusted you to make decisions. As you know, sometimes things don’t work out because of things outside your control. Would you be a manager if you could get sued when your employees don’t perform or some external factor caused your project to fail? Few people would.
Legally, you are in the same category as the CEO, CFO, or any other manager. Yes, you are one of them! You cannot be sued by shareholders if they lose their investment. They can fire you but they can’t make you compensate them if they decide that you did a poor job as a manager. That’s a good thing.
Limited liability actually does much to protect employees. It is quite common for corporations to continue operating under bankruptcy protection – some of the major airlines have been operating for years during bankruptcy restructuring. Without limited liability, these companies would simply shut down and there would be no jobs.
You really need to learn about how this stuff works before you rant about dismantling the entire economy and replacing it with something you can’t even describe.[/quote]
There you go with your reading comprehension problems, yet again. Apparently YOU need to learn more about these things before you start flapping your gums about them.
[quote=CA renter]
And your reading comprehension problem rears its ugly head, yet again. I’ve never said that limited liability shouldn’t exist at all, just that the rewards and risks should be balanced. If the risks are limited, then the rewards should be limited as well. And I’m referring to the broader concept of limited liability, too, not just where debt and creditors are concerned. Liability for tort actions — and who is responsible for insurance and legal defense costs of an individual officer/executive/shareholder — also fall under this umbrella. Limit the liability, limit the rewards.
[/quote]
Once again, because you keep failing to grasp this: risks and rewards should not be divorced from one another. I am referring to ALL types of risks and rewards. I have repeatedly noted that I was referring to owners and executives/decision makers (who are often one and the same, BTW), and referred to a variety of ways that liability is limited. In the case of traditional limited liability, those debtors are the shareholders, and the creditors are lenders, vendors, employees, customers, and other parties who are affected by the actions of a company and its managers/owners.
What you’re advocating for (risks and rewards being divorced from one another) has already destroyed our economy. Almost every financial crisis happens because of a disconnect between risks and rewards. As a matter of fact, almost any man-made crisis is usually caused by an imbalance between risks and rewards.
How many trillions of dollars have been lost because of the financial crisis and all of the manipulations? Don’t forget all of the foregone interest earnings by those on fixed incomes, along with the lost purchasing power of fixed-income earners, including workers. It is well into the trillions, and still growing. The costs have just been shifted from those who caused the financial crisis to those who didn’t have anything to do with it (including public employees who’ve been scapegoated for the problems created by the financial industry).
And your example of BK being good because (SOME of) the airlines continued to function through BK is silly. The airline industry wouldn’t shut down just because some companies failed. If airlines fail, new ones would spring up almost immediately, or other airlines would absorb both the capital of the defunct airline and their customer base, as long as the demand for air travel remained the same.
