Corporate transparency

Owen Byrne owen@permafrost.net
Tue, 8 Jan 2002 22:25:08 -0400


> to those with capital to invest.  .:, w/o corporations, capitalism as we know
> it --- the kind of innovation-encouraging capitalism that has made us the
> economic torchbearer for the world --- doesn't work.  IMO, those corps (at
> least the private ones) also have to be opaque to make it work.
> 
Economic torchbearer to the world. Please! Now that the NASDAQ pyramid scheme
has collapsed and hitech companies are actually forced to respect GAAP (and 
kissing goodbye to profits) - I think things are heading back to the early 90s
where every economist in the US was trying to figure out why the US couldn't 
compete with Germany or Japan, or South Korea, or frankly, just about anyone.

And is there really any capitalism left in the US? Isn't competition a
prerequisite to capitalism? I suppose I'm butting in here, but its like 
you guys are arguing over something (capitalism) that no longer exists, but is
trotted out every once in a while to keep the populous quiescient. Democracy and capitalism? Oligarchy and oligopoly!

I sure hope cynicism is coming back into style, because we've got so much more
to feed on now. 

> > Now, I'm not saying corps arent critical, because most people probably
> > wouldn't take any kind of risk at all without this mechanism in place. It's
> > the grease that capitalism runs on. Which is why you only see sole
> > proprietorships and partnerships in safe and boring types of business.
> 
> You got it! :-)
> 
> Now, a cryptoanarcholibertarian with a bias for contracts and a distrust of
> granting organizations any sort of legal status whatsoever ;-) may have *other*
> problems with the notion of a corporation, but I think it's pretty safe to
> assert that they are an essential feature of the mechanism through which
> current capitalism operates and which by induction is essential to the kind of
> technological progress and innovation that we've been enjoying over the last
> few decades.
> 
> jb
> 
Isn't this Ronald Coase territory? Doesn't his "Nature of the Firm" basically
say that the firm (not the corporation) exists because of transaction costs due
to imperfect information?

And since the corporation is a designed legal entity, who is to say that
there isn't some other legal entity that couldn't work better.
Also aren't you sort of assuming some information-hiding in your argument about
risk? Someone is bearing the risk - the creation of a legal entity called a
corporation does not make the risk disappear - it just shifts it to others,
namely everyone not in the specific corporation. Now assume that a mass
publicity campaign results in 100,000,000 corporations out there as each and
every individual in the US goes out and registers as a corp. Suddenly the legal
advantages of a corporation gradually disappear as investors and lendors adjust
to the new reality.
 
In fact, this is already happening - Once upon a time corporations did work as
limited liability companies. Now if you start one and try to get financing, 
you're almost guaranteed to have to put up personal guarantees. I imagine that
there are probably similar changes in terms of legal liabilities (ie if you 
want to set up a corporation to sell reverse bungee-jumping I'm pretty sure
a corporation won't hide the liability of the officers). 

Owen (aka 3030656 Nova Scotia Limited)
owen@permafrost.net