On May 5, 2:13 pm, alexy
asbry.net> wrote:>>Newsgroups: alt.philosophy, sci.econ, alt.politics.economics
>>From: alexy
asbry.net>
>>Date: Sat, 05 May 2007 11:39:42 -0400
>>Local: Sat, May 5 2007 10:39 am
>>Subject: Re: Limited Liability, More Good than Bad?
>>Reply | Reply to author | Forward | Print | View thread | Show
>>original | Report this message | Find messages by this author>
>>>>>>> really. so you are saying that if the shareholders were forced to
>
>>^^^^^^^^^
>
>>>>>>>look at the inner workings of enron, and started to blow the whistle
>>>>>>>on these guys that it would not have affected the behavior of the
>>>>>>>banks who invested in enron, or the board, or the accountants, or the
>>>>>>>advisors?
>
>>>>>> I forgot the game. It's not punish the guilty or those who were
>>>>>> negligent in performing oversight that they were capable of--it's
>>>>>> punish those who had no knowledge or way to gain that knowledge.
>
>>>>> i never said that. what i said was if the shareholders were able to
>
>>^^^^^^^^^^^^
>>>>>peak(audit)at the inner workings of enron, then what happened may have
>>>>>been averted, or perhaps nipped in the bud early.
>
>>>> No; if you had said that I would have had no objection, greater
>>>> transparency is a good thing.
>
>>> i and retro have been pretty consistent about that. we say smaller,
>>>more focused, more limited life span of corps, plus forcing investors
>
>> ^^^^^^^^^^^^^^^^^
>
>>>into looking at the inner workings of the companies they invest in.
>>> this is not a hard thing to understand what we are proposing.
>>> and of course there will be compromises. it will not be all on the
>>>shoulders of the investor.
>
>>Okay, I put in a little underlining to help you. I guess for the type
>>of totalitarian mindset that thinks the US Constitution gives the
>>gov't the right to regulate everything (whoops! There goes the
>>rationale for Roe v. Wade), the distinction between "forcing to" and
>>"making able to" is a bit too subtle.
>
>> i think perhaps it is you that does not understand.
>> no one is saying that a gun is to be pointed at your head to audit
>>the inner workings of the corporation you are investing in. i never
>>said that, and you know it.
>> but if you do not want to be fleeced, you will be self responsible
>>and curious about the inner workings of the company you are investing
>>in.
>
> No one wants to lose the money they are investing.
>
i agree. but it is good to have the tools to make sure that does not
become a reality. government is one good one, you are also just as
good as one.
>> what ever happened to that libertarian self responsibility crap you
>>harp on, or is that just for the other guy?
>
> Care to provide examples?
in many cases you seem to be a one toe in the water type.
And is your experience with libertarians
> that they argue for better government regulation of disclosure,
> tighter enforcement of anti-trust laws, etc.
>
that is true, they do not. of course libertarians by nature are
selfish. so they do the opposite when they are in power. they protect
themselves, while throwing everyone else to the dogs.
i am not saying you would. be libertarians have a long track record
of siding with monsters.
>> roe v. wade, man are you reaching.
>
> No. just pointing out one consequence of the absurd claim that the
> government can regulate everything.
then explain away article one, and many of its sections. also the
1938 supreme court(stacked by republicon free market conservatives)
ruling on giving them just that power.
also other sections in some of the articles say so. no one seems to
be able to explain that away.
A woman's reproductive system is
> one something on which the Supreme Court has disagreed with your claim
> that the government is authorized to regulate everything.
>
not so true. did you see the latest ruling?
the supreme court can and has whittled away at just about anything
congress has done.
but congress in many cases has come back with legislation that
survives the supreme court rulings.
it is the way the constitution works.
>> and yes, do you want me to point to you the article in the
>>constitution that plainly says congress has the right to regulate,
>>there are more than one you know.
>
> And apparently you don't realize that there are limits on that
> authority. It does not extend to everything.
>
you are taking my words out of context. ok, they cannot regulate how
much oxygen we inhale per breath.
>>>> that way the shareholders have now protected their investment.
>>>>> you are quibbling again. we are talking about reform, not punishment
>>>>>of the shareholders.
>>>>> a lazy shareholder is ripe for the pickings, and they are not self
>>>>>responsible.
>
>>>> And you feel it is society's responsibility to protect such fools from
>>>> themselves?
>
>>> well yes. ever heard of the great depression?
>
>>> I agree with requiring better disclosure to help the
>>>> responsible investor know what he is investing in. But I don't think
>>>> we owe it to "lazy shareholders" to keep them from failing.
>
>>> lazy, and misinformed i should have stated. how can you know what is
>>>going on when the system has become so huge and secret.
>
>>"secret" is a problem and needs to be corrected--a role for government
>>oversight.
>
>> that is part of the solution. but lets not let investors off of the
>>hook.
>
>> "Huge and complex" requires hard work and intelligence to
>>understand--something an investor better have or pay for if he doesn't
>>want to lose his shirt.
>
>> man, i can see that little old lady you care so much about now trying
>>to grapple with the inner workings of a enron.
>
> She would probably be much better off in a mutual fund, probably an
> indexed fund. But if she wants to risk some of her money on something
> she doesn't understand, I'd not going to tell her she can't. There
> probably should be a mechanism for red flags to go up and bells to
> sound if she does that, warning her that she may be taking a risk that
> is inappropriate to her circumstances. But if she decides to take that
> risk, that is her decision, absent big brother stepping in.
>
i agree. we should not tell her what to invest in as along as its a
legal entity. but if she is a fool, limited liability will mean
nothing any ways.
at least break up conglomerates, make them more focused, and lean.
give her the chance to peek inside the company.
even a fool can be educated.
>> i wonder how many of them were fleeced. and most of the fleecers got
>>a slap on the hand.
>> yes skilling got nailed. but he did have the money to pay it didn't
>>he?
>> so he probably has lots more squirreled away off shore.
>
>>> man i am proposing this for you if you are a investor. its better for
>>>you.
>
>>Again, the totalitarian mindset. I know what's best for you--for you
>>to put your life savings at risk if you want to invest $1,000 in a
>>company--so I will force this on you.
>
>> gee, for a libertarian that preaches self responsibility
>
> Again, care to provide an example?>
i am not going to search every post you have made. but you do lean
that way. at least in the past. has something changes in your outlook.
and let the
>>chips fall as they may. what's the beef.
>> you want government protection of YOUR investments.
>
> Not at all. Do you even understand what limited liability means?
yes.
I
> want NO protection of my investments other than government enforcement
> of disclosure and other laws.
>
so do i. but it looks like its almost impossible under current
conditions.
needed reforms if they happen will leave american business completely
different from what we see today.
so you might get your wish someday. but do not hold your breath. i
see a movement heading the opposite way, with investors carrying all
of the rugged individualism ones on their shoulders. coutesy of
conservative economics.
>>have to grapple with corporations everyday of our lives
>
> I'm sorry about your problems with the grappling. Maybe if you
> identified where those difficulties lay, it may be a legitimate role
> of government to ameliorate those problems. Or maybe not.
>
health insurance, home insurance, car insurance. bank fee's. imported
junk. high tax's on me, low to no tax's on the rich investors who
really own most of any corporations. the list is almost endless.
>>with your type
>>preaching the virtues of rugged individualism.
>
> What have you been smoking? Do you consider it "rugged individualism"
> to want government help with requirements that a company fairly
> disclose its finances?
i do not smoke nor drink. but you have in the past sided with the
leave it alone crowd. and i am not going to search your posts.
the reason why i am surprised at your stance is because of above
statement, you have sided with them more often than not. so i am
surprised.
What other "rugged individualism" do you have
> in mind?
>
you know what i mean. you are on your own.
>>>>> a shareholder that knows what his/her responsibilities
>
>>>> What are the responsibilities of the widow in Des Moines, in your
>>>> opinion?
>
>>> if she gets screwed. we the people will make sure she does not
>>>starve. its that simple.
>
>>Check the preposition in my question. I asked what are the
>>responsibilities _OF_ the widow, not what are the responsibilities
>>_TO_ the widow.
>
>> you cannot have it both ways. you want protections for yourself, but
>>not others.
>> now you sound like a libertarian, who cares if she starves.
>
> Still dodging the question, I see. What are the responsibilities of
> the widow?
no i am not. her responsibilities is to do the best job she can.
Referring back to your comment re a shareholder who knows
> his or her responsibilities, I am simply asking what you think her
> responsibilities are.
>
to be informed.
>>> you have to get away from that selfish thinking.
>
>>I'm not the one trying to screw her out of her life savings if one of
>>her investments goes bad.
>
>> neither am i.
>
> You are the one proposing to get rid of limits on shareholder
> liability, which puts that possibility squarely in play.
>
and if the government does not act responsibly, then what is she to
do?
>>> plus all of the litigation involved.
>>> the system that the free market has construed has made it almost
>>>impossible to get these cretins out of power before they completely
>>>destroy a company, and suck out all of the equity.
>>> investors, customers, and the employees(sometimes tens of
>>>thousands)all pay a huge price.
>>> this is not good for the country, as well as the economy.
>
>>That's because the government has not done its job.
>> there you go again. looking for government protection of YOUR assets.
>>government is a huge part of the equasion, but not the total.
>> taking away limited liability, as well as the current unlimited
>>corporate infrastructure will hurt the super wealthy rent seekers. it
>>will have little affect on the small investor as far as liability is
>>concerned.
>
> How do you figure that?
>
i have answered that before. as well as rights and responsibilities.
>> if you are so worried about the little guy, there are laws(and i am
>>sure retro knows)assigning a percentage of damages that assign a
>>percentage as deemed by responsibility(i already brought this up).
>> you can assign liability according to ownership percentage.
>
> That seems like a logical conclusion, but I am under the impression
> that tort law doesn't necessarily work that way. Would be interesting
> to find out.
>
that is my answer. it works in car accident cases. ask retro.
>> by the time it gets to the little old lady if she was lazy enough
>>just to cash the checks without being self responsible. then she would
>>be on the hook for very little if any at all.
>
> Maybe. Or maybe just the opposite. If she had limited funds, and
> diversified into only ten stocks, while Daddy Warbucks had much more
> money and diversified into 50 stocks, the dollar impact on him may be
> greater but percentage-wise it might be much less. And even if the
> same percentage, his loss probably much more discretionary dollars.
>
maybe, maybe not. my experiences with the daddy warbuck types is that
they smell quick rich's, and throw everything they got at that smell
with gusto.
the little old lady would be better off in a situation where
government broke up the conglomerates, made it almost impossible for
mergers, acquisitions, and leveraged buyouts. and only invested in
narrow focused, lean blue chip stocks that have a good dividend.
but that almost impossible today.
>>>>> are is a asset
>>>>>to the company, their fellow investors, and of course society in
>>>>>general.
>>>>> then of course they are self responsible. so they are better
>>>>>informed, and most probably wealthier.
>
>>>>> I
>>>>>> know she is a thorn in your side, but that widow in Des Moines could
>>>>>> not have prevented this.
>
>>>>> not so. in the first place we are arguing for smaller, more focused,
>>>>>more tightly regulated corporations.
>>>>> there are investment clubs all over america with lots of little old
>>>>>ladies.
>>>>> what is to stop them from pooling their resources, and independently
>>>>>auditing a smaller leaner more focused corporation?
>
>>>> I don't know; let's work the numbers. Let's say she has $50k in her
>>>> portfolio, there are ten members of her club, and that club is part of
>>>> an affiliation of 1000 such clubs across the nation, so total
>>>> portfolio is about $500 million. Now, because these are
>>>> single-industry corporations, there is less diversification within the
>>>> corporation, so there would need to be more by the investors--let's
>>>> assume 20 stocks per investor. Of course, any one stock will not be
>>>> held by every investor; let's say that 10%% of the club members have
>>>> XYZ in their portfolio. So total holdings in XYZ are $2.5 million. If
>>>> they are going to devote 1%% of their principle to audits each year,
>>>> that would mean they could spend $25,000 auditing XYZ. Presumably you
>>>> would want an audit that goes into somewhat more depth than what is
>>>> currently done. Now let's look at a single-industry company for a feel
>>>> for auditing costs. Google's audit fees in 2006 were $7.8 million.
>>>> Whoops! Looks like they are going to have to get a few more club
>>>> members before they can do a more extensive audit.
>
>>> of course you are talking about huge corporations.
>
>>I picked a single-industry company. But let's pick one even more
>>narrowly focussed. Intuit makes financial and tax prep software for
>>individuals and small businesses. Pretty narrowly focussed. Their
>>audit costs were about 1/2 of Google's, about 3.5 million.
>
>> then why not pool resources like i said?
>
> REread the example, It includes their pooling of resources.
>
who picks the auditor?
>>>the exact opposite
>>>of what i am talking about.
>>> as far as auditing is concerned, i bet a whole new efficient industry
>>>pops up to cover that.
>>> auditing a much smaller leaner company, plus pooling their resources
>>>will be easier, and less expensive.
>>> i bet as time goes by there will be auditors that specialize in sox
>>>that will cut costs dramatically for companies.
>
>>You are in La-La land there. What are you going to do, hire a
>>secretary and have him spend half-time auditing the company?
>
>> you are putting words in my mouth.
>> there are no specialized companies that pop up for a specific reason
>>then huh?
>
> Yes. There are already audit firms. While more competition would
> arguably cause lower prices, it is not orders of magnitude lower.>"Intuit makes financial and tax prep software for
>>individuals and small businesses. Pretty narrowly focussed."
>
yes, but as of right now they do not have much competition because of
the way markets are non governed.
>>>>> are you apologizing/making excuses for corporate plunder?
>
>>>> No.
>>> everything you say points to either a hopelessness of the situation,
>>>or a blase approach that its the system, so live with it.
>
>>No. I agree with requirements of better disclosure, and better
>>enforcement of existing, and possibly new anti-trust laws. Don't make
>>the same mistake nospam makes, My objection to a proposed solution
>>does not constitute an objection to the goals of that proposed
>>"solution".
>
>> you mean you want the nanny state(i personally hate that terminology,
>>its demeaning to the constitution) for yourself, but not the rest of
>>us.
>
> Huh? Where does that come from?
>
its the way you have leaned in the past. if you are more reform
mined, then please excuse the slam, sorry.
>> it certainly is part of the solution, a big part. but not the total
>>answer.
>> you cannot have more transparency in a huge conglomerate. history
>>shows us that well.
>> so why are you defending the criminals that fleece the little old
>>ladies. i have asked you that before.
>
> Where have you ever seen this, or ever asked me that. I think you need
> to take your meds.
>
no, you seem to be ok with the status qua, except you want proper
government over site which i agree with you on. except i see its
almost impossible under current conditions. the corporations are way
to large.
>> the article i posted on enron showed how the little old ladies were
>>fleeced by many many individuals as well as other investors, and only
>>a few really paid for it, the rest waltzed away quite richer.
>
>>>>> the little old lady would be much better off if she knew what the
>>>>>corporation was up to.
>>>> I agree.
>
>>> good.
>
>>>>> And unless you are successful in returning us
>>>>>> to the stage England was in when the aristocracy were the only owners
>>>>>> of corporations, she will be a reality.
>
>>>>> not so. stock ownership under the new deal allowed the little old
>>>>>ladies to flourish.
>
>>>> Under FDR, shareholders were not liable for debts of corporations
>>>> beyond the extent of their own holdings in the company.
>
>>> ah, but the companies were heavily regulated by real regulators. the
>>>companies were kept small and focused. and mergers and acquisitions
>>>were almost impossible the barriers were so high.
>
>>The point is that FDR accomplished this while moving forward. He was
>>not a Luddite looking to return to pre-industrial revolution ways of
>>doing things.
>
>> then why are you now extolling the virtues of the welfare state in
>>this case. but not in almost all others?
>
> Huh?
>
>
its your past responses.
>
>>> so the little investor knew if the company made steel, it made steel,
>>>nothing else.
>>> much easier to keep track of that way.
>
>>The goal of the regulation system should not be to make it EASY for
>>the most ill-informed or ill-equipped investor to keep track. It
>>SHOULD make certain that information is available and accessible.
>
>> the nanny state as you say. me, its a social welfare contract
>>chiseled in stone in the constitution.
>> but with rights come obligations.
>
>>>>> as the article stated, once market theorists(free marketeers)took
>>>>>over, the little old ladies have been skinned alive.
>
>>>>> One of the consequences of
>>>>>> giving financial freedom to the little people. Maybe that's an
>>>>>> underlying goal? Keep the masses as wage slaves dependent on their
>>>>>> employers, union bosses and government?
>
>>>>> oh bull crap, and you know it. tighter regulation, and smaller more
>>>>>focused corporations under the new deal years
>
>>>> and limits on shareholder liability>
>
>>> no, tight real regulations.
>
>>Yes, they did have limits on shareholder liability just like we have
>>today.
>
>> ah, but how will you guard your rights if market types get a hold of
>>america again. they will you know.
>> outside auditing is a good regulation.
>
>>>allowed the common man
>>>>>to buy stocks with the ability to see what these guys were doing.
>>>>> today we have monsters that have their tentacles into everything. no
>>>>>one but the guys at the top know what's going on. the regulators are
>>>>>the corps. there really is no such thing as transparency any more.
>>>>> in the new deal years you bought a stock of a company that made
>>>>>steel. you opened up the business section and looked at what's
>>>>>happening in steel.
>
>>>> Yes, there is no question that corporations are more complex today,
>>>> and it takes a little more effort to understand them.
>
>>> most people including the auditors really know what's going on.
>
>>I doubt it. The auditors probably do, but most people don't. That's
>>why we need better disclosure, which is not a one-time solution, but
>>rather an ongoing quest.
>
>> as long as you allow the current type of conglomerate corporatism,
>>you will never gain parity.
>
>>> these
>>>companies are way to big.
>
>>Big is not a problem, per se.
>
>>really? i question that. the bigger things get, the easier it is to
>>hide bad behavior.
>
>>> they now can operate in secret world wide.
>
>>Secrecy is.
>
>>> it is not healthy, nor should little people finance this.
>
>>And big people should?
>
>> no, you are showing immaturity here.
>> the big guys should not, but many do. so protect yourself.
>
>>> its a open invitation for criminal behavior.
>
>>>>> it gave the little guys a leg up on the boards and the super wealthy
>>>>>investors.
>
>>>> Because the boards and super wealthy couldn't understand a
>>>> single-product company?
>
>>> no because the little guy had a easier time tracking what the company
>>>was up to.
>
>>Okay, I guess I didn't see that as giving them a leg up on
>>super-wealthy and boards, who to my mind could do the same thing.
>>Maybe by "Leg up on" you meant "more on a level playing field with".
>
>> correct.
>
>>>>> buy a steel company today, and you might be buying a company that has
>>>>>little to do with steel.
>
>>>> True.
>
>>> so how can you track them if you do not know what they are into?
>
>>Read their annual reports?
>
>> written by a insider.
>
>> If those are inadequate, require better
>>disclosure?
>
>> you mean get the corporatists that run america to do their jobs?
>
>> Or if complexity befuddles you, buy an index fund.
>
>> lots of chances to get screwed there also.
>
> Paranoia aside, very little.> wasn't there just a scandal there on large fee's being charged
>
> Not familiar with the case you might be referring to. Increasing focus
> on that lately, though, and fee disclosure has been and is being
> improved.>
do not hold your breath. as these funds grow into a monster that is
almost impossible to audit, this is just the beginning.
other unsavory behavior with stock pricing?
>
> The trading scandals were caught and prosecuted, and procedures
> cleaned up, but damage to fund holders was minimal--certainly no one
> got screwed.
>
a lot of money changed hands. yours to them.
>>>>>>> if investors were forced into using independent audits, a lot of what
>>>>>>>happened at enron would either have been exposed, or never would have
>>>>>>>happened.
>
>>>>>> You may not be familiar with the SEC?
>
>>>>> yes i am. i am also familiar with what happened to arthur levvit. and
>>>>>also the republicons contract on america. it was to fleece the
>>>>>grannies. and it worked. and is still working.
>
>>>>> And independent audits that are
>>>>>> already performed?
>
>>>>> have you ever heard of arthur anderson?
>
>>>> Yes. My point was that the mechanism and requirement of independent
>>>> audits is already in place. What are you proposing to change?
>
>>> no they are not. they are hired by the company. that is a huge
>>>conflict of interest.
>
>>Guess you have never read a proxy. Don't remember one yet where the
>>shareholders didn't vote on appointment of the auditor.
>
>> paid for by the company, or rubber stamped by the proxy. either way
>>you might lose, and big time.
>
>> Yes, the
>>company effectively hires them, but the auditor's responsibility (and
>>legal liability for their opinions) is to the shareholders.
>
>> ever heard of a conflict of interest? if the boards pays them, that
>>is a big one.
>
>>> but you have hit onto something there.
>>> what if the investors were the ones to hire one, or more than one
>>>auditor as a backup to make sure there were at least two views of the
>>>inner workings of the company. and that the payment would be taken out
>>>of one quarters dividends.
>>> that way the costs would be spread out over many shares of stock.
>
>>That's exactly what is done now, although it is just one auditor.
>
>> picked by the company,
>
> And approved by shareholders.
the rubber stamp you mean.
Do you propose to send out the
> shareholder ballot with a blank to fill in for auditor to hire?
how about a statement from the company of their auditor, and also a
statement from the investors of their choice of a auditor paid for by
them. then compare the tow findings.
if the company can mass mail, why not the investors?
Short
> of advertising campaigns from auditors aimed at investors, how do you
> imagine that would be any different?
>
informed investors that are organized might do the trick.
>>and paid for by the company.
>
> As you just said. (you do realize the source of dividends, don't you?)
>
yes, but out of the dividends they receive. their own pockets. it
seems reasonable to protect ones investments.
>> If
>>the company were to pick two auditing firms and have them approved by
>>shareholders,
>
>> in most cases rubber stamped. why are you so hell bent on getting
>>screwed then demanding protection?
>
> What mechanism do you envision for the shareholders to pick an
> auditing firm.
>
maybe investors ought to get prodded to organize. individuals have
little power against well organized well oiled companies. so you fight
back with the same power.
>>the objection would be that the auditors had sweetheart
>>relationships with each other.
>
>> or the board, after all they will sign the check.
not if it is a check for the investors organization.
>
>> How do you know that PMM wouldn't say
>>to E&Y "I'll sign off on your audit of XYZ if you sign off on my audit
>>of ABC"?
>
>> collusion? of course there will be. unless we have independent
>>outside auditors paid for by the investors.
>
> Oh, get real. How do you expect that will change anything?
>
huh? there is always the chance for collusion, but if one is hired by
one group, the other hires a different company paid for by another
group, that will lesson it.
>
>
>>> the little old ladies would be spared a major expense.
>>> after all corporations are a socialists organization.
>>> so all should bear some financial responsibility.
>
>>They do now.
>
>> no they do not. only the investors, and in a few cases do the actors.
>>all others have offshore bank accounts.
>
>> I just suspect that the second audit would not provide
>>much security.
>
>> maybe, maybe not.
>
>> Might have in the Enron case, though. Interesting idea.
>
>> only the distorters hate the limelight.
>
>>>>> Do you think shareholders are nonchalant about
>>>>>> losing everything they have invested in a company?
>
>>>>> no they are not. so why not give them the tools to make things
>>>>>better. and protect them.
>
>>>> No objection from this quarter.
>
>>> good.
>
>>>>>>> as long as there is limited liability, you can use the excuse to look
>>>>>>>the other way when you cash your check.
>
>>>>>> What excuse?
>
>>>>> the excuse that you did not know.
>
>>>> How does limited liability give me an excuse for losing all the money
>>>> I have invested?
>
>>> because you did not know the inner workings of the company you
>>>invested in.
>
>>No, inadequate disclosure gives me the excuse that I did not know the
>>inner workings of the company.
>
>> thank you, you just made my argument:)
>
> If you had been arguing for more adequate disclosure rather than
> liability of shareholders beyond their investment, I would have.
i have argued for both, plus other reforms.
> Losing all the money I have invested is not an excuse, nor is keeping
> my house.
> --
then fight for reforms. get organized. the reason why so many market
types hucksters sing the praises of individualism is because you are a
easy target, like a lone deer in the headlights.
your enemy is the libertarian, and the abusers they pander to.
> Alex -- Replace "nospam" with "mail" to reply by email. Checked infrequently.
