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Politics : American Presidential Politics and foreign affairs
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To: DuckTapeSunroof who wrote (23795)10/30/2007 6:16:28 PM
From: TimF  Read Replies (1) of 71588
 
Having the corporation have a separate legal identity, greatly simplifies the ability of people to combine investment capital in useful and productive ways. Make every investor face unlimited liability for any actions of the company and you greatly reduce investment to say the least. To the extent you have investment it would change form in many cases from ownership to debt. Nothing inherently bad about using more debt and less equity, but if the change goes to far the debt levels would be hard to sustain in any down turn. Also there are many investment where even junk bond interest rates are not nearly high enough to compensate for the risk. Most of those companies will probably fail but the successes contribute greatly to the economy and if you don't let people get hit the jackpot when they do pick the right risky investment, than they won't make the risky investment in the first place.

Beyond the major practical issues, I just don't think it makes moral sense to allow lawsuits against small investors who might own some GE, or XOM, or IBM as part of an S&P 500 holding, if that company happens to do something wrong and/or cause damage to others. They properly are on the hook up to the value of their investment, but that should be the limit.
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