Friday 19th November

This week, Patrick will present "Should firms be allowed to vote?"

Corporate legal personality seems to have emerged to enable contracting

by firms, and to limit the problems created by personal limited

liability of the owners and of the workers.

But this may have perverse effects.

In January 2010, corporate legal personality has disturbingly led in the

US to invasion of the political sphere by corporations, the free speech

of which is now protected as that of "persons" (under the First

Amendment of the American constitution). (Citizens United vs. Federal

Election Commission) It means corporations are now free to sponsor

advertisements endorsing specific campaign candidates, by ruling of the

Supreme Court. But why stop there? If they are recognized as legal

persons, corporations should also be allowed to vote.

Is this the flip of the coin to excessive limited liability?

To make the case worse, one could argue that limited liability has

largely shifted the risk-bearing of entrepreneurship on owners (vs.

workers) at the corporate level, and it has shifted risk-bearing on

society (vs. owners) at a wider level, resulting in uncontrolled moral

hazard.

So have we gone too far with corporate legal personality, or should we

take it all the way and grant firms the right to vote? Or should limited

liability be relaxed?

Some readings:

* http://www.guardian.co.uk/world/2010/jan/21/citizens-united-supreme-court-ruling

* http://en.wikipedia.org/wiki/Citizens_United_v._Federal_Election_Commission

* Section 4.3 of Laffont-Martimort