Is there "capitalism" in the USA ?

[psionl0]

Originally Posted by Tippit

If profits get privatized and losses get socialized, then we don't have capitalism, we have something... else.

Banks?

[Tippit]

Originally Posted by psionl0

Under Australian law, corporate managers are required to act in the best interest of the company. The best interest of the company and the best interest of the shareholders do not necessarily coincide.

Theoretically that isn't really true. Of all company stakeholders, shareholders have the most balanced claim. Consumers will prefer the lowest possible prices, shareholders be damned. Suppliers will prefer the highest possible prices for their goods, shareholders be damned. Unions, employees and executives will prefer the highest possible salaries and bonuses, shareholders be damned.

Only the shareholder has it in his interest to balance all of these claims to ensure a going concern. Given that for a variety of reasons there is very little shareholder accountability these days, I would agree that companies aren't necessarily managed with shareholders in mind (or any other stakeholders, seemingly, other than executives). This is not to say that they shouldn't be.

If we did have "capitalism", which I agree with the OP that we don't, it would be in the best interests to strive for shareholder accountability, incentivizing shareholding for everyone. Then we should seek to manage companies accordingly.

[psionl0]

Originally Posted by Tippit

Only the shareholder has it in his interest to balance all of these claims to ensure a going concern.

You might be thinking of partnerships where the stakeholders have unlimited joint and several liability.

The idea of a company is to ensure that the shareholders have no liability beyond their initial investment. It is up to the management to ensure that the company is as healthy as possible. Other than the power to appoint or dismiss the management, shareholders have no say in the running of a company at all.

[theprestige]

Originally Posted by psionl0

Wrong. It is an artificial person - a separate entity. It exists independently of the shareholders.

Again, perhaps you could cite some legal question, and its outcome, in support of your interpretation?

Obviously a corporation doesn't exist entirely independently of its owners. The owner's liability is limited by incorporation, but that doesn't mean they cease to have an interest, nor that the officers do not owe the owners a duty to serve that interest.

As Brian-M pointed out, a corporation isn't some sort of robot, acting independently of its owners. At the end of the day, it's still people: People who incorporated for a purpose, and have a right to see their purpose fulfilled, and have a right to hold the corporate officers accountable for fulfilling their purpose.

Again, perhaps you could cite some court cases or other legal discussion, that analyzes how Australian law actually considers the interests of corporation separate from the interests of its owners, when judging the duties of the corporate officers?

[theprestige]

Originally Posted by psionl0

I don't mind that sort of imagery. "Legal entity" could easily be interpreted as "meaningless phrase".

So could "artificial person". My question is still, how do the Australian courts actually treat corporations in the law? As artificial persons? Legal entities? Meaningless phrases?

Does the legal treatment vary depending on the legal context?

Put it another way, and getting back to the meat of your claim: Under Australian law, if the owners of a corporation perceive that an officer is mismanaging the corporation, do they have the right to bring a suit against him and seek redress?

[psionl0]

Originally Posted by theprestige

Again, perhaps you could cite some legal question, and its outcome, in support of your interpretation?

Corporations are not associations of people, they are entities in their own right. They can own property, enter into contracts, sue and be sued and even be directors of other corporations.

This is not my "interpretation". It is a matter of law. I already proved it with my previous links.

ETA You can learn more about corporations from http://en.wikipedia.org/wiki/Corporation

[Dinwar]

Originally Posted by psionl0

Corporations are not associations of people, they are entities in their own right. They can own property, enter into contracts, sue and be sued and even be directors of other corporations.

I thought that was common knowledge. It's part of the reason corporations came into being in the first place: under law, it is the corporation that acts, not the shareholders (ie, the owners).

Originally Posted by TubbaBlubba

I am under no obligation to scrutinize and respond to everything I disagree with.

Of course not. But it's quite telling when you go out of your way to make snide comments to one side, but ignore the EXACT SAME ISSUE with the other side. It's a very strong indication of bias.

Originally Posted by TubbaBlubba

Not that one. Now you are deliberately misunderstanding for the sake of rhetoric. Again.

If it's not that one, why did you quote my response to that one? You quoted my response--I assumed you were using the common format of this forum and quoting it to provide context, given that this is a side issue. That's how I've always acted--I quote the statement I was responding to in order to avoid this manufactured confusions. If you wish to drop context and pretend that we can play mix-and-match with statements to make them mean what you want them to mean, enjoy--but don't pretend you're participating in a conversation.

Originally Posted by TubbaBlubba

Right, so you're not interested in as many as possible having it as good as possible. Nice talking to you.

Actually, I am. You seem to be under the impression that utilitarianism is the only way to accomplish this goal. I disagree. If you don't believe that there can be honest disagreement for how to achieve these ends....well, the word "dogma" comes to mind.

I'll take this quote as proof that you're not interested in an honest discussion (it would require you to actually pay attention to context, and to allow ME to state my views, both of which you've failed at thus far). As such, I'm not going to respond to any more of your comments in this thread.

[psionl0]

Originally Posted by Dinwar

I thought that was common knowledge. It's part of the reason corporations came into being in the first place: under law, it is the corporation that acts, not the shareholders (ie, the owners).

Nah! It's just our "interpretation".

An interesting case where not being a corporation makes suing for damages difficult arises with the Catholic Church.

Quote:

A court case in New South Wales five years ago found that the Church could not be held legally liable for abuse cases because the Church doesn't exist as a legal entity and it's also not liable for its priests nor their actions.

As Emily Bourke reports there are now moves now to change the laws, making the Church legally responsible and its assets subject to damages claims.

http://www.abc.net.au/am/content/2012/s3635453.htm

[Brian-M]

Originally Posted by psionl0

Nah! It's just our "interpretation".

An interesting case where not being a corporation makes suing for damages difficult arises with the Catholic Church.

http://www.abc.net.au/am/content/2012/s3635453.htm

Strange that it's only the Catholic Church and not any other church that holds this bizarre legal non-status.

[eirik]

Just out of interest, I would like to comment on the shareholder/corporation relationship. The managements duties shows roughly:

http://en.wikipedia.org/wiki/Directors'_duties

Quote:

directors owe duties to the corporation, and not to individual shareholders, employees or creditors outside exceptional circumstances

directors' core duty is to remain loyal to the company, and avoid conflicts of interest

directors are expected to display a high standard of care, skill or diligence

directors are expected to act in good faith to promote the success of the corporation

(Bolding mine)

My understanding is that the primary duty for a director/the board is to maximize profits for the corporation, (which in this context means the shareholders, because shareholders decide what to do with the profits - e.g. they decide how much should go to the shareholders) within legal boundries. That is off course how business success most often is measured: In money.

My interpretation of why it is clearly stated that it is not a duty to "individual shareholders", is to prevent discrimination of shareholders in a corporation. Not so rarely, it can be tempting to favor a majority shareholder, as the directors/board position typically can be terminated by the majority of shareholders. Third parties (and the corporations own law firm as it happens) can also have a incentive to favor a specific shareholder, to secure a stable relationship with the corporation, in order to maximixe *their* profit. In Norway this constitutes criminal corruption. And I'm sure it is illegal in other countries as well, as this is the ABC of corporate law.

My point: Management has a duty to make profits to all shareholders equally. It doesn't make sense to say that the corporation differs from the owners in this instance.

[psionl0]

Originally Posted by eirik

My understanding is that the primary duty for a director/the board is to maximize profits for the corporation, (which in this context means the shareholders, because shareholders decide what to do with the profits - e.g. they decide how much should go to the shareholders) within legal boundries.

That's not the case. Shareholders don't get to decide on the size of their dividends. That is the job of the directors. There is no shortage of public companies that don't pay dividends at all. The shareholders in those companies make their money by trading their shares at a profit (hopefully).

Originally Posted by eirik

My interpretation of why it is clearly stated that it is not a duty to "individual shareholders", is to prevent discrimination of shareholders in a corporation.

Although there can be different classes of shares within a company, discrimination of shareholders in the same class is not possible. Dividends are paid per share and not on the basis of who owns those shares.

[eirik]

Originally Posted by psionl0

That's not the case. Shareholders don't get to decide on the size of their dividends. That is the job of the directors. There is no shortage of public companies that don't pay dividends at all. The shareholders in those companies make their money by trading their shares at a profit (hopefully).

My fault. Dividends is as you say the board of directors' decision. Still, there is a dynamic here with the shareholders, in which a board can be removed if they go against the shareholders wishes. (The majority of shareholders will put their representatives on the board based on the corporate contract/law)

Quote:

Although there can be different classes of shares within a company, discrimination of shareholders in the same class is not possible. Dividends are paid per share and not on the basis of who owns those shares.

Well..It's possible, but illegal. That's my point. Dividends is one thing, but that probably doesn't happen much. Too easy to get caught. I was primarily refering to other forms of discrimination.

But it does happen de facto with dividends: A new court ruling from Norway ruled against shareholders (2/3) who were trying to starve the third (1/3) shareholder by deciding that dividends would *not* be paid out. This was a company worth *a lot*, and with excellent economy. The corporate tax (based on the company's worth) on the minority shareholder, made her lose money every year, and she was not able to keep up - she had to sell to the other shareholders. She was starved out, and it is not very uncommon.

(They majority took out money from the company not by dividends, but by giving theirselves generous, but legal, business contracts)

But there are many other ways of discriminating between shareholders, which happens every day. A friend of mine had a company where the majority shareholder was a personal friend with the lawyer who represented the corporation. They both had incentives to see to each others best interest, at the behest of the minority shareholder, and in fact they did so. It's all those small decisions in the daily mill which can skew the relations between the shareholders.

There's a conflict right there, not straight out illegal, but it certainly could have been depending on the situation. The same can and does occur with businesspartners of the corporation - they want to be on the good side of the majoritry stock holder.

But this off course is one of the main causes for corporate law - to protect the minority shareholder from abuse. The thing is, it's easier said than done.

[Brian-M]

Originally Posted by eirik

But it does happen de facto with dividends: A new court ruling from Norway ruled against shareholders (2/3) who were trying to starve the third (1/3) shareholder by deciding that dividends would *not* be paid out. This was a company worth *a lot*, and with excellent economy. The corporate tax (based on the company's worth) on the minority shareholder, made her lose money every year, and she was not able to keep up - she had to sell to the other shareholders. She was starved out, and it is not very uncommon.

I don't understand. Wouldn't the corporation have to pay the corporate tax, not the shareholders? Or are the tax laws over there different in this respect to the rest of the world?

[psionl0]

Originally Posted by eirik

But it does happen de facto with dividends: A new court ruling from Norway ruled against shareholders (2/3) who were trying to starve the third (1/3) shareholder by deciding that dividends would *not* be paid out. This was a company worth *a lot*, and with excellent economy. The corporate tax (based on the company's worth) on the minority shareholder, made her lose money every year, and she was not able to keep up - she had to sell to the other shareholders. She was starved out, and it is not very uncommon.

Norway must have some pretty nasty tax laws if you can be taxed simply for holding shares that weren't paying you anything.

Originally Posted by eirik

(They majority took out money from the company not by dividends, but by giving theirselves generous, but legal, business contracts)

It would not be in the best interests of the company if contracts were being awarded at higher than the market rate.

[Dinwar]

Originally Posted by TubbaBlubba

Right, so you're not interested in as many as possible having it as good as possible. Nice talking to you.

Actually, the more I think about this the more vile I find this sentiment. As it stands, only quality of life matters. What's left out of such a sentiment are considerations such as justice, liberty, individuality, etc. Simply put, some people EARN being dirt-poor--just as some people earn being rich. Some people make stupid choices, ruin businesses, or commit crimes such as murder and rape. I do not want those people to have it as good as possible. I want people to get what they earn, good, bad, or indifferent. THAT is where you and I differ most fundamentally: you want to focus on numbers, ignoring the individual, where as I want to focus on the individual, and consider the numbers irrelevant.

Originally Posted by eirik

My understanding is that the primary duty for a director/the board is to maximize profits for the corporation, (which in this context means the shareholders, because shareholders decide what to do with the profits - e.g. they decide how much should go to the shareholders) within legal boundries.

With the caveats psionl0 said, this is true. It's the job of a company to make money for the investors. What else would the purpose be? I know the company I work for doesn't exist to provide me a paycheck--I work for them in exchange for a paycheck. In the broad sense, my paycheck represents what my company thinks I'm worth. Frankly, I'm replaceable. Not terribly easily, I hope, but there are more paleontologists than there are jobs, so competition is rather stiff. If I become worth less than they're willing to pay someone else, I'm out. Shareholders are much less replaceable, in that their decisions make a much larger impact on the company and there are fewer of them in general, so they get paid more.

Quote:

directors owe duties to the corporation, and not to individual shareholders, employees or creditors outside exceptional circumstances

Well.....kinda. A company is obligated to pay back investors--and that's what shareholders are, really. They invest a portion of their money in exchange for a say in how to run the company (yes, the board gets more direct control, but a board of directors that makes the shareholders angry will not exist for long). And if someone thinks that screwing over the employees is a good way to help the business, they're welcome to try. I'm not a nice person--I'll enjoy seeing them on the street.

The whole issue you're having boils down to the idea that what can be good for a shareholder can be bad for the company. No rational person can hold such a view--not for long, anyway. Any gains obtained that way would be extremely short-term.

[eirik]

Originally Posted by Brian-M

I don't understand. Wouldn't the corporation have to pay the corporate tax, not the shareholders? Or are the tax laws over there different in this respect to the rest of the world?

In Norway there is a personal tax on assets. Not very high, but if you own something valuable not liquid, and you have a low income, it can be a problem.

[daenku32]

It does get to the point of arguing about the definition of "capitalism". In it I would say that modern investor-operator model is closer to state-owned model than the "producer" model than is the classical definition. The "owner" is just a group of people with pooled money that only care about one thing: return. That group mind as well be the government. They are just looking for growth of the stock. They are not insisting in running the business a certain way.

[WildCat]

Originally Posted by eirik

In Norway there is a personal tax on assets. Not very high, but if you own something valuable not liquid, and you have a low income, it can be a problem.

So your issue is with the tax laws that make this possible, not capitalism.

[Tippit]

Originally Posted by eirik

In Norway there is a personal tax on assets. Not very high, but if you own something valuable not liquid, and you have a low income, it can be a problem.

Who decides what an asset is worth, for the purposes of taxation?

[eirik]

Deleted

[eirik]

Originally Posted by WildCat

So your issue is with the tax laws that make this possible, not capitalism.

I may have been unclear. I don't have an issue with capitalism. I believe corporations is an important part of the personal freedom to enter contracts. And I might not even be against the tax law in question, for the reason that it gives incentive to productivity. "Dormant capital", the money in the matress so to speak, is not rewarded, that's a nice side effect of the tax.

There will always be someone trying to abuse the system, we just have to keep up. I believe well designed regulation can fix these things.

I shared my thoughts merely on the relationship between the shareholder and the corporation. They're different entities in some aspects (e.g. the formal), and identical in others.

Originally Posted by Tippit

Who decides what an asset is worth, for the purposes of taxation?

The law prescribes a method. The method is used by tax authorities, and their decision can be, and is ,appealed all the way to supreme court.

The important part in enforcing these rules, is that it is consistant, so that it doesn't violate an important taxing principle - equality. Equal subjects should be taxed equal. Againg, sometimes easier said than done.

[psionl0]

Originally Posted by eirik

And I might not even be against the tax law in question, for the reason that it gives incentive to productivity. "Dormant capital", the money in the matress so to speak, is not rewarded, that's a nice side effect of the tax.

How does taxing holders of shares that don't pay a dividend encourage productivity? I would have thought a policy like that would provide a huge incentive for people to hide their money under the mattress.

[psionl0]

Originally Posted by Tippit

Who decides what an asset is worth, for the purposes of taxation?

In the case of a public company, it should be the market value of the shares. For a private company, the company balance sheet should indicate what each share is worth.

No doubt, the Norwegian government has a much more arbitrary method of valuing the shares.

[Brian-M]

Originally Posted by psionl0

In the case of a public company, it should be the market value of the shares. For a private company, the company balance sheet should indicate what each share is worth.

But then there comes the problem of undeveloped land, fine art, antiques, etc.

[eirik]

Originally Posted by psionl0

How does taxing holders of shares that don't pay a dividend encourage productivity? I would have thought a policy like that would provide a huge incentive for people to hide their money under the mattress.

You would have to pay the tax even if your asset is merely capital. The point is to keep the economy flowing. No-one benefits from "dead" capital. Investments benefits the whole economy several fold.

The downside of this is if you own a lot of non-liqid assets, like in my example. You would have to sell the shares just to pay tax.

I think the reasoning goes like this:

The main reason to own a company you don't work in yourself, that doesn't pay dividends, is to speculate that the price goes up, and then sell for profit.

One can argue that this sort of ownership is less productive in the long term, than the ownership who expects to be paid dividends of company profit now and in the future.

[eirik]

Originally Posted by psionl0

In the case of a public company, it should be the market value of the shares. For a private company, the company balance sheet should indicate what each share is worth.

No doubt, the Norwegian government has a much more arbitrary method of valuing the shares.

He didn't ask how. He asked who. The answer to how is as you say stipulated market price/ net worth adjusted for e.g. vote impact etc. I believe this is how any court system would value a corporation. This comes up quite ofte. Two common examples:

- when shareholders contractually force other shareholders to sell out if the latter is damaging the corporation, conflict of worth is common.

- divorce settlement of a shareholder, where the non owning spouse talks up the price, and the owner talks it down. Conflict.

Court settles the question according to law.

[Brian-M]

Originally Posted by eirik

I think the reasoning goes like this:

The main reason to own a company you don't work in yourself, that doesn't pay dividends, is to speculate that the price goes up, and then sell for profit.

One can argue that this sort of ownership is less productive in the long term, than the ownership who expects to be paid dividends of company profit now and in the future.

New companies often don't pay dividends, because all the money goes into growing the company, to make it more productive (and therefore more profitable).

[eirik]

Originally Posted by Brian-M

New companies often don't pay dividends, because all the money goes into growing the company, to make it more productive (and therefore more profitable).

Absolutely, it's probably the norm. This is not a problem in Norway tax wise. The company typically don't have a big net worth if it doesn't pay dividends. And investors in new found businesses often have debt, so they are not taxed because their personal net worth is low.

(and I haven't even gone into that there is a separate system to support new businesses)

The problem is companies sitting on capital (not a sound buffer, but lots of capital) for no other reason than to save it for a rainy day. That's not healthy for the economy of a community.

[psionl0]

Originally Posted by eirik

You would have to pay the tax even if your asset is merely capital. The point is to keep the economy flowing. No-one benefits from "dead" capital. Investments benefits the whole economy several fold.

The downside of this is if you own a lot of non-liqid assets, like in my example. You would have to sell the shares just to pay tax.

I think the reasoning goes like this:

The main reason to own a company you don't work in yourself, that doesn't pay dividends, is to speculate that the price goes up, and then sell for profit.

One can argue that this sort of ownership is less productive in the long term, than the ownership who expects to be paid dividends of company profit now and in the future.

It sounds more like the government's reasoning is that only rich people own shares so this is a way to get more money out of them (Ironically, this ensures that only rich people will invest in companies).

One reason for not paying dividends is to have more working capital for investment purposes which would presumably make the company more productive in the long term. This would make the company more profitable which is reflected in the rising value of its shares. (Mining companies are often a good example of this). Companies that were having lean years might not make a profit and therefore be unable to pay a dividend. It seems unfair to tax the shareholders instead when this happens.

People who profit from buying and selling shares would have a realized capital gain which the would be fair enough for the government to tax.

Originally Posted by eirik

The problem is companies sitting on capital (not a sound buffer, but lots of capital) for no other reason than to save it for a rainy day. That's not healthy for the economy of a community.

A company that was "sitting on (lots of) capital" would not be locking up cash in a vault but have it in an interest bearing bank account (at the very least) where it could be loaned out so that argument does not apply.

[eirik]

Quote:

It sounds more like the government's reasoning is that only rich people own shares so this is a way to get more money out of them

No, that's not the case, psioI0, at least that's not the goal. And my impression is that it doesn't have that effect.

The tax I'm referring to is a sort of personal luxury tax on assets. You don't tax before you hit a set ceiling on your net assets. The tax is modest, and the limit is set pretty high. I'm sorry I didn't convey that properly.

That's why the case i mentioned is an anomaly: It's very unusual to own *very* large amounts of non liquid assets and nothing else, and have a low income. But it does happen, and the court ruled that she had a right to a reasonable dividend to keep up with her obligations.

Btw, I don't hold a strong opinion on the tax, bit it has been widely debated in Norway. It was/is controversial.

Quote:

One reason for not paying dividends is to have more working capital for investment purposes which would presumably make the company more productive in the long term.

Some years there is profit, some years there is not, and some years the profit is reinvested in the company. Nothing wrong with that. But normally, the long term goal is a profit for the shareholders.

[eirik]

Originally Posted by psionl0

A company that was "sitting on (lots of) capital" would not be locking up cash in a vault but have it in an interest bearing bank account (at the very least) where it could be loaned out so that argument does not apply.

I can't think of a single company that would benefit from having lots of capital on a bank account. If the goal is to have capital in some bank account, there is no need for a corporation to do this.

Either invest in something or pay out to shareholders, preferably both. I guess I don't see the problem?

[psionl0]

Originally Posted by eirik

The problem is companies sitting on capital (not a sound buffer, but lots of capital) for no other reason than to save it for a rainy day.

Originally Posted by eirik

I can't think of a single company that would benefit from having lots of capital on a bank account

[stevea]

Originally Posted by theprestige

Doesn't clarify much for me. I thought that a corporation is an association of people--i.e., the shareholders.

If the officer is supposed to act in the best interests of the corporation, doesn't that simply mean the same thing as acting in the best interests of the people who incorporated themselves?

Yes, this is a correct interpretation.
However psionl0 has missed a few careful distinctions.

All corporations are companies, but not all companies are corporation.
For example I have a privately held company (two actually) that is/are not incorporated and therefore not corporations - no shareholders. Partnerships are not generally incorporated in the US.

So in Oz it appears that corporate officers have an obligation to the corporation, defined roughly as "A company or group of people authorized to act as a single entity (legally a person) and recognized as such in law". These are the equity stakeholders, and not for example the bondholders or creditors.

In UK derived law there is the concept of a corporation as "A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members". And recently there has been a lot of paranoiac imagining about these legal entities as pseudo-people. This is just plain wrong. For a lot of very pragmatic reasons, the corporation has RIGHTS to create contracts, to bring civil action in court (and a few other odds & ends), the corporation does not have rights to free speech, to bear arm, to vote - or much of anything else that defines a citizen. In acting and creating contracts - the corporation creates liabilities and potential liabilities, however for very pragmatic reasons again these civil liabilities do not extend to the shareholders personally.

So for example if you buy a share of Dow the day before it accidentally kills 8000 in Bopal India - the share price might drop to zero, but as a shareholder your assets cannot be attached.

For this reason it pays to study the assets and liabilities of any company you are dealing with, and to make contractual decisions wrt this. As a concrete example - let's say you go the the store for a tube of toothpaste, and you find a name brand from a large financially attachable corporation like Proctor&Gamble and a no-name brand. Let's say for the sake of argument that both include poisonous diethylene glycol purchased in mislabeled form, from a vendor on Alibaba. It's pretty clear that P&G has some ability to compensate you for the liability and loss, but the no-name company will fold before they've gotten to court, and the Alibaba vendor is beyond reach.
--

As to the idea that corporate officers have a fiduciary responsibility to this "artificial person" - who has no expressible interests - I sincerely hope psionl0 is joking b/c that is ridiculous. If that were so then any CEO could claim the "artificial person" directed him to take a $500M no-interest loan, and to keep the corporate jet. Who could prove otherwise ? There is no "artificial person", the corporation can act as a separate entity wrt to a few aspects of civil law, and taxation, and liability. Also note that criminal liability does not stop at the corporation - if XYZ corporation puts out a contract to murder someone, or to steal some object - the managing individuals involved would face criminal charges.

No ! Corporate officers have a fiduciary responsibility to the equity owners interests - the "corporation" or "shareholders" is a matter of terminology.
---

There are some special cases, where for example a majority shareholder may have a responsibility to other shareholders. Where shareholders in a privately held corporation may have fiduciary responsibilities to each other. Where companies approaching bankruptcy may have some special responsibilities to creditors that are against the interests of shareholders.

[psionl0]

Originally Posted by stevea

As to the idea that corporate officers have a fiduciary responsibility to this "artificial person" - who has no expressible interests - I sincerely hope psionl0 is joking b/c that is ridiculous.

I have already provided a link to section 181 of the corporations act which says that directors must act in the best interests of the corporation - not the members or shareholders. If those interests were one and the same then there would not be a need for a section 187 which deals with wholly owned subsidiaries.

In case there is any doubt about this concept, the Australian Securities and Investments Commission clarifies it in its website:

Originally Posted by ASIC

. . .
A member of a company must be a person (e.g. John Citizen), a body corporate (e.g. XYZ Company Pty Ltd), or a body politic (e.g. State of Queensland). A member is an entity that can own property, sue or be sued. A business name is not a legal entity and therefore cannot be a member. Estates and trusts cannot hold shares in their own right – they must nominate an executor or a trustee.
. . . .
The members of a company own the company, but the company has a separate legal existence and the company’s assets belong to the company.
. . . .

Originally Posted by stevea

If that were so then any CEO could claim the "artificial person" directed him to take a $500M no-interest loan, and to keep the corporate jet. Who could prove otherwise ?

Now who is being ridiculous?

[Dinwar]

Originally Posted by daenku32

It does get to the point of arguing about the definition of "capitalism". In it I would say that modern investor-operator model is closer to state-owned model than the "producer" model than is the classical definition. The "owner" is just a group of people with pooled money that only care about one thing: return. That group mind as well be the government. They are just looking for growth of the stock. They are not insisting in running the business a certain way.

This is nonsensical. By your argument, anything other than a sole proprietorship equals government ownership, an obviously false equivication (a company cannot arrest you, for example, or make laws, at least not in a capitalistic society).

And if you think there's no connection between return on investment and running a business a certain way, all I can say is please never take a management position. How on Earth do you think returns happen? Here's a nice little essay on the topic.

Originally Posted by eirik

I can't think of a single company that would benefit from having lots of capital on a bank account.

This is equally nonsensical. I assume you have some money in the bank. Why? If no single company can benefit from having capital in a bank account, what possible benefit can YOU have? Where do you expect companies to put their profits? Most comapnies aren't zero-sum organizations--money coming in doesn't precisely equal money going out. Ideally, Min>Mout. That means there's a surplus of cash. What do you expect them to do with it? This also leads to one huge benefit to having a bit of cash easily accessible: if Mout>Min, a cash researve allows the company to stay afloat longer. Then there are issues such as contractual agreements (the banks they get loans from may want a certain amount of cash in an account with them, to hedge their investment).

My point is, there are a lot of rather obvious benefits to having a pool of cash lying around that can easily be dipped into. This is obvious on the individual scale to anyone with enough sense about money to put food on the table, and the same basic principles apply to corporations.

[Brian-M]

Just an odd thought, would it be possible for ownerless corporations to exist?

For example, two public companies each start buying the other's shares without initiating any takeover proceedings, until they each own 100% of each other, and then they merge into a single company?

Or a company with a share buyback scheme that continues until all the shares are purchased?

(Naturally there'd have to be some deception as to the actual value of the shares in order for the company to be able to afford to by them back, because by the time you got to the last share it's true value would be equal to the value of the entire company. Maybe It could borrow money or issue bonds to achieve this?)

[psionl0]

Originally Posted by Brian-M

Just an odd thought, would it be possible for ownerless corporations to exist?

Section 114 of the corporations act says "A company needs to have at least 1 member".

It might theoretically be possible for company A to own company B and vice versa but it would be pointless and the tax office might get narky about it. (Subsidiary companies must name their holding company when doing their tax returns).

[eirik]

Originally Posted by Dinwar

This is equally nonsensical. I assume you have some money in the bank. Why? If no single company can benefit from having capital in a bank account, what possible benefit can YOU have? Where do you expect companies to put their profits? Most comapnies aren't zero-sum organizations--money coming in doesn't precisely equal money going out. Ideally, Min>Mout. That means there's a surplus of cash. What do you expect them to do with it? This also leads to one huge benefit to having a bit of cash easily accessible: if Mout>Min, a cash researve allows the company to stay afloat longer. Then there are issues such as contractual agreements (the banks they get loans from may want a certain amount of cash in an account with them, to hedge their investment).

My point is, there are a lot of rather obvious benefits to having a pool of cash lying around that can easily be dipped into. This is obvious on the individual scale to anyone with enough sense about money to put food on the table, and the same basic principles apply to corporations.

Note my qualifier "lots" of capital. It's a language thing, English is my third language.. Off course a buffer of cash is a good thing.

Let's say you won a 10 million dollars. To just keep it on your bank account wouldn't be the best use of the money. You would want to invest large parts of the money in businesses, property projects etc.

It's all I'm trying to say.

[Tippit]

Originally Posted by eirik

The law prescribes a method. The method is used by tax authorities, and their decision can be, and is ,appealed all the way to supreme court.

The important part in enforcing these rules, is that it is consistant, so that it doesn't violate an important taxing principle - equality. Equal subjects should be taxed equal. Againg, sometimes easier said than done.

It seems to me that if the government can simply assess my house at $1m, and my neighbor's house at $200k for similar houses, it doesn't really matter whether the millage rate is 'equal'.

This system sounds a lot more arbitrary than it is equal.

[stevea]

Originally Posted by psionl0

I have already provided a link to section 181 of the corporations act which says that directors must act in the best interests of the corporation - not the members or shareholders. If those interests were one and the same then there would not be a need for a section 187 which deals with wholly owned subsidiaries.

Yes there would be a need since subsidiaries have no shareholders. Your website clearly states the subsidiary must be managed in the interest of the "holding company" (i.e. the constructive owners).

Quote:

In case there is any doubt about this concept, the Australian Securities and Investments Commission clarifies it in its website:

Your citation does not address the issue of "artificial person" at all, but supports my claim that the corporation is distinct from the shareholders/"company members".

Quote:

Now who is being ridiculous?

The ridiculous person is the one who extrapolates from corporate entity to "artificial personhood".

===

If your mis-interpretation was correct, then how could anyone divine the "interests" of the non-sentient corporate entity ? Next you'll be imputing motives to a pen or a sheet of paper.