"the very purpose of limited liability was to liberate business from the constraints of ethical scruples"

source:
www.vhi.st-edmunds.cam.ac.uk/.../paper-WS-rona

In reply to Daniel Rodger:

Hi Daniel

I've skimmed your article and can 't find the quote you have picked out, so I'm not sure if what I have to say actually answers the point made.

The problem I have with the quote is the reference to "the constraints of ethical scruples". A corporate entity cannot have ethical scruples and therefore cannot be constrained by them. There is a long section in the article on two competing views of groups or bodies of people. In stating that a corporate entity cannot have ethical scruples, I am coming down on one side of the argument: it seems to me that the individuals that make up a group can clearly have moral scruples but a body corporate, being a notional entity, cannot. In everyday speech we may talk about a company as if it does have a moral character: Company X is an ethical employer, Company Y is dodgy. That is just a convenient shorthand. What we are really commenting on is how the management and staff act.

Coming back to the quote, there are constraints on the activities of a business. Limited liability does not liberate the directors from the consequences of acting unethically (which is not the same as having ethical scruples - you could have scruples but go ahead anyway). If the directors act ethically and with due diligence, then their liability is limited but if they break the law, limited liability won't liberate them from going to prison or whatever penalty the law imposes if responsibility can be traced to them. If they act legally but unethically, limited liability will not liberate them from the consequences of public scorn.

As I couldn't spot the quote I don't know if it was a conclusion drawn by the author of the article or a quote from someone else, but either way, I think it is inaccurate.

In reply to Elizabeth Divver:

One has to grit teeth and endure it all until the very end, Elizabeth - the very last sentence I think contains that quote.
(I was taught that the limited liability company arose in consequence of and / or in order to facilitate The First Industrial Revolution and that it was nothing to do with 'ethical scruples'. Indeed, in the 150-odd years between c 1730 and 1870 British Society was permeated by (Christian) 'ethical scruples' - consider such things as employment law / factories acts / abolition of slavery / (even) the Poor Laws..........)

In reply to Elizabeth Divver:

Hi Elizabeth,

Thank you for your response. I understand what you are saying. I could be wrong in my opinions. To be honest, I found that article a bit heavy going, but I was interested in the quote which supported some ideas of my own. Here are some other quotes from other articles:

"Suppose a corporation owns a warehouse. Through the improper storage of highly flammable materials, the warehouse catches fire and burns to the ground. Additionally, the flames spread and five homes adjacent to the warehouse are destroyed. The damage to the homes totals two million dollars.
The corporation only has one million dollars in assets. It declares bankruptcy and one million dollars are distributed to the damaged homeowners. Under the doctrine of limited liability, the shareholders of the corporation are not liable for the additional one million dollars. The homeowners, for the remaining damages, are simply out of luck."

objectivistanswers.com/.../is-the-practice-of-limited-liability-for-corporations-morally-justified

"Although corporations are an entrenched force in our civilization that probably aren’t going anywhere soon, it’s not obvious that corporations are morally justified or supported by any system of justice. Libertarian justice don’t necessarily support limited liability considering that it allows companies to disrespect human rights and refuse to pay the full damages done. Utilitarian justice doesn’t necessarily support corporations because it’s not clear that limited liability is really best for the “greater good.” Rawls’s theory of justice doesn’t necessarily support corporations because limited liability can give the wealthy more rights and less responsibilities than are enjoyed by the poor, and it’s not clear that the poor will benefit from it."

ethicalrealism.wordpress.com/.../

‘The consequences of the Companies Act 1862 completed the divorce between the Christian conscience and the economic practice of everyday life. Legally speaking it paganised the financial and commercial community. Henceforward an astute man by adherence to legal rules which had nothing to do with morality could grow rich by virtue of shuffling off his most elementary obligations to his fellows.’

Sir Arthur Bryant

'Limited liability is contrary to biblical teaching because, exceptionally in the law of contract, it allows that certain debts may be left unpaid. As a result shareholders, who retain rights of ownership, are excused responsibilities of ownership, while directors bear some of the responsibilities of ownership, and share some of the rewards, but carry few of the risks. This flaw at the heart of corporate structure leads to problems in corporate governance, absence of corporate social accountability, and an unhealthy trend towards corporate giantism. Solutions lie, it is argued, in policies that restore shareholder liability, and incentives for business not to incorporate.'

Source:
http//www.jubilee-centre.org/risk-reward-and-responsibility-limited-liability-and-company-reform-by-michael-schluter/

'It's time to recognize limited liability for what it is: a subsidy for corporations paid by those hurt by malfeasance'

Source:
https//www.thenation.com/article/reforming-limited-liability-law/

My experience in the workplace is that people don't take ownership. There is always a gap where someone is not taking ownership of a matter. Having reflected on this and researched and read a bit online I think it may be connected with the Limited Liability Act which separated ownership from management. The Quakers were opposed to this Act on the grounds that it was amoral (or immoral?).

"...was it morally right to relieve the owners of a business from responsibility for its actions? "

Source:
throughtheflamingsword.wordpress.com/.../

When we own something we tend to manage or treat it better than if we don't own it. If we don't something we may be more negligent with it. I think this may explain why companies are not as well managed as they could be.

In reply to Daniel Rodger:

All this seems to be straying well away from the topic of individual HR professionals’ moral compasses (Or TomToms or Garmins or whatever).

Arguably the financing and therefore the very existence of the infrastructure which now supports all our lives today wouldn’t have been possible without limited liability companies - for example, the canals and later the railways typically involved huge projects which were (a) impossible for any sole proprietor to finance and (b) only attractive to the millions of investors that collectively funded them because their personal liabilities in investing were limited to the amount invested.

Long ago, CIPD Professional membership required serious study of Economics and Social Sciences broadly. It’s something of a pity IMHO that it’s now seemingly so narrow.

Any discussion about limited liability companies is while interesting, surely focusing on the legal responsibilities of an organisation. That status has little real relevance (imo) on the moral responsibilities as for these these can’t be defined by statute.

The original quote was about people managers not HR departments. I see no conflict at all with most reasonable socio economic models to say that those who manage people have some moral responsibilities towards those they manage. Whilst some seek to exploit their employees we rightly frown on these ( and the hullabaloo over SportsDirect last year showed this) suggesting that at some level most of us accept there is a moral dimension as well as a purely legal one. The difficulty is of course where you draw this line.

In reply to Daniel Rodger:

Daniel, what is your fundamental point? That limited liability companies are inherently immoral?

I’m not going to take your long post point by point, but I think that the quotations and examples you have collected don’t add up to a particularly good case. You are focusing on shareholder liability and shareholders do indeed have some legal protection. However, in the average British company, the shareholders don’t actually run the business and won’t have been responsible for the improper storage of goods that lead to houses burning down. Responsibility will sit with the people who have the power directly to influence how things are done. Try buying some shares and go to a few AGMs to see how much power you have to influence how the business is run and how much responsibility you think should morally be yours in an industrial accident.

In reply to Elizabeth Divver:

I suppose my fundamental point is that I don't think limited liability cares about the moral, it cares about the financial: to maximize profits.

I watched an interesting video the other day about a bike shop. The staff didn't like the control from management, and experienced anxiety and depression. They decided to set up the same business as a Cooperative, sharing the profits, and the anxiety and depression went.

thank you

When I was still in the Armed Forces, at the very start of my HR career, yet in a role with far more responsibility than my callow youth had prepared me for, I was wont to say, on a regular basis, "at the end of the day, we have to remember that we are just another employer".

The motto of the Royal Military Academy is "Serve to Lead", but I observed first-hand the pressure that this expectation - that commissioned officers had a moral responsibility for their subordinates - placed upon leaders, young and old. Now, don't get me wrong. There were elements of this culture that were truly excellent. The way a young, pregnant recruit was supported by the Army was terrific. The commitment to helping a drug addict into recovery, even as she was eased back onto civvie street, went far beyond the minimum. The readiness of not only individuals but the whole system to throw itself behind its people was often inspiring.

But it had a darker side. Deepcut Garrison showed this in the failed investigations into suspicious apparent self-inflicted deaths. And now we're seeing it again in the new investigations into the Bloody Sunday killings.

In a less sinister, but equally tragic, fashion I saw the toll that a personal sense of responsibility took on officers whose soldiers were killed, wounded or mentally scarred through combat. I lost one close friend because he insisted on accompanying a wounded subordinate to hospital, only for the ambulance to be caught in the blast of a roadside IED. But I also saw brilliant and committed men and women crack under the pressure and suffer their own permanent mental scars because they utterly believed in their moral responsibility. One colleague took his own life under the pressure.

And these, I would like to remind you, were some of the most talented, best-trained and mentally-robust leaders our nation has produced.

Now your workforce managers may not have to face the literal slings and arrows of combat, but they are expected to operate in an environment in which the wounds and risks are every bit as real and a thousand times harder to spot. It's one thing to give it everything you've got when you turn up for work, but it's quite another to willingly throw yourself into trying to manage situations that are, frankly, nothing to do with your job and which will only end up waking you at 3am in a cold sweat.

In guess what I'm saying is that it is good, ethical, even noble to give a monkey's about your staff. But it is also important to know where the line is - and it's a line that might be different for every manager. You owe it to yourself to know the point at which your commitment needs to stop, not only for good, professional reasons but for your own mental health.

Twenty years down the line, it's still just a job. We are still just an employer.

In reply to Robey:

Very well-said, indeed, Robey.

It’s taken me a nearly whole lifetime in HR along with a very close brush with death via serious illness to learn all that you say from experience.

The mental scars remain - and always will, as I’m sure applies to very many colleagues, -  but you’re no use to anyone at all - including yourself - if you buckle under the pressure. Sure the key to doing this is to keep a sense of proportion and to arrive at an understanding of that which really matters and that which doesn’t - as you surmise, it’s only a job, when all’s said and done......