An idea of limited value

Linda McQuaig has been a fixture of Canadian public life for many years, as a left-leaning, nationalistic newspaper columnist and occasional activist. She ran unsuccessfully for Parliament, as a candidate for the left-ish NDP, in the 2015 federal election.  Anyone who has had a running feud with Conrad Black can't be all bad, and a lot of McQuaig's ideas make a lot of sense.

But not, alas, this one, published on the op-ed page of the Toronto Star. Ms McQuaig is justifiably angry at the way that Sears Canada has been run into the ground under its American venture capitalist owners.  She is especially incensed at the way those owners have extracted large amounts of money from the company in the form of special dividends, then fired all of the company's employees without severance and with their pensions chronically underfunded. 

Ms McQuaig may be wrong when she suggests that Sears might have survived under different management, but the rest of her analysis is largely correct.  However, she veers wildly off track when she tries to suggest a way of preventing this kind of thing from happening again.  "No", she says, "I'm not advocating the overthrow of capitalism" (phew!) but something she says is "easier -- changing our corporate laws so that those controlling corporations can be held personally liable for money owed to their employees". 

That's right: she wants to put an end to limited liability.  Can I suggest gently that she hasn't thought this through very carefully?  The type of people who have shafted Sears Canada employees are certainly the unacceptable face of capitalism, but they are very much a subset of the universe of shareholders.  Millions of Canadians directly own corporate shares as part of their savings; millions more are set to rely on corporate or individual pension plans that invest heavily in the stock market. 

Ms McQuaig can't just take away limited liability from nefarious individuals she happens not to approve of.  If it's removed, it's removed for the wicked and the righteous alike. She may not think she's "advocating the overthrow of capitalism", but that would surely be the effect of putting an end to limited liability.

The kind of behaviour that killed Sears Canada and left its employees in the lurch has little to do with limited liability ownership.  What allows the "cartoon capitalists" (love that term!) to strip all the value out of a company is their access to vast amounts of debt, with the interest payments tax deductible.  If the authorities want to curb bad behaviour, this is surely the place to start, but even here it would be necessary to move very cautiously, because judiciously-used debt is a perfectly legitimate part of most corporate balance sheets.