His central thesis is that the public would be better served by a smaller, more committed “shareholder aristocracy.” The term aristocracy is “a metaphor for the civic virtues that a free people might expect of their leaders in politics, business and intellectual life”. It should not conjure up a picture of effete fops dancing the minuet at Versailles. Fraser’s proposed aristocracy would even be self-selecting rather than hereditary.
Fraser quotes Christopher Lasch’s remark that “the value of cultural elites [such as an aristocracy] lay in their willingness to assume responsibility for the exacting standards without which civilization is impossible.” Such an elite must “live in the service of demanding ideals.” Ortega y Gassett similarly writes that “nobility is defined by the demands it makes on us—by obligations, not by rights”.
Why, after all, does the prima donna of the shareholders’ meeting strike us as silly? Because he has no obligations toward the company, its employees, its other shareholders, its customers, or the general public. The neo-puritan crusader accuses others and poses demands, but bears no responsibility if his own proposals lead to disaster.
In smaller, family-run businesses the issue of placing responsibility hardly arises; everyone can see that the buck stops with the owner, who also runs his business from day to day. But in the modern corporation described by Berle and Means, characterized by a “separation of ownership and control,” it becomes unclear who is responsible for corporate acts.
The law at least makes clear that it does not hold individual shareholders responsible. This is the principle of limited liability, which only gained widespread acceptance around the middle of the nineteenth century. A company has legal personality, and can be held liable for harm it causes (think of the Exxon Valdez oil spill of 1989). But the individual shareholder cannot be held liable for any amount greater than the value of his stock. Thus, while it is possible to lose all the money you invest in stocks, it is not possible to lose more than that.
(The Occidental Quarterly, April 26, 2009).