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Lecture 4

PHL295 Week 4 Lecture

3 Pages
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Department
Philosophy
Course Code
PHL295H1
Professor
all

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Week 4 October-02-13 9:26 AM Continued from Last Week: Reading: Coase Williamson- Firm: Corporation  Descriptive argument: how the shape of the firm will change  Trying to explain why are things the way they are 5 Main Features of a Corporation 1. Legal Personality- "Nexus of contracts" - nexus for contracts- a firm can have contracts o Separate patrimony: 3 rules  Entity Shielding:  Authority- Board of Directors  Procedures for Law suits- when corporate law wants to sue, they can sue the entity as a whole o Reasons why there are legal personalities o Misleading: Corporation might have "mental problems" o Legal entity separate from its owner because of the 3 rules 2. Legal Liability: the owners are only liable for their own money the put in the corporation- When creditors o Owners shielding- assists are protected o Entity + Owner Shielding= Asset Partitions 3. Transferrable Shares o Open/Public vs. Closed/private  Listed /Publicly traded  Unlisted o Open- no restrictions/Close- restrictions o Closely Held vs. Widely Held- difference between buying shares 4. Centralized Management: Board directors 5. Investors are Owners o 2 key elements of Ownership of the Firm  Right to control the firm  The right to have appropriate of Residual Earnings Corporate Law Shareholder and Owners Primacy View: Interests and wills are primary Reading 1: The Modern Corporation and Private Property  Property rights come from ownership and applies control  Managers are trustees for shareholders o Fiduciary Obligations to shareholders - act in someone`s interests ex. lawyers o Shareholders interests are primary Reading 2: Freudman: Capitalism and Freedom  Argument: Freedom- government should protect freedom and avoid constriction of power- threat to freedom  Government powers should be dispersed  Limit Government power- 2 reasons o Protective- Liberty o Constructive- great advances in society= liberty - advances of civilization- wealth maximization  Liberty or Wealth- they do not go together all the time- which value is more important  School of Thought: Liberalism- values liberty then anything else- it is the most important value according to Freudamn  Freedom is the most affective way to promote wealth
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