The recently passed amendment to the Senate’s Sarbanes bill preventing corporations from making loans to their officers is just another step in the socialization of private property in America — and must be fought on that basis.
The concept of property inherently requires that an owner be able to decide how his property is to be used, disposed of, or invested. If an owner can’t use his property as he decides best, but instead must ask his government what he may or may not do with it, then the property is not truly his; it has been socialized by the State. Governments have no legitimate claim to an individual’s property, and our Constitution was expressly formulated to forbid it, so those who seek to extend the State’s reach are continually on the lookout for a new pretext under which to do so.
In this case, the alleged reason for further usurping private citizens’ property is the headline case of WorldCom having loaned its former chairman, Bernie Ebbers, $366 million for the purpose of buying WorldCom stock. Note that this loan and the use of the proceeds were promptly and fully disclosed, i.e. we are not here dealing with a case of fraud, but a simple corporate decision, the type which is made by every business owner on a regular basis. In fact, not only was the loan fully disclosed, but at the time, many analysts applauded the decision since it aligned Ebbers’ interest with that of the common shareholders.
There was no force or coercion involved — given the full disclosure, every investor who did not want his company to make such loans had the simple and expedient option of not buying the stock if he didn’t already own it, or to sell it if he did. No government protection was needed, this is just a typical decision an investor must routinely make in allocating his capital.
More importantly, it is not the place of government to protect citizens from themselves, but solely to protect them from aggressors. Every breach of this principle simultaneously expands government and violates individual rights — to the detriment of all.
That the case involves a public company rather than an individual changes nothing; a corporation is simply an organized group of individuals who have pooled their money to engage in some economic activity. Whether the company is privately held or the shares trade on an exchange (a “public” company), the assets are the private property of the shareholders and they therefore have all the same rights that an individual does. So just as an individual has the right to use his earnings to buy food, or beanie babies, or lottery tickets, so too does a company have the right to choose to use its capital to buy equipment, build ostentatious headquarters, or compensate its officers via large personal loans.
The fact that some decisions may be more productive than others, either in the case of the individual or for the pool of individuals, does not give the government any right to intervene in the choice. Anyone supporting such intervention is not protecting shareholders (who have always had the choice to not participate in such companies), but is instead dooming all of us to the continued erosion of property rights and the unrelenting socialization of America.
