Corporate Accountability (1) Limited Liability

An interesting thing about the corporate shield of limited liability: it could be viewed as one of the first “family friendly” policies. Prior to the invention of the corporation, investors had unlimited liability. That is, all their wealth, including their homes and personal assets, were liable to seizure to pay their debts. Many women and children found themselves in the poorhouse as a result of such bankruptcies.

The invention of the corporation limited investor liability to the monies invested, shielding families from such catastrophic losses. In this sense, not a bad idea. However, since its start, corporations have lobbied continually to extend the concept of limited liability far beyond this modest beginning.

Today, corporate boards and officers claim free speech protections for their advertising, file slander suits for “product disparagement,” seek to minimize their personal responsibility for environmental and social damage caused by their operations, and otherwise hide behind the corporate shield. We have come a long way from limited financial liability, to minimal personal responsibility.

Restoring the original concept of limited financial liability would mean that if the corporation were judged guilty of violations of the law, then the directors and officers would be subject as individuals to appropriate civil or criminal punishment. This would provide an immediate and lasting incentive for compliance with worker safety, environmental, anti-discrimination and many other laws and regulations intended for society’s benefit.