Limited Liability Is Causing Unlimited Harm
project-syndicate.org
project-syndicate.org
Limited legal liability is not the essential aspect of incorporation, legal personhood is. The ability to sue and be sued as its own entity is the one unique aspect of the corporation that distinguishes it from what came before.
Limited liability, on the other hand, is commonly used in contract law. The entire insurance industry is based on this idea. It even has a respectable, legalese name: indemnity.
In a world of shareholders having unlimited liability, shareholders would buy insurance against any loss beyond the cost bases of their investments, or they'd require the corporate entity - again, still a legal person - to indemnify them for any losses beyond the investment, or maybe the clever lawyers - including the professor's own students - would use indemnity to make even more innovative agreements and tools.
By creating out of whole cloth a market for insurance that heretofore has not existed, we'd probably see even more of a culture of haves vs have nots in the investment world. Those with more money and prestige would be able to buy better protection; ordinary people would be less well-protected.
In the end, we'd have a less equal system, more uncertainty and no change in the behavior of corporations with respect to liabilities of their shareholders.
Another obvious problem has been allowing professionals to transform from partnership structures to corporate structures. I would argue that insulating attorneys, accountants, and investment bankers from risk hasn't been a net positive for society.
There are no have nots in the investment world. The investment world, intuitively, is made up of have and have mores.
Otherwise, you could create an unlimited liability type partnership or something similar.
Company formation was for the wealthy.
A more honest statement would be that the wealthiest investors would gain more power over less wealthy investors; however, that is already the case, the wealthiest non-institutional investors are free to create their own hedge funds, an extraordinary overhead - but one some take on, to gain a leg up on the little (rich) guy.
Indemnity means that one party has to cover the other party's losses--in other words, pretty much the exact opposite of limited liability for the covering party.
Limited liability means that a party is not responsible for their business' debts beyond their investment in the business. Frequently, this means that no one is responsible for the businesses' debts if it fails. See for example, most environmental cleanup litigation or asbestos litigation.
This is incorrect. A business that has legal personhood (i.e. a corporate entity) is still responsible for its own debts if it fails (i.e. it goes into bankruptcy and is fully liquidated). Just like any other person.
By way of analogy, imagine a (natural) person's parents pass away deep in debt, and this person is not party to the parents' debts. In this case, the person may lose any potential inheritance, but the creditors may not go after the person's own assets in order to satisfy the parents' debts. Any assets belonging to the parents' estates may be liquidated to satisfy any outstanding creditors unless and until all of the debt is recovered.
Businesses in receivership are treated in substantially similar ways. Therefore, _someone_ does indeed pay: the business itself.
> Limited liability is not indemnity. > > Indemnity means that one party has to cover the other party's losses--in other words, pretty much the exact opposite of limited liability for the covering party.
I never meant to argue that limited liability was identical to indemnity, but they are practically similar. Because a corporation is a legal person (again, merely meaning that it can enter into agreements, sue and be sued, and thus can acquire or dispose of property), limitation of liability is equivalent in effect to the corporation itself indemnifying any investors from having to cover any costs that are incident to the corporation's operations exceeding the investors' contributions.
Perhaps the law could be structured in such a way that investors would retain some of the firm's liability exceeding their investments. This might be set up as some sort of bond held in escrow that an investor must post before investing, or maybe would involve the law authorizing creditors to go after investors up to some percentage of that person's share in equity in the event of collapse (this would almost certainly lead to large numbers of personal bankruptcies). My whole point was originally that there are already legal tools - like indemnity and insurance - that would preserve the aspects of limited liability. However, these would not be distributed in an equitable way, instead being most available for the wealthiest investors and the largest corporations, and inaccessible to ordinary people or entrepreneurs.
In practice, we'd still have limited liability, but a more unequal one with higher lawyer fees.
On the other hand, shareholders have about the same incentives and there is already corporate governance.
If we take the Deepwater Horizon oil spill from 2010, certainly one of the largest potential liabilities we've seen, BP's liability was capped at $75M.[1] BP ultimately waived its liability as a condition of settling with affected parties, but I think I'm justified in thinking this arrangement was just a particularly expensive PR cost. Insurance providers looked at BP's minuscule liability and were happy to sign the papers. I'm guessing the underwriters had only minimal conditions for the insurance policy. In a world where BP's liabilities were uncapped, I'm guessing the insurance underwriters (and ultimately actuaries) would have taken a much closer look at BP's operations on the oil rig.
If someone wants to propose lifting statutory caps on liability, or even creating liability for e.g. sea level rise, I'd be fully in favor. That solution is like a scalpel rather than a machete (such as revoking limited liability for corporate entities).
But if the shareholders are being called on for more money, it's because the corporation has run out. And in that scenario, contractual indemnity from the corporation would be of no use, because it neither (i) provides funds to pay those who are suing, or (ii) protects the shareholders from lawsuits from third parties.
The definition of indemnity is protection from lawsuits filed by third parties. This is in fact why you have insurance. Person A sues person B (an investor in C) for something corporation C did. Person B produces the indemnity agreement between himself and C, and the court throws out the suit.
And worthless judgments happen all the time. A party's inability to pay does not dissolve that party's agreements to indemnify some other party, or expose them to liability.
And, besides, it would likely never get to this point anyway, unless this proposal also involves abolishing corporate bankruptcy.
This sounds like it's missing something. Why wouldn't company B pay company D, a small LLC with 0 assets, to indemnify it against everything it does, period. There has to be a case where, in your scenario, C can't cover the issue and B is on the hook, rather than the case just being "thrown out".
To protect a third party from liability you would have to operate somehow like insurance, and that has a lot of legal requirements like you need to have sufficient cash in a bond or something to be able to guarantee you can pay claims.
I don't know. This is where it gets into the territory that a lawyer would need to find the precedent and find scenarios where courts did indeed find that an indemnity agreement was invalid for some reason. That goes beyond my knowledge of finance/economics and basic working knowledge of the law. My gut tells me that you are right about your scenario.
IANAL, but if I were to hazard a guess, I'd say that the courts would be unimpressed with a corporate entity that has no assets and loads of indemnity agreements. (I'd also point out that a LLC being paid for anything by definition has assets, although it may just convert them all into expenses.) A court might decide that such an agreement is unenforceable. I'm guessing that blatantly bad faith arrangements like that would not stand up in court. But, again, this is a total guess.
So, if A has a claim against B, cannot impact or nullify that contract.
Sure, B can try to get C to pay. Or B can pay up and then try to get the money back from C. But this is between B and C, and does not affect A's ability to collect.
If you were directly responsible for the decision making that caused predictable suffering, you can be criminally liable. You can go to jail. What is the problem with that?
Limited liability doesn't protect anyone from criminal charges anyway.
Could you explain what problem this would solve?
To use a concrete example: Electricite de France (EDF). They operate a large fleet of nuclear reactors. How much should they be required to put aside against the contingency of a massive Chernobyl-level incident? Their "total assets" are 283.2 billion EUR according to Google. Is that enough?
(Slightly bad example in that the majority shareholder is the French government, but never mind)
> up their ante until it actually covers the worst-case loss
The worst-case loss is difficult to predict in advance and may be a huge number with low probability. What do you think the minimum "ante" should be required for a low-end business such as opening a restaurant?
In some of the examples cited, the beneficial owners will get to keep ill-gotten gains, while the company implodes. The Sacklers/Purdue is a great example. The owners picked the corporate carcass clean, shipped the money out of the jurisdiction of the US Courts, and are protected against most future claims.
Perhaps a rule that anyone in a decisionmaking position who earned over $1m total comp last year is partially liable for fines against the company?
In the UK a few decades ago there was a huge fiasco when Lloyds, one of the few remaining places whose investors have unlimited liability because the company dates from 1686, dumped liabilities relating to asbestos onto them. https://www.theguardian.com/money/2000/nov/04/business.perso...
Was Sir William Jaffray responsible, in the 1980s, for the actions of those marketing and installing asbestos in the 1970s? He ended up liable for it anyway.
Limited liability is almost always irrelevant to megacorps, because they're large enough that any given liability doesn't actually bankrupt them. Which also means that managers in a company that size would still expect it to never happen and it wouldn't impact their behavior, and they would just carry insurance against it anyway.
On top of that, it doesn't even really help the victims, because if you have a claim which can bankrupt a $100B corporation, the few million in additional assets you could get from the managers is a rounding error.
If you're really trying to affect behavior, criminal penalties for the managers would tend to be more effective, but they also tend to already exist in cases of malice rather than negligence. Negligence tends to be punished with financial penalties rather than prison, and then we're back to the money getting paid by the corporation itself or insurance.
A lot of people in this thread keep citing insurance, as if you can _just carry_ insurance for anything. This completely ignores the actual insurance companies in the equation.
Insurance companies are not limitless pits of funds, they won't just give insurance to anyone for anything. If a manager has a track record of damaging behaviour or works in an industry that does obvious harm, why would somebody give them insurance?
People are talking like the results are useless unless it personally bankrupts the managers responsible, the goal is not to hurt the person responsible as much as possible, its to actually provide compensation for victims, and provide a market force to reduce harmful behaviour.
You can't just "get insurance" for anything. If you were legally liable for harms, and you had a track record of harmful decisions or work in a obviously harmful industries, then the insurance companies are unlikely to provide you insurance or will charge you high enough premiums that those who are more responsible or do safer work are economically advantaged.
If a manager has a track record of damaging behaviour or works in an industry that does obvious harm, why would somebody hire them? The liability to the corporation as things are now is the same as what it would be to the insurance company.
And that's assuming that actuarially the people who have made mistakes in the past are more likely to make them in the future. Maybe the people who have made mistakes in the past are the people who have learned what not to do and are a safer choice than someone with less experience, or at least are not sufficiently more risky that the difference in insurance premiums would be prohibitively large.
> People are talking like the results are useless unless it personally bankrupts the managers responsible, the goal is not to hurt the person responsible as much as possible, its to actually provide compensation for victims, and provide a market force to reduce harmful behaviour.
Making the managers responsible for corporate liability doesn't do much for victims because the managers typically have far less money than the corporation itself. All it can really do is try to motivate the managers to avoid the liability, but it doesn't even do that when it's the insurance company and not the manager that pays in the event of liability anyway.
Managers have assets, insurance companies have assets, shell corporations designed to shield other corporations and managers do not have any assets.
> And that's assuming that actuarially the people who have made mistakes in the past are more likely to make them in the future.
Moreso I'm assuming that the actual actuaries will be incentivized to assess this correctly when somebody actual has to pay when things go bad.
And that's what needs to change, not the concept of limited liability itself.
Suppose you go to a drive through and order a coffee. The restaurant is negligent; their coffee is unreasonably hot, the lids they use don't seal well and their employee spills the coffee on you. You get second and third degree burns, sue them and get awarded a million dollars.
If it was a mom and pop restaurant, they're bankrupt. Their restaurant isn't worth $1M but now they owe you that much and they don't have it so they go out of business.
If it was a national chain, they make $1M less profit this year but none of their locations close. Maybe they fire that employee, start using better fitting lids on their coffee or don't serve it so hot anymore.
Their behavior was the same, the liability was the same, the only difference is that they were big enough to pay the money without going bankrupt. That's not necessarily bad. Better that the victim gets the $1M they were awarded instead of something less than that. Better that the other employees who weren't negligent don't lose their jobs too. As long as the liability is enough to get them to fix the problem (or, ideally, to have predicted it and prevented it to begin with).
I also don't think that allowing companies to externalize their costs (either implicitly or explicitly) is beneficial to society, and that is why I said that the regulatory environment needs to change in scenarios where that's not the case.
It’s worth noting that even Lloyd’s has been changing as a result of unlimited liability being, well, a liability. New private individual investors with unlimited liability (called “Names” in Lloyd’s parlance) haven’t been admitted in some years and corporate entities have been admitted to join with limited liability for almost thirty years. As it stands now, something like only 3% of Lloyd’s insurance capacity is provided by unlimited liability Names and that’s expected to hit 0% before 2030.
Average Joe has very little of that say, and proportionately little of the benefit. But the institution that manages Joe's 401(k) has, in aggregate, quite a bit of that say. And it's a little disingenuous of them to say, "It's not our fault that the manager we hired was dumping toxic waste. We just benefited from the savings in the waste management department."
Shares represent both a piece of the profit and a piece of control, so it's not unreasonable that they should bear financial responsibility for the actions of the corporation. It shouldn't stop at management -- though the corporate veil is supposed to be pierced by illegal activity, and for a lot of reasons it rarely is. Which just makes it more imperative that the people who hired the manager be required to protect their investment.
They absolutely are not. Do you think I (as an investor in Dow) have any say over who managed the plant in Bhopal?
> Average Joe has very little of that say, and proportionately little of the benefit. But the institution that manages Joe's 401(k) has, in aggregate, quite a bit of that say. And it's a little disingenuous of them to say, "It's not our fault that the manager we hired was dumping toxic waste. We just benefited from the savings in the waste management department."
That I agree with, and that's why you fine the company for the cost of the cleanup plus some punitive fine as a response. If that forces the company into bankruptcy, so be it, but BP absorbed a $65 billion cost for the Horizon disaster, so it seems like large companies could survive the potentially high expenses.
> Shares represent both a piece of the profit and a piece of control...
This is true in theory but not in practice, so I feel the rest of your comment doesn't hold up.
In UK banking now there are regulations that manager above a certain level are legally liable for decisions made below them. This means in the worst case, a director level manager can go to prison for a decision they or one of their subordinates makes. If it's a subordinate, I believe it is their responsibility to prove that the information was hidden from them, i.e. they are required to know what's going on below them as far as they reasonably can.
I understand why there is a human need to hold someone accountable for everything. But that's not realistically possible. Trying or pretending it is leads to very weird results (like the article)
There are so many failures here, I'd go as far as to call it "not even wrong". It's just a mess of accusations and (incorrect) assertions. The cynic in me wonders if its intended to just appeal to people's prejudices. But maybe I'm just cynical...
Everything else is hot garbage, though. I don't understand why the shareholders are being dragged into this at all... Suddenly making millions of people partially liable for the acts of the company would result in nothing other than panicked crashes. Not to mention things like index funds suddenly becoming untenable -- imagine liability to the entire stock market?! And that to me is enough to confirm that this is barking up the wrong tree, because index funds are one of the best things to happen to the investment market for the average person.
The answer is to internalize the costs to the corporation, so that the market can properly reflect them just like every other cost. This works fine, and doesn't destroy the very nature of the market or shareholding.
EDIT: I mean this broadly. Not just carbon taxes and other classic examples of externalities. But also things like proper fines against damages discovered in court. Currently fines seem flatter than they should be. They're often enough to completely shutter a small company, but when scaled up often don't even negate the potential profits for megacorps.
> not connected to limited liability [like] pollution
I'm pretty sure that's in reference to things like https://indyweek.com/news/legal-maneuver-absolve-duke-energy... where a company offloads its pollution liabilities to an under-capitalized LLC:
] In most cases, the landowner would be legally liable for such damages. But the owner of the abandoned brick mine is not Duke Energy; it's Green Meadow LLC, a new corporation led by the president of Charah Inc., a Kentucky ash disposal company contracting with Duke on the coal ash project.
] Once Charah takes possession of the ash, Duke may not be responsible for the waste, legal experts say, a contingency that may be part of Duke's private contract with Charah.
] And if Green Meadow or Charah does not have the money to pay damages emanating from a lawsuit, then county governments and the state not Duke Energy may be ultimately forced to pay, legal experts say.
> misunderstands limited and zero liability
I find it hard to believe that "Katharina Pistor, Professor of Comparative Law at Columbia Law School, [and] author of The Code of Capital: How the Law Creates Wealth and Inequality." understands the topic worse than an HN commenter.
> pretending the former is the later
I don't see that. For example, Pistor writes "The corporate entity itself might face liability, perhaps even bankruptcy, but the shareholders can walk away from the wreckage, profits in hand."
That distinguishes between limited and zero liability.
A quick look (following the links) finds several papers related to piercing the corporate veil. Eg https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1517428&... describes how the inability to pierce the corporate veil may "improperly shield irresponsible business owners."
If that we're not the case, llcs would be a sort of crazy loophole to dump problems and walk away. But it's not. We already have a whole web of regulations, most based around requiring insurance and regulating insurer risk profiles...
In answer to you the "profits in hands" quote, I think that's misrepresentation because its incredibly rare. How many times does someone invest in a company, magically get more than their investment back in cash and then the company goes bankrupt and have it all happen so quickly that it's fraud rather than just 10 years of success and failure? The article doesn't give even 1 example of that. Also to take advantage of limited liability a dividend needs to be properly declared and paid. Companies that realise they have major liabilities can't do that. That's why they don't. So the article pretends you can just wait till pay day, liquidate everything and throw the money over the fence and you get away with it.
Though it does link to https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1871173 "The Modern Law of Corporate Groups: An Empirical Study of Piercing the Corporate Veil in the Parent-Subsidiary Context"
] Empirical analysis treating the application of substantive piercing doctrine to the parent-subsidiary context is virtually nonexistent. This Article begins to fill that void. The underlying project is an empirical analysis of piercing the corporate veil in the parent-subsidiary context. The Article's first objective is to describe statistically the propensities of modern courts for piercing the corporate veil in the parent-subsidiary situation. Its second objective is to use advanced statistical techniques to explore potential causal relationships regarding piercing the veil in the parent-subsidiary context. Both of these objectives are unique to this study. The hope is that courts, commentators, and practitioners may be better equipped to understand and predict under what circumstances a court is likely to exercise its equitable discretion and hold a parent company liable.
Fraud or misrepresentation was discussed in 46.4% (n=167) of the piercing cases, and found to be present in 7.2% (n=26) of them. (See page 1128.)
Undercapitalization (which I mentioned) was in 44 of those cases.
So examples are out there.
Does this not reflect the world outside your window? When I can put money into a company, then sit on it over a period of years and just watch it grow, what’s my incentive to prevent the company from doing bad things? When I can do that for hundreds of companies at a time, in the form of an index fund or ETF, and be virtually assured my money will grow over the long term, why would I do anything to prevent the company from taking risks?
TL;DR: “Zero liability” is not zero, it’s just so small it doesn’t discourage bad behavior.
(Getting rid of limited liability also means the company is no longer necessarily a liability shield for its staff! People would likely fallback on not being a company, so either partnership arrangements or just a cloud of independent contractors)
Because you expect to make more money than you expect to lose. The liability risk (or the cost of insuring against it) would just get priced into the stock price.
> What would happen to Exxon if everyone thought that way?
They would presumably consolidate even more than they already have, so that the total amount of corporate assets is greater, which reduces the probability that a liability could exceed them and cause the shareholders to lose more than they put in.
Limited liability benefits small corporations far more than larger ones, because the risk of incurring a liability that exceeds the total value of the corporation is higher when the total value of the corporation is smaller.
Eliminating limited liability would finish these businesses because it would require risk to be borne by employees and managers. They are not able to bear that risk...that is why we split ownership and management with limited liability...this has been thought out.
Well we can't just micromanage everything perfectly. If you change this, the liabilty doesn't just magically disappear. You will see firms collapse into themselves, and that risk will move to managers and employees. It moves to managers because they are the only ones who will take the risk (i.e. we have no principal/agent problem, everyone is a principal) and it moves to employees because that system is incapable of bearing the risk (do you understand that wage labour didn't exist until the late 19th century...before that point, you had union gangmasters who were paid by piece and putting out...again, what we would call employees today bore substantial risk). Again, it moves risk from those able to bear it to those who cannot (the system we have is enormously favourable to employees, and very disadvantageous for employers...the reason people think the opposite is because they don't know what the world was like before this).
Srs, this site is one of the worst for people with no knowledge telling you something they have no understanding of with absolute authority. Read a book on pre-20th century economic history...there is a reason why we got here, it is called progress.
Also, I don't think anyone misunderstands what the author is saying, as it's very clear. It just makes no sense, isn't supported by the examples she brings up, and the proposed solution would do significant harm.
2. I'm not sure how this supports your argument, as an index fund investor is even more removed from the decision making process that leads to some sort of disaster.
You don't need to go to a 25 year time horizon to have a very high chance of making money. By my count, the S&P only lost money in 20 out of the past 94 years. According to https://www.thebalance.com/rolling-index-returns-1973-mid-20..., there was no rolling 15 year period since 1973 where the index lost money. The index lost money in only 11 of 80 rolling 10 year periods from 1928-2008.
My point, since you seem to keep missing it, is that "a very high chance" is not the same as "virtually assured", and "virtually assured" is not the same as "guaranteed", yet you seem to be conflating these concepts, as well as minimizing the current consequences of investing in an irresponsible company (losing your investment).
(I can tell you that I worked in investment management and sat in meetings where this kind of thing was discussed...no-one thinks this, companies that do bad things lose money...end...SRI is something that the good managers always did, it is just branded so bad managers can make money. Index funds are making it easier on companies but...that is a choice people are making to separate stewardship from their portfolio management).
I didn't say "no consequences." I said the consequences were too small.
Who cares if it’s wealth transfer, anyway? If I lose my initial investment in a company, that money goes somewhere, right? Ergo, what we have is already a form of wealth transfer.
You're right, there has to be a balance between punishment and forgiveness.
Sarcasm aside, this strikes me as the kind of vague solution waving that sounds great on paper and has no connection to reality.
Is that specific enough?
"That'll be enough of that! This is for all those dolphins you murdered with your oil spill!"
The kindergarteners looked on in horror - they liked dolphins. They couldn't believe their teacher was a dolphin killer.
"I swear, I just chose the default fund allocation! My rep said it was the most stable set of funds for retiring at 65!" Ms. Wilson made no attempt to choke back her tears.
The officer was having none of that nonsense. "You should have been an active investor in your own future and chosen the 35/5 fund instead. I guess you'll have plenty of time to read up on retirement planning in the clink."
A faceless corporation won't keep you warm at night, no matter how much love you profess to them.
When your paycheck is deposited, you used the ACH clearing houses propping up your bank's ability to make transfers.
When you applied to buy a mortgage, or for renters insurance on your apartment, you supported credit check companies like Experian.
Did you do this because you love Experian and 3M? Did you make a critical evaluation of each of their offerings, investments, subsidiaries, owners, share holders and stated outlooks? Did you factor the environmental impact of the aerosol which powers Super 77 glue when you decided to buy shoes?
Since you're a major supporter of 3M and Experian, I assume you also attend their quarterly briefings by phone. Do you feel they will continue to act in an appropriate and moral way for the foreseeable future? If not, do you intend to return your shoes and find a new dwelling?
The investing market would shrink.
> Would it make people invest more wisely in things that are less damaging?
People are incapable of investing "wisely" enough in a company where they don't have any meaningful access to data or control over employee behavior, so I would say the answer to this is no.
> Would we hold corporations to a higher standard of responsibility?
Probably not, as holding corporations to a higher standard isn't really the job of individual, passive investors. Institutional investors might try, since they do so already, but you can see how successful that has been.
> A faceless corporation won't keep you warm at night, no matter how much love you profess to them.
I don't expect them to do so, so I'm think I'm fine here, but thanks so much for your concern.
2. Individual teachers and mail carriers have literally no control over how their pensions are invested in most cases, so why should they be liable for those decisions?
No one would want much XOM stock in their pension portfolio because they take big risks, shipping and piping toxic substances in ways that frequently cause major disasters. Their business wouldn't be completely destroyed, but they'd have an incentive to take fewer risks - They finally phased out single-hull tankers in US waters 25 years after the Valdez, if this proposed liability was present 1989 they might not have chartered that ship for fear of a shareholder exodus.
The way to ensure safety is through regulation and regulatory enforcement, not by relying on everybody's grandpa to thoroughly vet the safety practices of Exxon before reallocating his IRA.
I.e. teachers go to jail for a few minutes, whereas major shareholders go to jail for a few years or decades.
The underlying problem is essentially inherent to diversified investment strategies -- nobody owns enough of anything to actually care about that corporation in particular, so then shareholders can't act as a check on corporate behavior because none of them are paying attention.
This has nothing to with limited liability shielding investors, and everything to do with the companies themselves not being adequately punished for their wrong-doing. The market is accurately measuring the risk of these activities and determining they are low risk, because their consequences are lower than their gains. If you fix that, I guarantee you that the stock prices will follow.
Now investors will still end up making some profit of off harmful behavior of companies before that behavior comes to light, and thus the market reacts to it, but I don't know that investors should be punished in that situation. It is at most negligence, but it is hard to blame them for lack of due-diligence when regulators and law enforcement, whose job it is find wrongdoing, hadn't yet discovered it either. Leave the liability on those who performed, agreed to, or at least had knowledge of the wrongdoing.
It seems wrong to me to require punishment to scale with the size of the company, as opposed to the size of the "wrong doing". If Boeing has ten other subsidiaries doing defense contracts, satellites and whatever else, that should require them to be fined ten times more?
Because the repercussions of catastrophic events aren't enough to bankrupt companies like Exxon, Dow, and BP, limited liability is irrelevant in those cases.
In my opinion, a more coherent argument for her position (which I don't agree with at all to be clear) would be to find examples of companies that did go bankrupt after some negative event they caused and highlight how the limited liability of the corporation shielded bad actors from punishment they arguably deserved.
Not sure I'm buying that one.
She should not be personally liable as she had no direct part in the decision to make opioids that kill people.
That's the thing, though - we don't. Her liability is limited to effectively zero. Her investment may lose value, but that is another risk entirely. If the company in which she is invested goes bankrupt with a billion dollar debt, she isn't on the hook for a penny of it.
That shows one of the really big problems with 401k's, you pretty much get no say in what companies you invest in. Worse, you usually can't even get information about what companies you invest in.
That is effectively what already happens. You're basically just asking for the amount of liability for particular behavior to be larger than it is, and then in more cases it would cause the corporation to go bankrupt and have to raise new capital in order to continue operating, because the result would be the same.
That's what is supposed to happen through the legal process, but isn't currently as you pointed out.
We don't need new processes, we just need to use the ones we have as they should be.
The author is a lawyer arguing to expand the field of defendants in a lawsuit. Most of those defendants would be likely to settle rather than be dragged into court. Who would be the beneficiary in that scenario?
(I am not a lawyer.)