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Personally (and I expect this to be controversial here) I think that we should stop treating corporations as different liability-wise from limited partnerships

Personally (and I expect this to be controversial here) I think that we should stop treating corporations as different liability-wise from limited partnerships in terms of what owners and managers can be held liable for. The problem is not really limited liability for passive owners. Why should a passive investor have more liability than a lender? The problem is that we provide even more limitations in some areas (like product liability) exclusively to the corporate form. So suppose a company dumps toxic waste into a river. I think we should be able to accept the following two propositions: 1. The company's investors themselves, absent any part in this decision on their part, should be liable only to the extent of their investment. 2. The folks who signed off on the decision should be personally liable for the rest. That's not far from the situation today. The problem really are all the exceptions to this approach (product liability for example) and the fact that nobody actually sues individuals for their personal parts in such things. So let's have a simple rule: There should be no difference in liability between an unlimited partner and a corporate executive for decisions actually made under their watch. That preserves corporate limited liability, but also limits it appropriately.

AnthonyMouse 13y ago
> That's not far from the situation today. The problem really are all the exceptions to this approach (product liability for example) and the fact that nobody actually sues individuals for their personal parts in such things. The problem is the reason nobody sues individuals for their personal acts is that individuals don't have any real money. Even executives have peanuts compared to the amount of liability a corporation can incur. If you have a claim large enough to bankrupt the corporation, going after the CEO just to get his three year old Lexus isn't worth the trouble. And if you sue the executives then they hire lawyers and by the time you get a judgment the lawyers have burned through any assets they might have had to pay you with, unless they have litigation insurance in which case you can look forward to fighting them in court until the end of time. It doesn't do much good to make parties liable who pretty much never have the capacity to pay.
- einhverfr 13y ago
  But liens against homes can be useful. Additionally if you can get a temporary lien pending litigation, it means that both sides are relatively tied up. But more to the point if individuals were to be held legally responsible, then you give incentive to behave. Also keep in mind one's options for participating in other companies with international legal concerns may be impacted by personal bankruptcy. Many European countries do not allow those who have filed bankruptcy to sit on the board or have legal responsibilities on behalf of a corporation.

AnthonyMouse 13y ago

> That's not far from the situation today. The problem really are all the exceptions to this approach (product liability for example) and the fact that nobody actually sues individuals for their personal parts in such things. The problem is the reason nobody sues individuals for their personal acts is that individuals don't have any real money. Even executives have peanuts compared to the amount of liability a corporation can incur. If you have a claim large enough to bankrupt the corporation, going after the CEO just to get his three year old Lexus isn't worth the trouble. And if you sue the executives then they hire lawyers and by the time you get a judgment the lawyers have burned through any assets they might have had to pay you with, unless they have litigation insurance in which case you can look forward to fighting them in court until the end of time. It doesn't do much good to make parties liable who pretty much never have the capacity to pay.

einhverfr 13y ago
But liens against homes can be useful. Additionally if you can get a temporary lien pending litigation, it means that both sides are relatively tied up. But more to the point if individuals were to be held legally responsible, then you give incentive to behave. Also keep in mind one's options for participating in other companies with international legal concerns may be impacted by personal bankruptcy. Many European countries do not allow those who have filed bankruptcy to sit on the board or have legal responsibilities on behalf of a corporation.