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Does Control Make a Difference? The Moral Foundations of Shareholder Liability for Corporate Wrongs
Author(s) -
Crowe Jonathan
Publication year - 2012
Publication title -
the modern law review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.37
H-Index - 22
eISSN - 1468-2230
pISSN - 0026-7961
DOI - 10.1111/j.1468-2230.2012.00895.x
Subject(s) - wrongdoing , shareholder , doctrine , liability , law and economics , argument (complex analysis) , business , shareholder resolution , limited liability , control (management) , corporate law , accounting , law , corporate governance , economics , political science , finance , management , biochemistry , chemistry
The doctrine of limited liability, as traditionally understood, prevents shareholders from being held personally liable for corporate wrongs. Several authors have recently argued that the doctrine should be modified to make some or all shareholders individually liable for torts committed by corporations in which they hold shares. This article distinguishes three types of argument that might provide a moral basis for shareholder liability in such cases. I contend that while these arguments support holding at least some shareholders liable for corporate torts, they fail to justify a general regime of unlimited pro rata shareholder liability. The level of control shareholders exercise over a company makes an important difference to their moral duties to compensate victims of corporate wrongdoing.