Corporations have a few advantages, and one of those advantages – limited liability – has slowly but inexorably also become the greatest flaw of the corporate culture. This means that shareholders may take part in the profits through dividends and stock appreciation but are not personally liable for the company’s debts… or for any crime or action taken in the interest of the shareholders. Generally, the law has also held that a corporate official cannot be held personally liable for an action taken in the best interests of the corporation.
In practice, that means that if a corporate official decides that a cheaper part is in the corporate interest because it will reduce costs and increase profits, so long as the part is not known to be defective, that official cannot be held personally liable if the part fails and causes multiple deaths. This is what happened in the Ford Pinto gas tank scandal or more recently in the 2009-11 Toyota “sticky” accelerator problems.
Over the years, as I noted in an earlier blog, California’s electric utility, PG&E, engaged in numerous unsafe and unethical practices which led to massive environmental problems and practices as a result of groundwater contamination with chromium six, and affected at least 2,000 residents with carcinogenic effects, effectively resulting in the almost total depopulation of Hinkley California, and costing PG&E over a billion dollars. In 2018, shoddy PG&E practices led to the Camp Fire, which destroyed 18,000 structures and killed 85 people, and required an $11 billion settlement with insurers. Yet in more than 20 years of environmental and technical problems, not a single official or executive has been held personally responsible, and now PG&E has filed for bankruptcy because it fears it cannot pay what it owes in damages. Even if it can, none of those executives will be held responsible, and the shareholders, not the executives, will pay.
Drug companies can raise prices to astronomical levels in the name of profits, effectively depriving uninsured or underinsured or poor patients of live-saving medications, and not even the corporation can be held responsible for the resulting deaths.
Financial firms can take incredible risks and nearly destroy the financial structure of the U.S., if not the world, cost tens of thousands of people their homes, and tens of thousands their jobs, and the government bails them out – and not a single executive was personally held responsible.
Talk about risk free! A poor man shoots someone over a few dollars and spends years, if not his life, in prison, while executives make decisions that kill scores of people, and they get rewarded.
Or am I the only one who thinks this is a bit unbalanced?
