In the US, a corporation traditionally is called Something Or Other, Inc. In certain other countries, a corporation is called Something Or Other, Ltd.

The "Ltd" refers to the fact that a corporation is a limited liability organization. If you buy stock in a corporation, your liability is limited to your investment.

Unlimited Liability

That's not the only way a large business enterprise can work. The underwriters at Lloyds of London, for instance, are fully committed, and if you join a syndicate, you are committing yourself to honoring your commitments, up to and including your personal bankruptcy.

And while the laws protect the shareholders of a corporation, the officers of a corporation are not so protected. One of the problems in protecting your assets, as the owner of a small business, is that lawyers may be able to pierce the corporate shield and attach the assets of the owner, not because he is the owner of the corporation, but the officer of the corporation who engages in misfeasance or malfeasance.

The Need Is Obvious

I'd argue that the time is ripe, after the various corporate failures of the past few years, to expand the responsibility of a corporate officer. If you are running a corporation, and the corporation ends up owing debts it cannot pay, the creditors of the corporation should be able to reach into YOUR pockets to get paid back. After all, as the person running the corporation, you were in a position to provent that from happening. Your victim was not. It's only fair that you are held personally responsible for your personal actions.

In some cases, it's not your direct personal act that causes the problem. A few years ago, a rogue trader at a leading British bank, Barrows, engaged in unauthorized and outrageous trades that led to collapse of the bank. The persons who supervise him are responsible, at least to a greater degree than anyone else we can think of. Officers and directors of failed corporations should face unlimited liability.

Limited Partnerships

The situation applies to limited partnerships as well. If you win a lawsuit against a limited partnership, you can only collect when the general partner is willing to authorize distribution of assets. This is used to unfairly cheat those who have been harmed by the partnership.

Personal responsibility for your actions is a good idea. It should be the law as well. This isn't an anti-business notion; it's an anti-bad-business practice.

Other Bloggers On Related Topics:
bp - corporate shield - goldman sachs - Lloyds of London - personal responsibility