Owning stock is the only type of property ownership where the owner is not liable if what they own results in someone getting hurt. Ending this indemnity, and allowing shareholders to be sued, would lead to: 1) The election of CEOs with high moral standards, 2) Naturally limit corporate size, as large companies’ behavior is harder to observe and would have a higher legal risk. In turn, the giant company becomes less appealling. This would cause a renaissance of investment in small business, the which becoming more attractive to investors because what they do would be more visible, and allow for tighter shareholder oversight. 3) “Too big to fail” would end with capital naturally distributing itself through all markets. The juggernaut influence of the mega-corporation would diminish with the natural reduction in corporate size. 4) Businesses would become much more robust self-regulators with shareholders being wary of liability issues. This allows for less government regulation, and more innovation, all the while keeping the public protected. 5) What’s said on Sunday would become good business on Monday. Currently, the conventional wisdom says the opposite: when people leave Sunday church service and they return to “the real world” in business, they often abandon the unrealistic and unprofitable pieties of moral teachings. Legal accountability of shareholders would create a ethical revolution in the country, and strengthen the fibre of our daily life. 6) Many big stock owners have already budgeted in downward stock price shocks due to wrongdoing. They have big dollars to absorb that. Suing stock owners for corporate wrongdoing, however, would take from them the resource they DON’T have a lot of: time. Lawsuits take time and attention. In avoiding lawsuits, we’d see corporate governance shape up fast. To have a truly Capitalist system, and nourish our society, we need to end the indemnity of stock shareholders.
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I think it’s ideas like this that are needed. If a big Pharma company can make billions while people get hurt, then turn around and spend their ill-gotten gain on lobbying and advertizing then there is no protection for the people. There might be little tweaks to corporate law that would make a difference also.
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