Limited liability in tort has been the prevailing rule for corporations in the United States, as elsewhere, for more than a century. This rule is generally acknowledged to create incentives for excessive risk-taking by permitting corporations to avoid the full costs of their activities. Nevertheless, these incentives are conventionally assumed to be the price of securing efficient capital financing for corporations. Although several authors have recently proposed curtailing limited liability for certain classes of tort claims or for certain types of corporations in order to control its worst abuses, even the most radical of these proposals retains limited shareholder liability as the general rule.
Date of Authorship for this Version
Hansmann, Henry and Kraakman, Reinier, "Toward Unlimited Shareholder Liability for Corporate Torts" (1991). Faculty Scholarship Series. 5035.