Originally Posted by
Acala
Angelatc's argument about insurance is a good one and deserves more comment.
If the corporation has insurance, the current shareholders are paying for it and, therefore, paying for any damage that is covered by that insurance even though they are not directly liable. Of course not all corporations carry insurance and not all injuries are covered by insurance. But there is another problem. I'll give an example based on the real world.
Publicly owned Corporation X operates a missile factory. It has been operating since 1985. From 1985 to 1995 some of its employees, under direction from the plant manager, dumped spent solvents into a French drain out in the back of the facility rather than paying to have the solvent recycled or properly incinerated. During that time period, the shareholders of Corporation X enjoyed slightly increased profits due to the short cut taken in solvent disposal. But they also had a slightly decreased profit due to paying premiums on a Comprehensive General Liability (CGL) insurance policy.
Now suppose the solvent entered the aquifer and, over a period of ten years, migrated a few hundred yards where it crossed a property boundary and contaminated a drinking water well owned by a neighbor, making it unfit for use. It is now 2005. The neighbor comes to Corporation X and says "You need to pay me for the damage you have caused me." Corporation X says "Let's tender the claim to our insurance carrier!"
If the insurance carrier pays, then everything is hunky dory. But the insurance carrier refers Corporation X to the absolute pollution exclusion that has been contained in virtually every CGL policy in the USA since 1985. (Any corporation you own stock in has no pollution coverage unless they have purchased, potentially at great expense, additional coverage. Chances are they have not.)
So, Corporation X, after wasting a bunch of money consulting its lawyers, says to the neighbor "Fine, here's a bunch of money." Neighbor goes away satisfied (only because Corporation X had assets), but who paid for the damage? Corporate stock is traded freely and rapidly. After the passage of twenty years, the stock holders who gained by the dumping in 1985 are NOT the same as the stockholders who have to pay the judgement in 2005. As a result of the corporate shield, even when the corporation has assets and doesn't just tell the victim to pound it, the WRONG owners pay.
And this is not some fanciful made-up scenario. It happens all the time. If there is any significant gap in time between the corporation's bad conduct and the payment of compensation for the bad conduct, many or even most of the people who benefitted from the bad conduct are gone with their profits leaving latecomers who did not benefit to pay the damages. This is a result of the government-created liability shield.