Beyond 'Unlimiting' Shareholder Liability: Vicarious Tort Liability for Corporate Officers

106 Pages Posted: 12 Aug 2004  

Timothy P. Glynn

Seton Hall University - School of Law

Abstract

Although limited liability is the primary benefit of the corporate form, it continues to generate controversy. In this Article, Professor Glynn argues that extending vicarious tort liability to corporate officers is the best way to retain the benefits of limited shareholder liability while reducing its social costs.

Some commentators defend limited shareholder liability; others contend it inflicts excessive costs, including encouraging unduly risky corporate activities. These costs are most pronounced in the tort context because tort victims rarely are able to protect themselves through monitoring corporate activities or bargaining with corporate actors. Proposed reforms almost always focus on extending liability for corporate activities to some or all shareholders. To date, however, the discussion has largely overlooked a more promising solution: holding top corporate officers responsible for the torts of their enterprises.

Professor Glynn argues that extending vicarious liability to high-ranking corporate officers, rather than to shareholders, is the most efficient and realistic way to ensure that firms internalize tort risks. Given their unique role, these officers are the firm's most efficient risk bearers: they are best situated to monitor and avoid risks, and to implement efficient levels of risk spreading among customers, shareholders, and insurers. And officer liability, unlike shareholder liability, cannot be evaded through judgment proofing techniques. Ultimately, Professor Glynn's proposal synthesizes modern tort theory and corporate law theory, and offers a viable resolution to the lingering tension between limited liability and the aims of our tort regime.

Suggested Citation

Glynn, Timothy P., Beyond 'Unlimiting' Shareholder Liability: Vicarious Tort Liability for Corporate Officers. Vanderbilt Law Review, Vol. 57, No. 2, p. 329, March 2004. Available at SSRN: https://ssrn.com/abstract=572482

Timothy P. Glynn (Contact Author)

Seton Hall University - School of Law ( email )

One Newark Center
Newark, NJ 07102-5210
United States

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