What is Corporate Liability?

Corporate liability is an assessment of the activities that a corporation may be held legally liable for in a court of law. Under the law, individual people are considered liable for their actions, but a corporation is an entity, not a person, making it somewhat more challenging to make decisions about legal liability for corporations. The law in terms of corporate liability varies worldwide and some critics have claimed that it has become significantly diluted in some regions as a result of pressure from corporations that want to avoid legal liability.

Liability can be a topic of discussion in both civil and criminal cases. Debates about corporate liability surround situations when corporations may be considered at fault for the activities of their employees, including both actions and omissions. Corporations do have human agents who can be held accountable for things like fraud, environmental violations, and other activities that violate the law. Individual employees can also be brought into court if they are directly responsible for violations of the law.

If a corporation is liable, it can face fines and damages. This commonly occurs with situations like violations of environmental regulations, where government agencies levy fines on corporations that pollute or commit other environmental infractions, and in product liability cases where people are injured or killed by something a corporation sells. It is possible that key figures involved in a corporation can be held accountable in court and sentenced to jail time in some cases, as seen when executives conspire to commit fraud. In these cases, however, it is not the corporation itself that is liable, but the individual employees who committed the crime.

One of the reasons people incorporate is because they want to limit liability by taking advantage of the way the law handles corporate liability. Governments recognize that penalizing a corporation with fines and other measures can have the effect of punishing people who are innocent, like stockholders and employees. This must be weighed when calling a corporation to account for business practices and other activities.

Liability law can become extremely complex. Lawyers who specialize in this topic are usually called upon in cases where corporate liability is in question to ensure that all aspects of a case are considered, while decisions are made about how to pursue it. Governments agree that some checks are needed on the activities of corporations to protect the general public, their stockholders, their employees, and the environment, but establishing the limits of that liability can be challenging.