Abstract: What Happens When the Money Runs Out? The Corporate Veil and Multinational Liability for Industrial Disease
This paper explores how corporations utilize the law to limit liabilities for past actions. A key instrument—little discussed in business history writing—is the corporate veil. This relates to the concept of corporate "personality," in which the corporation is granted the same legal rights as an individual. Risks can be externalized by the creation of subsidiaries, in which the parent company is legally merely a shareholder and fireproofed from liability by a corporate veil. This device has proved attractive for asbestos companies dealing with "long tail" and expensive liabilities for asbestos-related cancers. Since the 1980s, several asbestos companies have retreated behind the corporate veil, including Cape Asbestos in the United Kingdom, W. R. Grace in the United States, and James Hardie in Australia. As an example, a brief account is offered of James Hardie and its controversial relocation to the Netherlands in 2001—a move that triggered a public outcry and then a government inquiry and criminal proceedings. The paper concludes with a review of the key ethical issues raised when the law is used to limit liability in this manner and explores ways in which involuntary creditors can be protected and companies made more accountable.