I'm angry. BP appears beyond control as they poison the Gulf with crude oil and Corexit--and then lie about it. As I understand it, the corporation's liability is limited to the value of the corporation, and the owners and executives are protected by the corporate structure--unless they can be proven negligent or proven to have committed crimes.
I just read Jamess' well-researched diary, and asked myself, who will pay? Who will pay for the impossible and longterm repair of this man-made disaster and coverup?
I'm not a lawyer or an accountant, but here's how I understand this issue. (Below the fold) Please tell me if I'm wrong, and I'll correct the mistake, (or delete the whole diary if my underlying premise is wrong.)
Why is BP is a corporation, and who pays for their mess?
1. One of the main reasons to incorporate a business is that the financial losses are limited to the corporation itself. That is, with the exception of taxes, once the company is out of money, the owners can shut it down and walk away, leaving all the debts unpaid. And the owners are not personally liable for those remaining debts.
2. Second, corporations buy liability insurance to pay for damage that they cause. Those policies have financial caps that are much less than the potential damage the company could cause to the planet. Furthermore, if they are like my car insurance, they also have exclusions for losses due to illegal activity. With BP and associated companies, the insurers will go to court and try to prove that BP and others were acting illegally, irresponsibly, and negligently, and that the insurers shouldn't have to pay damages. Meanwhile, not much financial help will go out to injured parties. [ jsfox comments that BP is self-insured, so that should eliminate some of the hagling in court over whose fault it was. Maybe they'l haggle over quantity of damages. ]
3. Third, I don't think we'll get much money through criminal prosecution. I might be wrong, but I'd imagine that these cases are expensive to prosecute, and have low monetary yield compared to the damage done.
What now?
I hope that the government is vigorously pursuing criminal cases against the responsible parties. That will act as a background to show why we must change the laws that create and regulate corporations (and LLCs and so on). The current laws protect the owners and top executives of corporations from personal liability for some of the damages their corporation causes. That immunity encourages corporations to take unreasonable risks with the ecological web of our planet in the pursuit of profit. Corporations are built to pursue profit without moral constraint, without empathy, and without caution for the long term effect of their actions on plants and animals.
Now, making a profit is not bad. That is what business corporations are designed to do. They have only two "prime directives": 1. Make a profit and 2. Stay alive. Neither of those is bad or good; however, a moral question arises when you ask, "How are you going to make money?" The answer depends on human guidance and regulatory laws.
I'm aware of only two humanitarian constraints on the actions of a corporation, and one of those isn't really based on caring about people: First, corporations need to stay alive, and to do so, they must maintian a positive image with the public so they will be tolerated. Thus, they do "good deeds" in order to be percieved as useful to society. While their actions may be genuinely helpful, the primary motivation is to create a good image for the corporation. The second humanitarian constraint on a corporation is truly for the good of humanity and comes from individual employees (at any level) who care about other people and about our planet. These employees have a moral aversion to hurting people, and they do not want to work for a "killer" corporation--no matter how profitable. They exert some influence from inside to steer corporate behavior in a friendly direction.
Today's corporation took its inspiration from when the European governments encouraged investors to undertake a business activity seen as beneficial to society. As an incentive, the Government offered legal protection from the liability that might arise from that activity. For instance, as an incentive to form a shipping company to increase trade and enrich everyone, the government could agree to protect the investors' personal property from liability claims made against that shipping company. in such a worst case, the owners could lose what they had invested, but not their homes or bank accounts. Those protections for individuals who take risks to start a new enterprise such as a shoe factory, a knitting mill, or a construction company. Those smaller corporations have the power to enrich a society, but much less power to harm it.
Times have changed, and large corporations have the power to destroy a society. For example, we are watching in horror as a man-made catastrophe is created by corporations In the Gulf of Mexico. We learn that the actions of corporations like BP can wipe out whole ecosystems, whole societies, cause the extinction of species. The actions of these huge corporations can sterilize broad areas of the land or ocean, and create toxic areas that will persist for future generations. Under these circumstances it is right and necessary that society protect itself by removing or limiting those special protections and immunities that it previously granted to the owners of corporations like BP.
When corporations began, they were always smaller than governments. Now, international corporations are often huge economies to themselves, larger than all but the biggest countries. Because they no longer exist for the benefit of society and only for the benefit of themselves and their owners, there is no longer a reason for society to grant their owners special immunities from personal liability for the actions of their company, and no reason to give a corporation the rights of an actual person--like the right to free speech.
Perhaps restoring personal liability to the owners and directors of large corporations is the only way we have to motivate the corporations to be cautious in their actions.
I fear that we, the people of the world, and particularly of the United States, are going to pay most of the costs of BP's reckless adventures in pursuit of profit. Let this painful lesson motivate us to demand changes in the laws that govern corporations. Now is the perfect time to overhaul those laws.