Question

As you have read in the text concerning the legal forms of business ownership, the corporation avoids the concept of unlimited liability. This means the owners (stockholders) are not liable for the entire debts that the corporation incurs. The only amount of money they can lose is the amount of their investment in the company.

The Board-of-Directors and the Chief Executive Officer (CEO) are the main group of people that are responsible for strategic decisions that a corporation makes. This group also owns quite a bit of the company's stock which makes them partial owners of the company. During the past few years, the federal government has had to come to the aid of many large corporations in order to bail them out of potential bankruptcy because of the high level of risk and unwise business decisions made by the CEO and Board of Directors. All of this basically means, is that the leaders and highest paid positions of major corporations have very little to lose by making questionable business decisions.

The question is:

1. Should the CEO and Board of Directors have more personal liability in the way they run a corporation?

2. Should their personal assets, houses, bank accounts, automobiles, etc. be used as payment when they knowingly make unsound, precarious business decisions?

****Limit 200 words for both questions

Answer 1

CEO and Board of Directors should have more personal liability in context to the way they run a corporation. Though a corporation may have large number of shareholder who are treated as the owners of the corporation and as a rule owners have to bear the losses also. CEO and Board of Directors too are partial owners but they are responsible for making strategic decisions also and such decisions effect not only their personal position but the whole corporation and other stakeholder (shareholder ) also. From this point of view, they act as trustees of the corporation ; agents of other shareholders, thereby are requied to act in good faith and with due diligence. They are not supposed to perform their duties carelessly or in lesser interest of other shareholders. Results of the decisions taken by them have been on all other stakeholders and moreover, they earn good compensation for their position. Considering all these facts, CEO and Board of Directors should have more personal liability.

As they are the key personnal in the organisation and are strategic decision makers it is their responsibility that all the decisions are take with great care and taking personal interest. However, this personal interest also depends upon the extent to which they personal liability. If they know that their personal assets, houses, bank accounts etc. can be used to pay off the liabilities which have arisen due to their negligence in performing their duties and taking decisions, they are ought to work more diligently. Though for the decision which could not be fruitful due to certain external reasons like pendamic state as of now, or changes of policies of government etc. they cannot be personally held liable, but, surely for the decisions which could not turn beneficial and proved to be liability for the corporation due to negligently making unsound decision they should be held personally liable. However it is to be noted here that whether they acted negligently or with due care, is further a matter of discussion.