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Nefarious Uses of Corporations
Part 4 in “How to Dodge Taxes”
In previous articles of this series, I have provided a few details of corporate law. I need to bring up an important aspect right now.
As mentioned earlier, shareholders in corporations are not liable for failures of the corporations they own. The shareholders may lose their original investment, but no more.
But there is a different legal obligation on the directors of the corporation. The directors have been elected or appointed to make the big decisions of the corporation. Their legal responsibilities do not include the business decisions, so the directors can lead their company to financial ruin — and legally escape that failure. Rather, the directors are obligated to keep their company operating within the law. If the corporation breaks the law, the directors can be taken to civil and criminal court.
Unfortunately, putting a legal case together is difficult. So most errant directors escape their legal consequences, similar to the bad business decisions they may make.
One good example is the board of directors for British Petroleum after the BP Macondo disaster in 2010. The board interfered with the culture of this well, forcing well trained petroleum engineers to make bad engineering decisions. In essence, BP Macondo was more of a…
