3400book - 3400 VICARIOUS AND CORPORATE CIVIL LIABILITY...

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669 3400 V ICARIOUS AND C ORPORATE C IVIL L IABILITY Reinier H. Kraakman Professor of Law, Harvard Law School © Copyright 1999 Reinier H. Kraakman Abstract Vicarious liability is the strict liability of a principal for the misconduct of her agent. This chapter reviews six areas of commentary on vicarious and corporate civil liability. It begins by formulating the standard case for vicarious liability based on the likely insolvency of the firm’s culpable agents in the face of massive liability for business torts. Next, it addresses cost considerations that militate against imposing vicarious liability on the corporation in some circumstances, and the relationship between corporate liability the structure of liability imposed on corporate agents. Two additional sections of the article review alternatives to traditional vicarious liability regimes, including alternative liability rules for corporate principals (notably a negligence rule) and alternative targets for liability besides the firm (notably top corporate managers). Finally, the chapter reviews recent literature on the distinction between corporate civil and criminal liability. It concludes that the case made out thus for distinguishing between these too forms of corporate liability is weak. JEL classification: K13, K22, K42 Keywords: Vicarious Liability, Corporate Liability, Principal, Agent, Gatekeeper 1. Introduction ‘Vicarious liability’ is the absolute liability of one party - generally the legal ‘principal’ - for misconduct of another party - her ‘agent’ - the actor whose activities she directs. As such, traditional vicarious liability is a form of strict secondary liability, in contrast to secondary liability imposed on principals or other parties under a duty-based standard such as negligence. In the common law, the legal doctrine of respondent superior is the principal vehicle for holding principals liable for the torts and other delicts of their agents. Under this doctrine, principals are jointly and severally liable for the wrongs committed within the ‘scope of employment’ by agents whose behavior they have the legal right to control (‘servants’) (Restatement (Second) of Agency, 1958, §§2, 219, 220, 229). Most corporate liability for torts, and in the United States for crimes as well, is vicarious liability imposed under respondent superior or a similar doctrine.
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670 Vicarious and Corporate Civil Liability 3400 To be sure, corporate liability may also be direct, as when the independent actions of several corporate agents cumulatively result in a business tort, although no single agent is individually culpable. But even in this case, the liability of corporate principals is best conceptualized as vicarious liability for the failure of the firm’s management to supervise its employees. An overview of the literature on vicarious and corporate civil liability must
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This note was uploaded on 03/01/2012 for the course FINANCE 780 taught by Professor Scott during the Spring '12 term at Missouri State University-Springfield.

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3400book - 3400 VICARIOUS AND CORPORATE CIVIL LIABILITY...

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