Who has a stake in holding companies legally responsible?
I am not crazy about the company. No, I don’t mean the people near me. Let me explain. I am retired from my practice, but I am still reflecting on what about the legal system bugs me.
High on my list is the concept that a company has its own independent status. I see no reason why there should be a corporate veil protecting a company’s owners from personal liability. I know I may ruffle some feathers with my view, but as Einstein said, “What is right is not always popular and what is popular is not always right.”
There is rhyme and reason to my opinion.
My first concept of a corporation dates back to when I was a grade school kid shopping with my mother at Steinberg’s, a now long-defunct supermarket chain in Montreal. The store used to issue trading stamps called “Pinky,” which customers would collect and redeem for gifts. During one visit, my mother got into a dispute with a cashier about the number of Pinky stamps we were entitled to. We all got a bit vocal, and the store manager was summoned. I recall butting in and asking him to call over Mr. Steinberg. He looked at us smugly and said, “This has nothing to do with Mr. Steinberg. It’s company policy.”
This experience somewhat soured my concept of corporate status going forward. Why should the owner wiggle out of responsibility? After all, what is a company? My mom and I were tempted to barge through that “Employees Only” door where we were sure Mr. Steinberg was comfortably settled. We expected him, as owner, to resolve the issue with us. However, it was beyond us why that never happened. We left disgruntled.
I now think of a comment by Edward, First Baron Thurlow, the Lord Chancellor of England: “Did you ever expect a corporation to have a conscience when it has no soul to damn and no body to kick?”
That day while arguing with the manager, my mom and I certainly would have liked to have Mr. Steinberg in front of us, thereby giving us the option to consider doing what the Lord Chancellor said cannot be done to a company.
I think about that scene in Shakespeare’s Julius Caesar, where after Caesar’s assassination, an angry mob descends upon the streets of Rome looking for the conspirators in order to avenge their crime. One of the conspirators is a politician, Cinna. While the lynch mob is out hunting for the culprits, they come across Cinna the poet. Unfortunately for this Cinna, the collective finds the name match is good enough to constitute guilt. Quoting in part:
Third Citizen: Your name, sir, truly.
Cinna the Poet: Truly, my name is Cinna.
First Citizen: Tear him to pieces; he’s a conspirator.
Cinna the Poet: I am Cinna the poet, I am Cinna the poet.
Fourth Citizen: Tear him for his bad verses, tear him for his bad verses.
Cinna the Poet: I am not Cinna the conspirator.
Fourth Citizen: It is no matter, his name’s Cinna; pluck but his name out of his heart and turn him going.
To my mom and me, the connection between Mr. Steinberg and Steinberg’s was close enough.
No doubt, however, my mom and I would have been much kinder to Mr. Steinberg. I am surprised how Shakespeare dispensed with his fellow poet. All we wanted was what was owed to us, namely those short-changed Pinky stamps.
The landmark case of Salomon v. Salomon, decided in 1897 by the British House of Lords, affirmed this unjust corporate immunity principle. Creditors tried to hold the company’s principals liable for its debts. However, England’s highest court unanimously held that as the company, Salomon Ltd., was duly incorporated, it is an independent person with its own rights and liabilities appropriate to itself, and that “the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are.”
Thus, the legal fiction of a “corporate veil” between the company and its owners/controllers was firmly established by the Salomon case.
The fallout of this ridiculous ruling has resulted in inestimable losses and damage to good people. It cost us a few well-deserved Pinky stamps.
One may ask, what should be the responsibility of owners in large corporations? I am talking public companies. Neither a large corporation nor a small one has a soul to be damned nor a body to be kicked. I say the shareholders should always be responsible for the actions of their company. For example, I own a number of Apple shares. This makes me a part owner, no doubt. I will say, I do not flaunt my ownership status. I own a couple of Apple devices, and whenever I visit my Apple store, I never pull rank. I recently went there to have my torn iPhone cover replaced. I did not say to the associate something like, “I’m one of your bosses. I’ll just help myself to that orange one on the shelf.”
Yet, if anybody was to make a claim against Apple, looking to me should be fair game. I would never think of saying anything like, “Hey, you can’t sue me. Uh, uh. Remember Salomon v. Salomon.” I do not have a double standard.
My obligation as part owner, however, should be proportional to my stake in Apple. And so, if there is some successful class action resulting in a large judgment, I have no problem receiving and responding to a notice from the corporation’s lawyer saying, “Sorry, but we got hit big time. Please remit your check in the amount of 17 cents.”
This makes sense to me. I own up to my responsibilities.
I will say that in Ontario, lawyers can incorporate their practices. However, the lawyers behind the corporation are liable personally for any malpractice claims. And so, if a lawyer misses a deadline and fails to issue a claim in time, we cannot hide behind that corporate veil and say something like, “I missed nothing. When the deadline arrived, I was out skiing in Aspen. If there is any responsibility for your claim, it falls on the company. Please direct any further queries, accordingly, sending a letter together with a self-addressed envelope to Post Office Box 126, Station B, Toronto.” No problem.
It’s been many decades since that supermarket experience. The supermarket is long gone, and we know it did not have a conscience. No company does. However, this simple matter could readily have been resolved had we—as we should have—had an audience with Mr. Steinberg.
Aren’t we all perhaps influenced and swayed at times by life’s Pinky stamps?
Marcel Strigberger, after 40-plus years of practicing civil litigation in the Toronto area, closed his law office and decided to continue to pursue his humor writing and speaking passions. His just-launched book is Boomers, Zoomers, and Other Oomers: A Boomer-biased Irreverent Perspective on Aging. For more information, visit MarcelsHumour.com and follow him at @MarcelsHumour on Twitter.
This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.