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Liability within corporate groups : Parent company's accountability for subsidiary human rights abuses

Mares, Radu LU (2020) p.446-470
Abstract
Multinational enterprises have outsourced production and distribution to layers of subsidiaries and contractors to expand into new markets and increase profitability. This compartmentalization of the enterprise is facilitated by company laws and has resulted in risk shifting, excessive risk taking and lack of remediation for those injured. Company laws in virtually all jurisdictions allow for corporate personality, which means that the law sees shareholders and the company, or the company and its subsidiaries, as separate entities with their own assets, rights and obligations. The law erects a firewall that makes claims against parent companies extremely difficult. In economic terms, this ‘separation principle’ means the exposure of... (More)
Multinational enterprises have outsourced production and distribution to layers of subsidiaries and contractors to expand into new markets and increase profitability. This compartmentalization of the enterprise is facilitated by company laws and has resulted in risk shifting, excessive risk taking and lack of remediation for those injured. Company laws in virtually all jurisdictions allow for corporate personality, which means that the law sees shareholders and the company, or the company and its subsidiaries, as separate entities with their own assets, rights and obligations. The law erects a firewall that makes claims against parent companies extremely difficult. In economic terms, this ‘separation principle’ means the exposure of investors is capped; there is limited liability as investors can limit their losses by keeping assets separated. Parent companies can pursue outsourcing without commensurate responsibility for losses caused by their expansive operations.

This chapter offers reference points to facilitate analysis, and reviews options for reform. Corporate accountability writings often recognize in the separation principle one of the most significant obstacles on the path to increased access to remedies. In terms of structure, Section 2 shows the difficulties posed by legal separation and discusses the corporate group as a legal and economic entity. Section 3 presents the current situation in law (company law, tort law, and other regulatory areas) and policy (international soft law, and national action plans on business and human rights). Section 4 covers proposals for regulatory reform and puts them into perspective by explaining the resilience of the principle and its deep ramifications.
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Please use this url to cite or link to this publication:
author
organization
publishing date
type
Chapter in Book/Report/Conference proceeding
publication status
published
subject
keywords
human rights, business, accountability, Indigenous people, mänskliga rättigheter
host publication
Research Handbook on Human Rights and Business
editor
Deva, Surya and Birchall, David
pages
24 pages
publisher
Edward Elgar Publishing
ISBN
978 1 78643 640 5
9781786436399
language
English
LU publication?
yes
id
6f156fa0-d1ae-4af4-b5d4-97f2e32578b7
date added to LUP
2021-01-24 19:52:08
date last changed
2022-05-12 16:40:10
@inbook{6f156fa0-d1ae-4af4-b5d4-97f2e32578b7,
  abstract     = {{Multinational enterprises have outsourced production and distribution to layers of subsidiaries and contractors to expand into new markets and increase profitability. This compartmentalization of the enterprise is facilitated by company laws and has resulted in risk shifting, excessive risk taking and lack of remediation for those injured. Company laws in virtually all jurisdictions allow for corporate personality, which means that the law sees shareholders and the company, or the company and its subsidiaries, as separate entities with their own assets, rights and obligations. The law erects a firewall that makes claims against parent companies extremely difficult. In economic terms, this ‘separation principle’ means the exposure of investors is capped; there is limited liability as investors can limit their losses by keeping assets separated. Parent companies can pursue outsourcing without commensurate responsibility for losses caused by their expansive operations.<br/><br/>This chapter offers reference points to facilitate analysis, and reviews options for reform. Corporate accountability writings often recognize in the separation principle one of the most significant obstacles on the path to increased access to remedies. In terms of structure, Section 2 shows the difficulties posed by legal separation and discusses the corporate group as a legal and economic entity. Section 3 presents the current situation in law (company law, tort law, and other regulatory areas) and policy (international soft law, and national action plans on business and human rights). Section 4 covers proposals for regulatory reform and puts them into perspective by explaining the resilience of the principle and its deep ramifications.<br/>}},
  author       = {{Mares, Radu}},
  booktitle    = {{Research Handbook on Human Rights and Business}},
  editor       = {{Deva, Surya and Birchall, David}},
  isbn         = {{978 1 78643 640 5}},
  keywords     = {{human rights; business; accountability; Indigenous people; mänskliga rättigheter}},
  language     = {{eng}},
  pages        = {{446--470}},
  publisher    = {{Edward Elgar Publishing}},
  title        = {{Liability within corporate groups : Parent company's accountability for subsidiary human rights abuses}},
  year         = {{2020}},
}