Corporate executives should have more personal liability for a company’s actions

Elie Waitzer is an associate in the class action group at Koskie Minsky LLP.

Ed Waitzer is a former Chair of the Ontario Securities Commission and a senior fellow at the C. D. Howe Institute.

Limited liability, the long-standing legal concept that protects owners’ personal assets in the event of a lawsuit, has encouraged the flow of capital to private enterprises. It does so by shifting the risk of a corporation’s actions from shareholders (beyond the amount they invested) to other stakeholders. Insofar as growing the economy, limited liability has been a good thing.

But as the risks created by corporations become more devastating and harder to undo – examples such as climate change, PFAS contamination, social-media addiction and unregulated AI usage come readily to mind – courts should take the lead on adapting the scope of limited liability.

The theory behind limited liability is that ordinary shareholders lack the ability to effectively direct a corporation’s activities to mitigate the risk of wrongdoing. Absent protection from lawsuits, such shareholders would be discouraged from risking their savings.

That logic should not apply to those who are part of a control group or “guiding mind” of a corporation (whether through ownership or their managerial roles) and, as a result, have full access to corporate information and the ability to influence corporate conduct. Such “controllers” can also mitigate their personal exposure contractually or through insurance.

Yet under the protection of limited liability, those who control corporations stand to enrich themselves as a result of activity that could wrongfully injure others. This “externalization of risk” creates powerful incentives for corporations to engage in activities which reduce social welfare and leave others (whether individuals, communities or governments) to foot the bill. While corporate directors and officers constantly make decisions that entail risks that may have unintended consequences, it is reasonable to expect those injured by a corporate wrong that is intentionally caused should be entitled to redress.

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A classic example is the story of DuPont, which from 1951 to 2013 emitted PFOA (a toxic “forever” chemical used in the manufacture of Teflon), causing irreparable harm to human health and the environment. Litigation filings show that by 1984, DuPont executives knew that PFOA was toxic, didn’t break down and accumulated in human blood. While acknowledging (internally) the risk of substantial sanctions, they decided to double production.

It appears those executives determined (correctly, it turns out) that the profits from continuing to pollute outweighed the present value of any sanction they might ultimately have to pay. The executives responsible were not part of eventual regulatory and litigation settlements. Neither litigation, regulation nor reputational concerns deterred their conduct. Today, DuPont reaps enormous profits as the world’s leading producer of reverse osmosis filters that remove PFOA from water.

Over time, our courts have “pierced the veil” of a corporation to impose liability on controllers, in cases where to do otherwise would be unfair or objectionable. Likewise, legislators have overridden corporate law statutes to disregard separate legal personality in a range of circumstances (including tax, health and safety, consumer and environmental protection) as a matter of public interest. However, as the British Columbia Law Institute recently lamented, neither courts nor legislators have yet to explain veil-piercing in a consistent manner.

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A clearer statutory framework for imposing liability on controllers could remove legal uncertainty, better align corporate interests with those of society and strengthen our economy by eliminating massive incentives to externalize risks. As such risks become more irreversible (if not existential) and the ability to otherwise regulate or insure against them is less feasible, the need for legislative intervention becomes more acute.

However, legislative action is unlikely in Canada. Corporate law reform of this nature rarely attracts political interest.

Fortunately, case law is gradually evolving. According to a United Nations report, a cumulative 3,099 climate-related cases had been filed in 55 national jurisdictions and 24 international courts or quasi-judicial bodies, as of June, 2025. Many are predicated on corporate duties, corporate liability and claims for compensation.

For the courts, a principled and narrow exception to limited liability for controllers is low hanging fruit in the fight against many of the systemic risks we face today. The threat of piercing the corporate veil should cause corporate leaders to more carefully consider net social costs before they act.

A useful analogy may be made to the strict liability imposed in common law for the keeping of dangerous animals. To the extent that they are not otherwise effectively regulated, it makes sense to impose high standards of liability on those in the best position to mitigate systemic risks.