Limited Liability

1) Limited liability is a guarantee of regularly occurring manmade disasters (such the British Petroleum oil spill in the Gulf Of Mexico or the methane gas containment breach in Southern California) as well as systematic destruction of ecosystems (for example, deforestation, pollution of rivers and oceans from industrial farming, pollution of the atmosphere). It is a way to assign the costs of damage caused by the company to the public.

2) It is a legal protection that allow companies evade responsibility for environmental destruction and encourages companies to assign a value of zero to ecosystems and all elements of the biosphere (such as the atmosphere or any publicly owned lands) not owned by the company.

3) A scheme by which companies can avoid bearing full responsibility for its actions. Because a company can avoid responsibility for damaged caused by an oil spill or the pollution of an underground aquifer, for example, companies have a very strong incentive to take extreme risks.

4) A way for companies to shift the burden of a risk from the company to the public. It is one of the many devices companies uses to push costs for harms it causes away from the company.

Limited liability is a way to shift the burden and cost of a catastrophe away from the company responsible for it and away from that company’s shareholders and place that burden on those costs on ecosystems and the people and other living things that inhabit them.

Limited liability laws were passed before it was possible for a company to cause an earthquake (by pumping wastewater from fracking into the ground) or manufacture a chemical that could kill microorganisms in the soil and cause birth defects in a variety of species—and before chemical plants were so large that a fire could destroy miles of land in the vicinity. The notion of limited liability was conceived when the scale of a mishap was relatively small and when massive man-made environmental catastrophes were unheard of.

Risk Asymmetry

The difference in the risk levels and possible outcomes between the decision maker—the person or entity that chose to take a risk—and the bystander who often bears the consequences for that decision maker’s actions.

In short, there are those who take risks and profit from them, and there are those people and things (ecosystems, habitats, the species within those habitats) who were excluded from the decision making process but who pay for the risks.

The duty of every company’s risk manager is to define the risks that result from the company’s activities and, as much as possible, push the costs and consequences of these risks to parties outside of the company. Another duty of the risk manager is to conceal the risks that result from their actions, and the quantification of those risks, from view, so opposition to the action cannot be organized. So because of this concealment there is, in addition to a risk asymmetry between the decision maker and the bystander, also an information asymmetry. This information asymmetry is widened by different methods of obfuscation and misdirection.

One example of a risk asymmetry: A fracking company causes an earthquake by pumping wastewater into the ground. The fracking company suffers no losses as a result but the residents of that area, who were not part of the decision to frack for oil but whose homes are damaged by the earthquakes and whose water is now undrinkable, do.

One reason for high levels of risk asymmetry is the protection afforded companies by limited liability laws.