Enterprise Liability and the Organization of Production Across Countries

Parent corporations often externalize the risk of tort liability through legally separate subsidiaries. For instance, utility companies in the US often create separate limited liability subsidiaries for each nuclear plant they own, arguably to protect the parent company from liabilities in case of accidents. Manville, a global leader in the manufacture of asbestos-containing products, separately incorporated its non-asbestos operations in the aftermath of asbestos litigation. Philip Morris did the same in response to tobacco litigation. Recently, Google reorganized as the Alphabet group, where a parent company (Alphabet) controls firms such as Google (online search), Verily (biotech and medical instruments) and Waymo (self-driving cars). One possible reason for the reorganization was, again, to prevent risks from spreading from one unit to another. As former Google engineer Anthony Lewandowski recalls, from the very beginning “Google was very supportive of the idea [driverless cars], but they absolutely did not want their name associated with it […] They were worried about a Google engineer building a car that crashes and kills someone.” Now a legally independent subsidiary, Waymo, builds self-driving cars.

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