Texas electric firm files for bankruptcy citing $1.8B in claims

Yes, assuming you meant "shareholders" rather than "investors"—creditors are also investors, having put money into the company with the expectation of a return, but would not be liable for borrowers' debts regardless of limited liability. It's the shareholders who are shielded from liability to the corporation's creditors. But the creditors know this and accept the risk as a cost of doing business with a limited liability corporation. If they don't like the corporation's prospects they are not obligated to extend credit.

There is no financial motivation for me to care. Sure, stonks can go to zero, but I still don't care. I have a very diversified portfolio (5k positions) because stonks go to zero all the time, even if companies don't do anything illegal.

If I were liable, I would have to care, because one position could bring down your whole portfolio. I would only invest in companies with a lot of oversight, etc.

I don't think a system in which the government is in charge of the oversight can work; there are just too many companies. I think every party financially invested in the company must be intrinsically motivated to perform a high degree of oversight.

https://www.congress.gov/bill/110th-congress/senate-resoluti...

Unless I misunderstand what you are intending with your original post (and obviously that can be subject to reinterpretation, modification, etc. - i.e. I don't hold anybody to the original idea when there is room for evolution) - if you put money into your 401k into something like, let's say a total stock market index fund - you could be sued for any company doing anything negligent. Right?

Now you might say - well that's the point. You should do your research. So let's say you're risk-adverse to being sued as a shareholder and only buy stock in the S&P 500.

So the S&P 500 Surely those are good companies, right? Sure. Except now there's only a small exclusive group of companies that get investor dollars. You're funneling money straight into the dominant companies. How could a smaller company ever raise capital?

You may recall that index funds and ETFs are made up of individual companies - actual shares. So to the extent that you have to research every company and know it inside and out so that you aren't exposed to potential lawsuits effectively eliminates all individuals from the capital markets. Only the wealthy would have ownership stakes! 401ks are just a convenient vehicle to help regular people save money - many in Europe and elsewhere opine for such a thing (spend some time on the investing subreddit).

Part of the whole point of this exercise is that you want regular people to share in the success of companies. If you open them up to liability, you defeat that. Jeff Bezos and Marc Andreesen can afford liability lawsuits. You and I can't. The rich get richer.

I'm also not sure why bonds would shield you from liability. You're still giving the company money to do these bad things, why does it matter if you have ownership? Hell, maybe companies just issue high-dividend paying bonds and avoid the whole "ownership" liability thing?

I think you're on point with regard to accountability - but that's a current failure of government, not corporations. I'm also not sure about the potential externalities that are caused by making any shareholder liable for a company's bad behavior. From a philosophical standpoint there are a lot of things to consider and I think we'd really have to nail down what specifically the issue is. Certainly workers who work at bad companies should be punished just as much as shareholders, right? Shouldn't the be personally liable even more than shareholders since they make the whole company run? And why would that not extend from management down to the janitor?

Sorry, should have clarified "government bonds" here.

We are hypothetically talking about changing the rules, so we could change them to whatever.

I think the fundamental problems here are a lack of oversight, and also a lack of financial incentive to avoid defaulting in the very long term (as a "mortal" investor, at some point you are going to cash out).

Thinking about the 401k, you mention the S&P500 index, but there are thousands of indices. There could be an S&P500 "proper oversight" index, that filters the S&P500 by some oversight metric. If that gives you 200 stocks instead of 500, and that's too little diversification for you, there could also be an MSCI ACWI IMI "proper oversight" variant as well.

Creating an exemption for 401 and pension plans in general could be an option, but TBH many index funds are big investors in companies, and they do often have a say.