In the 18th Century, Lord Chancellor, Edward, First Baron of Thurlow, expressed his frustration at pinning wrongdoing on slippery businesses; “Did you ever expect a corporation to have a conscience when it has no soul to be damned and no body to be kicked?” As a supposedly enlightened and media-literate people (or a bunch of folks hell-bent on putting business leaders in metaphorical stocks), we enjoy a culture of corporate governance that is shaped by ethics and systemic controls; where the corporation has a public face. The Baron’s aforementioned entity in its contemporary guise may not necessarily lose sleep about its status at St Peter’s Pearly Gates; but it will invariably try to avoid a good kicking.
The Corporate Manslaughter and Corporate Homicide Act 2007 came into effect in April 2008, ‘though companies have been open to manslaughter proceedings since 1965. The first conviction (link to http://www.expolink.co.uk/2011/03/corporate-manslaughter-act-first-conviction-arises/) in February 2011 of Cotswold Geotechnical Holdings Ltd resulted in a fine of £385,000, £115,000 under the minimum fine suggested in the 2010 guidelines, due to its precarious financial position. Cotswold Geotechnical Holdings is a relatively small company, the litmus test of the reach of the law would be when a substantial organisation with an elaborate management structure is prosecuted. For a successful conviction the following needs to be proven; that the defendant is an organisation that causes the person’s death, that the duty of care owed by the organisation was breached due to mismanagement of activities on a senior level and that the defendant must not fall within one of the exemptions to the Act (military operations, policing, emergency response, child protection work and probation to name a few).
Given that the first conviction resulted in nothing more than a fine, it would seem that holding iniquitous companies to account would be as easy as juggling salt. If a company has diffuse layers of management, assigning accountability takes you right back to grappling with the salt seller. What corporate liability benchmark should be imposed when deciding if it is the company or the individual at fault? Fundamentally, the Act needs to show that its purpose, to streamline the accountability process for corporate manslaughter cases, is workable both with cases of clear liability and for those where multiple parties or contexts are involved.
The public, while sceptical of the fluidity of legal proceedings in the UK, is generally in support of the onus of responsibility being held by business owners, and suspicious of junior employees being scapegoated to avoid penalty; of situations where corporations wriggle free after neglecting their health and safety obligations. Media proliferation and public demand for accountability in the face of disasters such as the Potters Bar train crash and the Costa Concordia have added to the carrion call for change.
In December 2005, Olivia Bazlinton and Charlotte Thompson, aged 14 and 13 respectively, were killed instantly after being hit by a train at a level crossing at Elsenham station. Network Rail pleaded guilty to two charges under The Management of Health and Safety at Work Regulations and to one charge under the Health and Safety at Work Act. A risk assessment conducted in May 2001 noted the wicket-gate pedestrian crossing was “undesirably risky”, and a report three years prior to the incident had recommended automatic locking gates at the crossing, but this had never been actioned. Despite the judge damning Network Rail with allegations of “corporate blindness” and acknowledging that the company “failed to ensure that the risks were properly assessed, controlled or managed”, no charges were made under the Corporate Manslaughter Act and the company was fined £1m within the aforementioned statutes. So, to surmise, a public crossing with considerable footfall was allowed to remain for a number of years with inadequate safety measures in place, resulting in tragedy, the company admitted fault and still charges of corporate manslaughter were deemed inappropriate! Motivation indeed for large organisations to commit to governing their health and safety with an iron fist…
In July 2008 three year old Meg Burgess was killed when a wall designed by George Collier and constructed by his company, Parcol Developments, collapsed on to a footpath in Prestatyn, north Wales. Rosemary Ainslie, lawyer for the Crown Prosecution Service (CPS), deemed that as Mr Collier represented ‘only’ half the company directors it was not in the public interest to extend the charge to Corporate Manslaughter. This strikes me as a problematic and unproductive decision, not to mention one with suspiciously avaricious undertones. The law, supposedly aimed at protecting and compensating citizens like Meg’s family, was swayed in this instance not to prosecute Parcol, who as an organisation with depleted coffers had little to offer the CPS.
David Cameron’s recent plans to privatise roads could result in increased litigation for private companies if accidents arise from poor maintenance. At present this is under the remit of the Highways Agency, Transport for London (TfL) and similar public bodies. Following the death of cyclist Deep Lee at a notoriously dangerous stretch of road in the capital, Detective Chief Inspector John Oldham, head of Scotland Yard’s Road Death Investigation Unit, said that although corporate manslaughter was one of a raft of offences that could be applied to the incident, the Act was “badly drafted” and had “loopholes everywhere.” Transport consultants had advised that the area was extremely hazardous and had failed design standards for safe cycling (it is due an upgrade in time for the Olympics). The case presents another problem with accountability. When asked about the design standards of the road, Mayor Boris Johnson stated that the structure had been implemented before the guidance was published. It is hard to see why the above cases would not be considered as valid grounds for corporate manslaughter charges and, unless I am mistaken, none qualify for exemption. The beacon of accountability is an ever-diminishing light. At time of writing, no charges have been brought in the case.
Justice is a shaky entity in systems that favour Goliaths over Davids. Decentralised safety services are problematic in delivering such justice but it cannot be that due to devolution of responsibility, accountability can be swept under the carpet by smart talking corporate lawyers. To encourage business owners to meet their health and safety and governance responsibilities robust deterrents need to be upheld and negligent companies held to task. There are, of course, arguments for culpability to lie with both the organisation and the individual. Often it is the actions of a number of responsible individuals, from policy makers to policy undertakers that cause an incident, and apportioning blame can prove contentious. If an individual is ultimately held responsible they may not have the means to effectively repair the damage done. Conversely, it is unacceptable for individuals to feel that they are not culpable for their own actions
Between 1992 to 2005 (prior to the Act) there were 34 prosecutions for work related corporate manslaughter in England and Wales but only six small organizations convicted. Clearly that system was not working. What is important now is to ensure processes of the Corporate Manslaughter and Corporate Homicide Act are tight enough to tie loopholes in the system and not allow it to become the next on the list of laws that oleaginous corporations laugh in the face of.
How has the culture of ethical business changed in the last 25 years?
I am not sure it has actually changed. Companies have simply recognised the need to be more explicit about doing business ethically.
Major developments have been that companies now, in the main, provide guidance to staff about expected behaviours, ways of handling certain situations and so forth, usually in the form of a code of ethics/business practice. This has happened because the ‘job for life’ syndrome where one would learn alongside another employee about how the company worked no longer is the case. People switch careers or companies more frequently and have more diverse backgrounds than 25 years ago, so they need to understand more quickly how the company operates.
What has been the toughest challenge of your career?
The toughest challenge has been to do the right thing even if it meant I went out on a limb! It is rewarding though when doing so is recognised subsequently as having been the right thing to do.
What do you consider your career high points and/or your greatest achievements?
Finding myself at the Institute of Business Ethics which combines my interest in business, seeing it run successfully with education and encouraging people to share best practice – all within a charitable not-for-profit organisation.
If you could set one piece of global legislation to make businesses work more ethically what would it be?
I think if companies had to state in their memorandum and articles of association when they set themselves up how they are going to conduct their business (not just what the company is going to do), a benchmark would be set to measure that company’s performance.
What are the main factors that attract people to working with the IBE?
We are a small, friendly team who work closely with our subscriber base and others who share an interest and passion for the subject. Every day is different so there is no time to get stale!
In terms of ethics, what are your greatest fears for the UK business community?
I fear that cynics will never acknowledge the good that business does and the way, in the majority of cases, that businesses behave. Businesses and companies are human societies in themselves, with well and poorer behaved individuals making up the whole. Sadly, there are some rotten apples but to judge all by the few is unfair.
And your greatest hopes?
My hope is to prove the cynics wrong through businesses providing goods and services and conducting themselves in an open and fair manner that earns the respect and trust of the wider community.
How has the IBE utilised new technologies to progress its work and message?
We have Twitter and Facebook pages and regularly update and review our website; always looking for new ways to improve communication with our subscribers and others interested in the subject. During 2012 we will be introducing webinar events to reach out to those unable to attend our events in person.
The response to the Bribery Act from the business world has been well documented; but from your own point of view, what have been the most significant contentions and concerns with adhering to the legislation?
The legislation, for the most part, is common sense if you wish to stamp out bribery and corruption, which the business world needs to do as it is so corrosive. The most difficult element is how to say ‘no’ to a facilitation payment when you are at the front line and a lot hinges on whether you pay or not. This can be made worse if the payment made actually equates to the official’s salary as the local government knows they can get away with such practice.
Do you think the communications regarding the Bribery Act from the MoJ et al have been adequate?
In general, yes, though clearer practical guidance regarding facilitation payments would have been helpful. The SFO has now issued further guidance on this.
What do you see as the IBE’s main responsibilities when it comes to the Bribery Act?
Ensuring that experiences and practical solutions that companies have, relating to the Act, are shared for the benefit of all.
IBE has always fostered strong academic partnerships – how do you hope this will evolve in the future?
We will continue our annual student essay award, which for the last three years has had an Olympics theme of Ethics, Business and Sport, co-sponsored by the Pierre de Coubertin Committee.
We are also doing research into the Teaching of Business Ethics, an initiative co-led with the Institute of Global Ethics, to encourage the standard setters to include a larger element of teaching business ethics in their criteria for evaluation.
Thirdly, we are encouraging higher education institutions to establish codes of ethics, following up from a publication we did with the Council for Industry and Higher Education a while back. This was picked up on again by Lord Woolf in his recent report on the LSE where he concluded that such institutions should have a code of ethics.
For further info about the IBE visit www.ibe.org.uk
View our interview with David Harris, Head of Business Conduct at BAE Systems.
Whistleblowing does not enjoy the high profile in Hungary that it has in the US, the UK or elsewhere in Europe. There is no concise translation in the vernacular and the practice rarely receives attention in the media. There is a historical context to this reticence. Hungary, like many of its neighbors, was governed for much of the 20th century by authoritarian regimes and dictatorships – thus the concern that reporting corrupt activity could end very badly for the citizen(s) concerned. However, recent proposed developments in the country’s legislation have brought Hungary and its constitution, to the public’s attention.
On April 1st 2010 a new whistleblowing regulation, the Act on the Protection of Fair Procedures, was ratified enabling whistleblowers to safely report on issues that may provoke public concern. This was supported by the initiation of the Public Interest Protection Office, whose remit was to handle incidents arising from the Act. This met with contention from opposition parties and the Office doors were never opened. The Protection of Fair Procedures Act is now solitary in its stance against the protection of whistleblowers and indubitably weakened by the lack of an office to facilitate the law. The initiatives were part of a wider anti-corruption strategy which faltered after a change in government to the centre-right Fidesz Party in May 2010, intended to strengthen the existing constitution rather than introduce new legislation.
As it stands, the Hungarian Labour Code does not offer employees recommended avenues for whistleblowing but more general information regarding how to behave when exposed to corruption or wrong-doing in the work place. Disregarding externally imposed legislation (such as the United Nations Convention against Corruption) there are only intermittent mentions of whistleblower protective policy throughout Hungarian Law. Regulations are outlined in the Act on the Protection of Fair Procedures aiming to ensure that the whistleblower is protected across economic, legal and personal spheres. Provided the information has been submitted to a regulating body named by the employer, the whistleblower enjoys full confidentiality of personal data and is kept informed throughout the lifecycle of the investigation.
Despite this lack of coherency, a study carried out in 2007 by Price Waterhouse Coopers suggested that whistleblowing has been highly beneficial to Hungary in reporting economic crime and in fraud detection. Another study by Gallup showed that while most citizens surveyed were happy to report corruption, most did not know how this would be best achieved. For those not willing to do so, the main reasons were fear of reprisal or fear of the police (who were listed as the only option for referral). A further justification was that the interviewee felt the incident did not merit reporting.
The value of this data is diminished by the police-only option for referral and that the survey did not make the distinction between reporting in and out of the workplace, and whether the interviewee was using a private or public sector context. However, the survey does highlight the discrepancies and lack of understanding of the whistleblowing and corporate governance culture in Hungary. Holistically, the Act and overall approach to whistleblowing rests on shaky ground.
When it comes to global business, the Hungarian data protection authority has adopted the stance that it is illegal for domestic whistleblowers to make reports directly to the international parent company (considered to be a third party) rather than for the matter to be reported to the Hungarian employer. The control of data therefore rests with the Hungarian employer; the option to retain the assistance of the parent company in processing the report remains.
Currently the Hungarian Government is facing a humiliating review by the European Commission regarding changes in its media laws. This embarrassment is felt even more keenly by president, Viktor Orbán who is coming to the end of a six month presidency of the EU. Neighbour states are challenging proposed changes to media laws that activists fear could subjugate free press and create a public information culture that panders to the Government. Under new laws if national security is considered ‘at risk’, a journalist protecting a source (or associated data) can be fined up to €661,000, and a press provider fined €180,000. If media agenda marches to Orban’s drum then what truly defines national security is surely subject to Government bias.
Orbán recently stated that his government is willing to review these laws at the request of his neighbours. Perhaps his stated original intention of strengthening and integrating Hungary’s existing constitutions holistically could herald a greater institutional sea-change to whistleblowing and corporate governance for his country.
Sources
http://www.whistleblowing-cee.org/countries/hungary/research/#14
http://www.edri.org/edrigram/number9.2/hungary-media-legislation-2010
The Corporate Manslaughter and Corporate Homicide Act 2007, which came into effect in April 2008, achieved its first conviction in February this year, of Cotswold Geotechnical Holdings Ltd.
The case attracted huge media attention purely as it was the first conviction under the Act. However, there may be wider ramifications for employers and it remains to be seen whether or not the Act will lead to larger companies being prosecuted. As Cotswold Geotechnical Holdings was run by a sole owner and was a small organisation, it was felt that this case did not determine the full extent of the Act, which was established to address the problems of convicting larger organisations. The real test will be when a substantial organisation with an elaborate management structure is prosecuted.
When the Act initially came into force it was implied that there would be an average of 12 cases per year. However, the Crown Prosecution Service has mentioned that they are contemplating a number of other records of evidence in relation to possible further prosecutions for the offence. Prior to the law coming into effect, it had been hard to convict bigger companies but it was possible for a corporate body to be prosecuted for a selection of criminal offences including the common law offence of gross negligence manslaughter. However for an organisation to be guilty of an offence, it was imperative for a senior member of staff, such as a managing director (known as a controlling mind) to be guilty of the offence. Where any events occurred prior to 6th April, the pre-existing law applies and the current Act only applies to deaths where the injury or behaviour leading to the death, occurs on or after 6th April.
The Act focuses on the way in which a business’ activities are maintained and co-ordinated, which is generally referred to as “management failure” and whether that caused death and was a gross breach of the relevant duty of care. In addition the way in which activities are maintained and co-ordinated by senior management needs to be a significant aspect of the breach.
Organisations need to consider the sentencing guidelines, as they do not only apply to corporate manslaughter cases but also to health and safety offences that result in a person losing their life. The director of Cotswold Geotechnical Holdings was charged with an offence under the HSAW as well as gross negligence manslaughter. It was the company itself who was the first to be charged under the 2007 Act. The Act indubitably predicts concurrent prosecutions for both breaches in health and safety as well as corporate manslaughter as both of these emerge from identical facts.
It is likely that both the Health and Safety Executive and The Crown Prosecution Service will persist in prosecuting senior officials with health and safety offences which carry serious sentence, including imprisonment. One of the main sanctions for conviction under the Act is an unrestricted fine. Sentencing guidelines published in February 2010 stated that fines should seldom be less that £500,000. Cotswold Geotechnical Holdings were fined £385,000 to be paid in equally split amounts over a period of ten years. This decision was based purely on the company’s financial situation, although it is plausible the company may go into liquidation as a result of the conviction. The presiding judge at the time said that if the company was to go out of business that would be a consequence of the appalling breach that had been committed.
Cotswold Geotechnical Holdings has applied for permission to appeal its conviction. At the time this article has been published, no other information is currently available.
View our update on the Corporate Manslaughter Act (March 2012).
