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To:
The ETR Select committee
From: The Centre For Corporate Accountability
Date: 27 October 1999
This is a supplementary memorandum to the evidence given
by the Centre for Corporate Accountability..
- Imposition of Safety
Duties upon Company Directors
At present safety duties are placed upon "employers"
(and, "manufacturers" etc) which are in
almost all cases "companies" Company directors
as individuals have no legal safety duties.
In March 1996, Michael Meacher M.P, as Shadow Environment
Minister, told Parliament, that: "I emphasise
the responsibility for health and safety must be
vested at the highest level of each organisation.
… Companies should appoint an individual at
board level with overall responsibility for health
and safety."
Explicit financial duties are already placed upon
directors which can result in seven year imprisonment
if breached. Imposition of duties would both assist
prevention of death and injury and as well as increase
their accountability, in the event of death and
injury
- Conflicts of Interest
The failure to distinguish between HSE inspectors
who carry out preventative inspections from those
that carry out death/injury investigations can result
in inspectors having a conflict of interest. Inspectors,
who have failed to properly enforce the law, may,
if an injury or death subsequently takes place may
be less willing to prosecute the company.
- Use of the word "accident".
Our submission does not contain the word "accident",
since we believe that the use of this term immediately
implies that the injury/death is not the result
of corporate criminal conduct. Although some injuries
may well be the result of what is commonly understood
as an "accident", a significant minority
(if not majority) are the result of serious crimes.
Until they are investigated, it is impossible to
know the cause.
We believe that the use of the word sends the wrong
messages to the public, companies and to inspectors
themselves. It is a misleading and confusing term.
We would like to make the point that the HSE should
refrain from using this word, and should use neutral
terms like "incident", "major injury",
or "deaths" etc. It should say for example,
"We investigate X% major injuries" rather
than "X% of major accidents"
The word "accident" has already found
its way into legislation, particularly the Reporting
of Injuries Deaths and Dangerous Occurences Regulations
- and so inevitably the word can not be removed
from all official discussions. However, it is possible
for the HSE to ensure that none of its press releases,
official documents, and other public announcements
use the word.
- "Name and Shame"
The Environment Agency has instituted a "name
and shame" policy, with a league table of those
companies who have suffered the highest fines.
The HSE have decided not to go down this path. The
HSE argues that the Environment Agency's criteria
- the highest fines and the biggest polluters -
were "unsophisticated". Although we agree
that "fines" are a very imprecise indicator,
it is possible to come up with other criteria.
Channel Four broadcast a Dispatches, documentary,
"Bosses in the Dock" on 6 May this year
which analysed all the convictions over the last
twelve years. They then produced a league table
setting out the most convicted companies in Britain
over that period. We do not see why the HSE can
not do this, perhaps considering the number of convictions
over a period of the previous five years.
Looking at the number of criminal convictions is
an "objective" criterion - that does not
have the same problem as "fines" - since
larger companies will usually receive larger fines.
A criminal offence is a criminal offence - determined
by the courts. Companies cannot justify multiple
offences simply because they employ more people,
or are larger than other companies. In fact, large
companies have greater levels of resources to ensure
that they comply with the law..
Such a policy would chime in with the Home Office's
concern about "repeat offenders". Another,
league table could consider the number of enforcement
notices imposed byon companies the HSE over a five
year period.
In our opinion, a "name and shame" policy
could assist in deterring companies from committing
criminal offences. Companies would not want to be
part of a league table of corporate criminals.
- Alternative punishments
for companies
In our initial submission, we did not discuss issues
relating to "sentencing". We would like
to make the following points:
- The law does not allow company
managers or directors convicted of health and safety
offences to be imprisoned (except for four very
technical offences). The absence of this power contrasts
with environmental law that does allow for imprisonment.
This should change.
- Companies are not subject
to fines that are proportionate to a convicted company's
turnover or pre-tax profits. The recent case of
R v Howe, (which provides sentencing guidelines
to courts) does not require companies to provide
financial information to the magistrate or judge.
Companies are only obliged to give financial information
when it is arguing that it is not able to pay a
particular level of fine.
Evidence collected by the West Midlands Health and
Safety Advice Centre indicate that fines have no
correlation with the company's profits. It obtained
information on the annual profits of 65 of the 260
companies sentenced in the region between 1987 and
1993. The five companies with average profits of
between £1-10,000 received an average fine
of £750 per offence which amounted to 16%
of their profits. The biggest category of companies
with profits of between £100-150,000 received
fines of £1,290 per offence - 0.5% of their
profits. Whilst at the other extreme, the five companies
with profits of over £10 million received
average fines of £1185, equivalent to 0.002%
of their profits.
There needs to be a proper system - established
by statute - which will allow courts to fine companies
proportionate to their turnover or pre-tax profits.
For example, each category of offences could have
a specific percentage attached to it depending upon
its seriousness. This percentage could then be multiplied
by the annual profits of the convicted company.
This would provide a "base fine". A judge
or magistrate could then use his or discretion,
on the basis of laid down criteria, to either raise
or lower the level of fine.
- Courts should have the power
to impose "equity fines" on Public Limited
Companies. In such a case, a court orders a company
to issue a particular number of shares, worth a
particular price, and place it into a fund. This
would be a very effective way of fining PLCs: in
particular it would ensure that shareholders "suffer"
- since the price of every individual share would
decrease - as a result of criminal conduct of the
part of the company.
- Courts should have the power
to impose a sentence of "corporate probation"
and "corporate community service". Under
corporate probation - available to US courts - a
company is required to undertake changes to this
company to make it safe - changes that can be more
far reaching that can be required by an HSE prohibition
notice
We would like to make the point that no government
committee - though the Sentencing Advisory Panel
is now looking at environmental offences - has ever
considered alternative forms of corporate sentencing.
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