On April 24, 1998, Simon Jones, a 24-year-old student taking a year off from college, was killed on his first day as a casual worker at Shoreham Dock. He was set to work unloading cargo inside a ship with only a few minutes of “training”. Within hours of starting work he was decapitated by the grab of a crane.
A campaign group was set up following Simon's death, and a range of direct action taken, including:
A corporate killing prosecution was, and remains, the campaign group's fundamental objective and the case highlights how far the public is prepared to go to make companies account for omissions in their safety procedures.
John Prescott, secretary of state for the environment, transport and the regions, said at the labour party conference last year that the government was shaking up health and safety. He said that for the first time in 25 years, a new wide-ranging act of parliament to make Britain a safer place to work is to be introduced, including a new offence of corporate killing. But this was not specifically referred to in the last Queen's speech.
To understand why there is the perceived need for a new corporate killing offence, it is useful to look at the problems enshrined in the existing law on manslaughter, which make prosecuting a corporation for manslaughter difficult and, in some cases, impossible. At one time it was thought that manslaughter was an offence that could only be committed by individuals. What is clear, following the P&O case (Herald of Free Enterprise ferry disaster), is that a corporation can, in theory, be guilty of manslaughter.
The difficulty, however, lies in the fact that the offence requires a state of mind to be attributed to a company. Lawyers will be familiar with the vivid description of corporate make-up by Lord Denning in the Tesco and Nattras case. He said: “A company in many ways may be likened to a human body. It has a brain and a nerve centre that control what it does. It also has hands which hold the tools and act in accordance with directions from the centre.” He went on to say that it is directors and managers who represent the mind and will of the company and that the law recognises this.
This doctrine of identification has therefore meant that, unless someone representing the directing mind and will of the company is himself or herself guilty of manslaughter, then a successful prosecution against the corporate employer could not be brought. This was the difficulty in the P&O case, and indeed in the other attempted prosecutions after it, with the exception of the one-man company OLL in relation to the Lyme Bay canoeing disaster.
To summarise the elements of the proposed corporate killing offence:
What the expected standard is will depend on each organisation, but it is clear from the P&O case and the Law Commission's comments on it, that the standard adopted across a sector could still fall below the expected standard.
Back in 1996 when the Law Commission issued its recommendations, it advised that the offence should extend to all corporations, irrespective of the legal means by which they are incorporated. The home office, however, has put forward a wider proposal whereby the offence would not only apply to corporations but to all “undertakings”. On this basis it would apply to any trade or business or other activity providing employment and would extend to schools, hospital trusts, partnerships, small businesses, unincorporated charities and so on. Although the government has put this question out to consultation, it has already strongly indicated that it does not want to create artificial barriers between incorporated and non-incorporated employer organisations. It also wants to ensure that companies incorporated outside England and Wales would also be liable for offences committed here, although it recognises it may be difficult to enforce action against companies incorporated in some foreign jurisdictions.
There is a rather peculiar sentiment expressed in the Home Office consultation paper stating that company group structures should not be used as a mechanism for evading liability for corporate killing. The example given is of small subsidiary companies being established to carry on the group's riskier business. The government has now proposed that the prosecuting authority should also be able to take action against parent or other group companies if it can be shown that their own management's failures were a cause of the death concerned. This is a significant departure from liability principles under health and safety and other company legislation.
The draft bill prepared by the Law Commission in 1996 makes it clear that any serious management failure that is the cause of a person's death, whoever this person might be, and whether or not an employee, could amount to a corporate killing offence. The question of whether an employer can be criminally liable for injuries caused or suffered by independent contractors was made clear in the Associated Octel case in 1994. Here, the Court of Appeal said that for health and safety offences, all the prosecution had to show was that the activity in question was part of the conduct of the employer's undertaking, for example repairs to the employer's plant or machinery, whether this was conducted by an employer or contractor. It was then for the employer to show, if it could, that it was not reasonably practicable for it to have to prevent the accident.
It is proposed that the same principles will apply to corporate killings – that is to say, if the management failure resulted in the death of an independent contractor, a corporate killing offence may have been committed.
While it is possible for directors and senior managers to be guilty of manslaughter offences in their own right, the government is also proposing new penalties for directors even if they are not personally liable for manslaughter but where there was some fault on their part.
In fact, what is proposed is extremely worrying with very harsh consequences. Government proposes that any individual who could be shown to have had some influence on, or responsibility for, circumstances in which a management failure falling far below what could reasonably be expected was a cause of a person's death, should be disqualified from acting in a management role in any undertaking carrying on a business or activity in Great Britain.
Disqualification would normally be for a limited period of time but in more serious cases could be unlimited. Any disqualification would not be limited to preventing a person acting as a director, but would preclude the guilty person from holding any senior management role. Again it is suggested that it would also be possible to bring disqualification proceedings against officers of the parent company or of other group companies who exercise control or influence management of the company that caused the death. It is also possible that directors will be made personally liable for fines.
The main penalty imposed on the corporation or undertaking itself will be significant fines. These will not be limited in amount by statute, and, following the Howe guidelines, will need to be large enough to bring the message home to both company management and shareholders.
The Health and Safety Executive and other enforcement authorities already have power to issue enforcement notices as part of, or following, their investigations and in advance of any trial.
The new proposals will give the courts power to order remedial action, either where the relevant enforcement authority has not issued a notice requiring deficiencies to be remedied or where such notice has not been complied with.
What is clear from this introduction to the subject of corporate killing is that health and safety is now a board agenda item and the implications of getting it wrong could be dire indeed.
Some questions that need to be asked include: are the significant internal and external operational, financial, compliance and other risks identified and assessed on an ongoing basis? Significant risks may, for example, include those related to market credit, liquidity, technological, legal, health, safety, and environmental reputation and business probity issues. Is there a clear understanding by management and others within the company of what risks are acceptable to the board?
One important aspect of corporate governance is the system by which large companies are controlled and directed. The work of Cadbury, Greenbury and Hampel has provided a firm basis for this, most recently through the Combined Code. I believe that in general the issues dealt with under the code are more suitable for best practice than legislation. Best practice is more flexible, enabling companies to fit their own particular circumstances and it can be updated more easily.
The code is held in high regard, both here and overseas. One of the main reasons for its success is that it has wide support from both directors and shareholders. I believe that it is essential that the code continues to have such support. That is why I am pleased that the Financial Reporting Council has agreed to take responsibility for monitoring corporate governance developments and for recommending, where appropriate, amendments to the code.
This government has made clear that it does not intend to replace the use of best practice by legal rules in this area, provided that best practice is seen to be working. The basic principles of company law and corporate
governance have changed little since they were formulated in the middle of the last century. There are, however, likely to be fundamental changes in the next few years, including the establishment of a minimum standard of care for company directors.
In general terms, there is an increasing trend in the law towards finding more responsibility on the part of directors for the corporate actions of the companies on whose boards they sit. The Government's review of company law, launched in 1998, is also likely to lead to some significant changes. One suggestion is the formulation of a standard statement of directors' duties. This is likely to be printed on the Companies House form that every director signs, consenting to his or her appointment.
The standard of the duty of care owed by directors to their companies has recently been increased from the historical standards by which 19th century amateur directors were judged (which was not high), to the standard applied in “wrongful trading” cases. That is, not only the level of skill, care and attention of the “average” director (the objective test), but also the actual level of skill and care that the director actually had (the subjective test). This raises the prospect of being judged by a higher standard.
One of the problems with having a statutory statement of directors' duties is that it may still create uncertainty, even though this is precisely what it is trying to defeat. The Law Commission and the Scottish Law Commission have previously consulted on this issue, and published their views on the matter in September 1999. They recommended then that, in order to retain flexibility and to allow for judicial evolution of the law where necessary, any statutory statement should not be exhaustive. However, trade secretary Stephen Byers said last June that he had ruled out a complete rewriting of directors' duties to act in the interests of employees and communities rather than shareholders.
At a time when risk management is evolving, an ethics programme can be a catalyst for that transformation. Risk managers are endeavouring to adopt, and to encourage, their senior management to accept a broader, more strategic perspective toward their function in the firm: to take a cross-functional approach in reviewing business processes and to develop a language for addressing risk that is relevant, compelling and accessible to a wider organisational audience.
Most fundamentally, they have been moving from risk protection (insurance) to risk prevention (information and control systems).
The underlying principles of a business ethics practice support each of these shifts. An effective initiative begins with a corporate conversation concerning the organisation's primary values and driving principles, requiring a public commitment to those premises by the firm's leadership and making those premises explicitly clear to all employees. The programme provides a language of shared values and commitment to raising concerns and inconsistencies while representatives across the organisation review the messages given and the practices supported, explicitly and implicitly, across all functions.
The key components of a corporate ethics programme are designed to optimise a corporation's information culture. Such components include: organisational assessments, cross-functional and multi-level compliance and responsible practices teams, communication programmes, ongoing assessment and monitoring of business practices (through focus groups, surveys, hotlines and email) and integration of programmes into performance measurements.