Legal Hurdles: Part I

Many critics of CSR assert that a voluntary framework to improve human rights and labor standards is not adequate and that a regulatory framework must be established for this purpose.  This is easier said than done for a number of reasons, but two main hurdles are legal definitions and questions of jurisdiction.  In the next two blog entries, I will look at each problem in turn by means of analyzing newly proposed legislation in the UK and US respectively.

Legal Definitions and The Corporate Manslaughter and Corporate Homicide Bill (UK)

If you've ever seen or read The Corporation, you know that in the US and the UK, corporations are defined in law as "legal persons."  That means a large group of people are all bundled together as one person under the law.  As a result, if something goes wrong, it's very tough to successfully prosecute a business - how do you punish a "person" that isn't a person?  The frequently quoted line is "there's no body to kick, no soul to damn."  To make matters worse, under UK law at present, in order for a corporation to be found liable for corporate manslaughter, one senior official in the organization must be found responsible for what happened (this is called the identification doctrine).  Well, that's not how things work in the real world, is it?

Here's an example of the problem with applying this legal framework.  In 1987, the Herald of Free Enterprise, a ferry sailing between Zeebrugge and Dover, sank near the Zeebrugge harbor.  The incident resulted in 187 deaths, and the company that ran the ferry was charged with manslaughter. (BBC, "1987: Zeebrugge Disaster Was No Accident")  The Law Lords found that the tragedy was the result of "organizational sloppiness through and through."  But they concluded that while a corporation could be convicted of manslaughter, the organization could not be held liable legally for the incident, however culpable it was morally and in practical terms.  This is because the law requires that one person in the organization be found liable for "causing" the accident, and this person could not be pinpointed in the present case. (R v. P&O European Ferries (Dover) Ltd. [1991] 93 Cr. Ap. R. 72, June 5, 1990)  This legal approach helps to explain the following statistic quoted in The Guardian in July, 2006 - in the last 30 years, 10,000 people have been killed in work-related incidents; 70% of the deaths were attributed by the Health and Safety Executive to be a direct result of management failure, but only 11 company directors were convicted during this period, and only 5 were imprisoned for their crimes. (The Guardian, "Manslaughter Bill Must Ensure Justice for those Killed at Work," July 24, 2006)

The Herald of Free Enterprise was one of a number of tragedies that occurred in the UK at around the same time where a company was clearly responsible for a fatal accident but was not held liable due to the legal framework.  This spate of accidents led to public outcry and growing political support for a new law on corporate manslaughter. (BBC, "Corporate Killing Law to Change," July 21, 2006)  In 2005, proponents of such change kept their ears peeled during the Queen's speech for word of this development, but no mention was made. (King's College London, Lecture in Criminal Law, 2005)  Observers feared that Blair would never introduce a new law in this area after promising and failing to do so in three previous election manifestos. (The Guardian, "Corporate Manslaughter Crackdown Cheers Unions, July 20, 2006)  But on July 20, 2006, the Corporate Manslaughter and Corporate Homicide Bill was introduced in the House of Commons.  (It has 2 names for the offense because the Bill covers Scotland as well and the offense is called corporate homicide there.) (Corporate Manslaughter and Corporate Homicide Bill, Explanatory Notes)

The Proposed Law

The definition of the offense is as follows: "An organization to which this section applies is guilty of an offense if the way in which any of its activities are managed or organized by its senior managers causes a person's death and amounts to a gross breach of a relevant duty of care owed by the organization to the deceased."

According to a Home Office report entitled "Corporate Manslaughter: The Government's Draft Bill for Reform," the new offense would be based on "failures in the way an organization's activities were managed and organized" and would focus on "arrangements and practices in carrying out an organization's work, rather than an immediately negligent act by an employee."  So the focus would be more on collective company organization and action than on an individual employee's action, as is the case at present.  The offense would only kick in if the organization owed a "duty of care" to the victims - in other words, a company would not be liable under the law if it acted and something happened as a result to people for whom it had no responsibility.  Not surprisingly, a company will have a duty of care to its employees, but also to recipients of its goods and services.  If this duty of care is established, the breach of this duty must be "grossly negligent" (ie, a seriously serious kind of breach - the Bill gives serious management failure as an example).

The definition also states that the offense must "cause a person's death."  Causation can get pretty tricky as it's not always clear what causes an event, and sometimes there are multiple causes.  So the Home Office report seeks to clarify the definition of causation for the pursposes of the Bill by saying there must be: (1) more than a minimal contribution to death; and (2) no intervening act to break the chain.  In other words, the company must have contributed to the point that it influenced the outcome in some way, and nothing can have happened between what the company did and the death to change the course of events to the point that the company's act couldn't be shown to influence the outcome somehow.

Finally, the explanatory notes to the Bill state that the definition of senior manager "is intended to capture a level of responsibility that represents the overall way in which an organization manages or organizes any particular activity," such as when "management responsibilities relate to the whole of an organization's activities or to a substantial part of them."  This definition covers decision-making and management functions.

The Effect

So would this law work?  Let's look at it in the context of the Herald of Free Enterprise disaster.

(1) There would no longer be a question of whether an offense of corporate manslaughter exists, which was thee central question in that case - here's the law to prove it does!  Obstacle 1 gone completely.

(2) The new law would focus on activities, mainly decision-making and management, by senior company officials rather than looking for one culpable person as the identification doctrine requires.  This approach seems to fit much better with how corporations function, although one wonders if it goes far enough to account for the complexity of corporate structure in assigning accountability.  Still, it seems much more likely that the company operating the Herald of Free Enterprise would have been convicted under this test.  Obstacle 2 dealt with in a much better way.

(3) The offense would only kick in if a company owed a duty of care to the victims.  It seems fair to restrict the circumstances of conviction this way as manslaughter is an extremely serious charge, and it would not be fair to make companies accountable for every bad thing that happened, regardless of how remote it is.  With the Herald of Free Enterprise, it is reasonably clear that the company had a duty of care to the passengers of the vessel as recipients of its services, as well as to employees working the ferry.  So, the duty of care set by the law seems reasonable using this case as a guide post.  Obstacle 3 dealt with in a seemingly adequate way.

(4) Breach of this duty of care would have to be "grossly negligent."  Again, this high threshold seems reasonable given the seriousness of a manslaughter charge, depending on exactly what standard is set in this regard.  Given the Law Lord's assessment that the ferry company was sloppy through and through, it seems reasonably likely that an assessment of gross negligence would have been assigned to the company's organization and arrangement, thus fulfilling the definition of the new offense.  Obstacle 4 dealt with reasonably pending further definition.

(5) Causation is defined relatively broadly.  This element is important, particularly with regard to corporate crimes as it is often unclear exactly who contributed to an event and to what extent the person or people contributed in complex organization structures.  It seems clear that the ferry company's contribution to the accident was more than minimal and it does not appear that there was an extraordinary intervening act that would have alleviated its culpability, so most probably, this case would have met the causation requirement for the offense.  Obstacle 5 dealt with in a seemingly adequate way.

(6) The definition of senior management is flexible.  Again, this flexibility is important because it reinforces the notion that the organizational structure and decision-making process is more important than individuals.  The "sloppiness" of the ferry company's organization pointed to serious organizational deficiencies by senior management within the organization.  Obstacle 6 addressed, but as mentioned above, it would be interesting to see if this construction of responsibility adequately accounts for how corporations work.  It's better, for sure, but potentially still inadequate.

Will It Work?

Although this Bill rectifies a lot of the problems with the existing law, there are still concerns about whether or not it would be effective.  According to the House of Commons leader, Jack Straw, the ultimate test of the law's success is whether it changes behavior of managers so as to prevent accidents. (BBC, "Corporate Killing Law to Change," July 21, 2006)  In order to do this, according to the same BBC article from July 21, the definition of "grossly negligent behavior" will need to be clarified.  Furthermore, it seems that questions about penalties remain.  Under the current proposal, fines and remedial action are possible, but 2 major UK unions want a provision to jail corporate leaders directly responsible for corporate killing. (The Guardian, "Corporate Manslaughter Crackdown Cheers Unions," July 20, 2006)  With regard to whether the offense would extend down supply chains, my sense is that a duty of care would not carry this far because of the gravity of the offense - it would cast the net of liability too wide to be politically feasible.  I also wonder if the fact that this law does nothing to redefine the corporate entity (recognizing the many implications this would have for corporate law) will have implications for other types of corporate liability.  Finally, this law only applies to deaths in the UK, but I'll cover jurisdictional concerns more next week.