Clarkson, 'Corporate Culpability'

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Corporate Culpability

C.M.V.Clarkson

Copyright 1998 C.M.V. Clarkson.
First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

Summary

This paper examines how the law should respond when deaths, injuries or other wrongs or harms are caused through corporate operations. It first considers a growing school of thought, emanating from the law and economics literature in the United States, that civil liability might be more appropriate than criminal liability in most cases. Rejecting this view, it argues that the goals of the criminal law are best achieved by the prosecution and punishment of the company itself rather than the individuals within the company. The issue then becomes one of determining the method by which this can be achieved. Various possibilities are considered: the identification doctrine; the aggregation doctrine; reactive corporate fault; vicarious liability; management failure model; corporate mens rea; and the creation of specific corporate offences. The paper argues that the corporate mens rea doctrine, coupled with the use of Corporate Compliance Programmes, is the best mechanism for the imposition of corporate criminal liability.

1. Introduction

Much of our lives and daily routines are affected by corporate activities. To a large extent, companies provide the food we eat, the water we drink, the necessities and luxuries of everyday living. Increasingly, particularly with growing privatisation, it is not the State that provides these amenities - but companies. Such companies generate wealth for the economy and their shareholders and provide employment for much of the population. Short of a revolutionary restructuring of the economy and the political institutions of the country, it is inevitable that the power and influence of companies will grow and not diminish in the foreseeable future.

But, with such power must come responsibility. Just as individuals owe a duty not to harm or injure others in society without justification, so too do companies owe a duty not to poison our water and food, not to pollute our rivers, beaches and air, not to allow their workplaces to endanger the lives and safety of their employees and the public, and not to sell commodities, or provide transport, that will kill or injure people.

The statistics on corporate pollution, death and injury at work and deaths caused in the notorious "disasters", such as Piper Alpha and Herald of Free Enterprise, are well-documented (see Bergman 1991; Clarkson 1996, at p.558) and will not be repeated here. Suffice it to say that it has long been recognised that through corporate operations such deaths, injuries, pollution etc. do occur and companies have long been prosecuted and convicted for offences resulting from their operations - even including, more recently, the offence of manslaughter. ⁽¹⁾

The object of this paper is two-fold. First, it is necessary to consider whether corporate criminal liability is the most effective method of preventing such harms. A more effective remedy might be to abandon recourse to the criminal law and impose civil liability on either companies themselves or individual wrongdoers within the corporate structure. Alternatively, the desired goal might be better achieved by the criminal prosecution and punishment of individuals within the company rather than the company itself. Secondly, if it is concluded that companies should themselves be held criminally liable, how can this best be done to achieve the twin objectives of the criminal law of, first, holding persons accountable and responsible for their actions and censuring them when those actions are, or cause, a prohibited wrong and, secondly, leading to a reduction of the wrongdoing.

2. Criminal or Civil Liability

While the use of criminal sanctions against companies is well-established in both England and the United States, there has been a recent movement, emanating from the law and economics literature in the United States, advocating the use of civil, as opposed to criminal, liability against companies (see Khanna 1996; Fischel and Sykes 1996). The gist of the argument here is that civil liability shares many of the same features as criminal liability, namely, both impose liability upon a company, both aim at deterrence and companies suffer a loss of reputation from both (see Khanna 1996, p.1508). However, civil liability is better able to calculate appropriate levels of damages to maximise deterrence in a cost-efficient manner because "pursuing corporate criminal liability results in society bearing the higher sanctioning costs of stigma penalties and the increased costs of deterring corporate misbehaviour created by the procedural protections of criminal law" (Khanna 1996, p. 1533). Overdeterrence can lead to excessive monitoring at the cost of beneficial activities and "when the penalty exceeds the social harm, the problem of socially excessive product prices and litigation costs again arises" (Fischel and Sykes 1996, p.325).

However, these claims can, and should, be resisted. Criminal liability differs from civil liability in a least four important respects (see Khanna 1996, p.1492). First, criminal liability involves stronger procedural protections such as the safeguards under PACE and the requirement for proof beyond reasonable doubt. Secondly, criminal law is enforced by more powerful enforcement agencies, whether it be the police or the HSE, with more resources at their disposal than many private plaintiffs.⁽²⁾ Thirdly, criminal punishment involves stigma and censure and, fourthly and related to the last point, criminal sanctions have a symbolic and "message-sending" (Khanna 1996, p.1492) role. Claims by law and economics academics tend to paint a one-dimensional picture: what is the minimum sanction in terms of a fine or compensation that is most cost-effective in deterring the activity? Even operating within their paradigm of deterrence, this misses the potential deterrent effect of subjection to the criminal process. The more powerful enforcement powers involving, for instance, the ability to detain and question corporate officials and the extra procedural protections emphasising the seriousness of the proceedings, can in themselves operate as a significant deterrent. The fact that private civil litigation depends upon an identifiable victim with the necessary resources to commence litigation weakens the deterrent impact of civil litigation. For example, with pollution offences there is often no identifiable victim who is aware of being harmed; the threat of a civil or administrative sanction brought by a public body will not have the same deterrent effect. But, more importantly and stepping outside their paradigm, it is now widely accepted that the main function of the criminal law and punishment is to censure wrongdoing and through such blame and denunciation to emphasise the level of rejection of the wrongdoing. Civil liability is ill-suited for this purpose. The massive publicity surrounding the conviction of a company for manslaughter in Kite and Others ⁽³⁾ and the failure of the prosecution in the P & O case is testament to the power and dramatic weight of a criminal conviction as compared with civil liability.

3. Corporate or Personal Criminal Liability

In Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 507 Lord Hoffman stated that there is no such thing as a company "of which one can meaningfully say that it can or cannot do something. There is in fact no such thing as a company as such." Crimes can only be committed by human, moral agents (see Sullivan 1995; Clarkson 1996). One might wish to attribute their wrongdoing to a company (see Sullivan 1996) but ultimately it is the individual within the company who is the culpable agent deserving punishment.

Further, in utilitarian terms it is argued that it is the individuals within the company who are most amenable to deterrence in that fear of prosecution and loss of employment and income will prompt such persons into greater care and vigilance. For example, in Kite and Others while the company was fined £60,000, Peter Kite was sentenced to three years' imprisonment - presumably a greater deterrent to persons running activity centres. In incapacitative terms, if it is an individual that has caused the harm, it is that person who should not be allowed to run such operations or, in rehabilitative terms, it is that person who should, whether in that or another company, be forced to improve the relevant work practices. Finally, it is argued that in relation to small companies which comprise about 45% of all companies in the UK,⁽⁴⁾ many of which might be "fly-by-night" or "cowboy" companies there is no significant reputation to be lost through stigmatic punishment (see Khanna 1996, p.1500) and, accordingly, it is only punishment of the individual concerned that can serve any useful purpose. The argument concludes that with larger companies punishment, in the form of a fine, is, in essence, punishment of shareholders, creditors, employees who might be made redundant and the public who will have to meet the cost of increased prices (Clarkson 1996, p.562).

The argument in favour of corporate criminal liability is that in many cases it is the company itself, through its policies or practices, that has done wrong and prosecution and punishment should be directed at the real wrongdoer.⁽⁵⁾ In many cases there is no individual who, alone, has committed a crime. It is the conjunction of the practices of several individuals, all acting in compliance with a company's sloppy or non-existent procedures, that has caused the harm. Alternatively, in many cases companies have complex structures with responsibility buried at many different layers within the corporate hierarchy making it difficult, if not impossible, to determine where the true fault lies. In the United States about 2/3 of all successful corporate prosecutions also result in conviction of individuals within the company (see Khanna 1996, p.1529, fn 274). This means that in 1/3 of all the cases no individual was thought sufficiently blameworthy to warrant prosecution or no individual against whom a prosecution could be brought was identified. One of the main objects of corporate criminal liability is to ensure that companies improve their work practices. If no individual who has committed a crime can be identified and no mechanism for corporate prosecution were to exist, the harmful practices would continue unabated. Prosecution of companies, particularly when accompanied by media attention, can provide a significant impetus to companies to improve their practices or can prompt law reform to improve safety standards.⁽⁶⁾

Further, in many cases even where a blameworthy individual can be identified a personal prosecution might be ineffective to achieve the law's objectives. Such individual managers or other employees might be "judgment-proof" (Khanna 1996, p.1495) in the sense of being insolvent or simply not having the resources to pay the type of fine that would be necessary for deterrent purposes. Such personnel, knowing a prosecution would be unlikely, would have little incentive to improve their work-practices. Alternatively, such managers who are potentially in-the line-of-fire could demand inflated salaries as a risk premium (Khanna 1996, p.1496). Not only would this distort the pay structures within the company with possible wider adverse consequences, but it would provide a shield for others in the company to operate criminal practices. In such cases, even if there were a successful prosecution against an individual, there would be little incentive for the company, if it were not economically viable, to remedy their practices. It might simply be cheaper to employ another "vice-president responsible for going to jail" (Coffee 1981).

Modern companies now often promote themselves as distinct identifiable entities. Such advertising "designed to 'humanise' the company in the interests of image-building, has reinforced the anthropomorphic perception of the company in the public mind, which in turn has led to a public demand to apportion blame and to criminalise and punish companies for serious transgressions" (Dunford and Ridley 1996, p.7). If one purchases a washing machine from X Co. and it explodes causing death or injury, no-one is going to respond: "X Co. is only a fiction so it cannot be blamed; one must blame Mr A or Ms B who performed their tasks negligently." In terms of public perceptions companies have become entities that are routinely blamed. In the aftermath of the Herald of Free Enterprise capsize the relatives of the victims who died were primarily interested in a prosecution of P&O and not of the individuals (see Wells 1989). The concept of fair-labelling applies not just to offences themselves, but to whom we choose to blame for the offences committed.

Finally, it should be remembered that the punishment of companies decreases their overall wealth (see Khanna 1996, p.1495). Accordingly, shareholders and employees have an incentive to encourage and monitor better corporate practices. Costs can only be passed on the public to the extent that the company remains competitive. Arguments that shareholders and employees need protection must be outweighed by the greater societal interest in ensuring the safety of employees, the public and the environment.

4. Mechanisms of Corporate Criminal Culpability

Assuming the case has been convincingly made in favour of criminal as opposed to civil liability and in favour of corporate as opposed to, or at least in addition to, personal liability, the central issue is to determine the method by which companies can best be held criminally responsible. Various possibilities present themselves.

(i) Identification Doctrine

The traditional method by which companies are held criminally responsible in English law (at least, for crimes involving mens rea) is under the identification doctrine. If an individual who is sufficiently senior within the corporate structure as to represent metaphorically the "mind" of the company commits a crime within the course of his or her employment, that act and mens rea can be attributed to the company.⁽⁷⁾ The company can be "identified" with these acts and held directly accountable. In such cases it will always be possible to bring a prosecution against both the company and the individual. However, a company cannot be identified with a crime committed by a person lower down in the corporate hierarchy. His or her acts are not the company's acts and thus the company cannot be liable. In such cases a prosecution can only be brought against the individual concerned.

Such a theory is attractive to those who assert that companies cannot act or do anything otherwise than through their human agents. Indeed, Sullivan calls it a "restricted version" of vicarious liability in that the company is simply deemed to be liable in the restricted circumstances of a sufficiently senior manager committing a crime (Sullivan 1996, p.518).⁽⁸⁾ There is no fiction that a company is acting in its own right as an "intelligent machine".

There are, however, significant objections to the identification doctrine particularly with larger companies where it is most unlikely that a senior manager will actually commit the actus reus of an offence with the accompanying mens rea. Dealing with pollution offences Morland J stated in National Rivers Authority v Alfred McAlpine Homes East [1994] 4 All ER 286 at 298 that: "In almost all cases the act or omission will be that of a person such as a workman, fitter or plant operative in a fairly low position in the hierarchy of the industrial, agricultural or commercial concern". With offences that cause death or serious injury it is even more unlikely that a senior official will directly have "blood on his hands".

Further, in many cases with large complex-structured companies, it can be almost impossible for outsiders to penetrate the corporate shell to ascertain which individual or individuals actually committed the crime. The amount of expertise, time and money involved in such an investigation may be out of all proportion to the wrongdoing committed and, in any event, may prove fruitless if a company is determined to throw a smoke-shield around its internal operations.

Most significantly, however, even if such an inquiry is mounted, it will often be revealed that the fault lay with no specific individuals but rather with the company itself in the sense that its policies and operational procedures did not ensure that preventive measures to ensure safety or limit pollution were in place. For example, the main cause of the collapse of the prosecution in the P&O case was the fact that P&O had no director in charge of safety and no clearly articulated safety policies, particularly in relation to open-door sailings. The various personnel involved in the capsize of the Herald of Free Enterprise were each doing their own job (admittedly, some of them not doing it very well); the real cause of the capsize and resultant deaths was the lack of co-ordination between them as a result of an absence of safety policies. The Sheen Report investigating the capsize was in no doubt where the true fault lay: the company itself, with its absence of safety policies and failure to give clear safety directions, was "infected with the disease of sloppiness" (DoT 1987). In such cases, despite clear blame being directed at the company, the identification doctrine precludes any successful prosecution of the company. Indeed, being cynical, it almost encourages companies not to appoint senior personnel with responsibility for matters such as safety. The worse the "disease of sloppiness", the greater is the immunisation against corporate criminal liability.

However, it may be that the days of the identification doctrine, in its classic form, are numbered as a result of the significant Privy Council decision of Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. In this case an investment manager invested in another company without making the necessary disclosures as he knew he was obliged to do. Under the classic identification doctrine such an investment manager would not be sufficiently senior to represent the "mind" of the company. Lord Hoffman, however, refused to limit the identification doctrine to those representing the "directing mind and will" of the company. He stated (at p.507) that in each case the court had to "fashion a special rule of attribution for the particular substantive rule". The rule here was one requiring disclosure of substantial investments to the company and the stock exchange. The question was: "Whose act (or knowledge, or state of mind) was for this purpose intended to count as the act etc. of the company?" (ibid.) In this case it was the investment manager who made the investments. He was the person authorised to do this. For the purpose of this rule his acts and knowledge could be attributed to the company. For other rules and purposes, for example, health and safety within the company, his acts and knowledge would not be attributed to the company.

This ameliorated identification doctrine is, within the context of that doctrine, to be welcomed. If a company employs a health and safety manager, it is obvious that his or her acts and knowledge should be attributed to the company for health and safety purposes even if such person is of relatively lowly status within the company. This relaxation, however, falls far short of meeting all the above objections to the identification doctrine. In particular, it still requires an individual to be identified within the corporate structure whose acts and knowledge can be attributed the company. If the companies structures are impenetrable or if its policies are so "sloppy" that no person has been made responsible for the relevant area of activity, a company can still shield itself from corporate criminal liability. In the P&O case, where there was no safety manager or director, there would still be no person whose acts and knowledge could be attributed to the company.

(ii) Aggregation Doctrine

In order to overcome some of the problems associated with the identification doctrine, an alternative basis for the construction of criminal liability would be the aggregation doctrine, known in the United States as the Collective Knowledge Doctrine. Under this approach one aggregates all the acts and mental elements of the various relevant persons within the company to ascertain whether in toto they would amount to a crime if they had all been committed by one person. For example, if the actions or inactions of A, B, C and D cumulatively led to the harmful result and if their aggregated mental elements or negligence would amount to the mens rea of the crime, the company can be held liable. This doctrine has the advantage of recognising that in many cases it is not possible to isolate a single individual who has committed the crime with mens rea. This doctrine can deter companies from burying responsibility deep within the corporate structure.

This doctrine, however, suffers from many flaws. While the aggregated acts and states of mind of A,B,C and D might cumulatively amount to a crime, the reality is that none of these individuals need personally be at fault. Indeed, the company may be structured and compartmentalised in such a manner that there is no reasonable way that A could know what B was doing or failing to do (see Ragozino 1995, p.441). If A and B are in different departments they may have little opportunity to communicate (Ragozino 1995, p.468). Yet, because their actions are in part attributed to the company, they will "fall under the shadow of a serious offence (with possible disciplinary, employment and pension-right consequences)" (Sullivan 1996, p.529). With large complex corporate structures the doctrine is ineffective in terms of deterrence in that it fails to give advance notice to companies of what they are expected to do to immunise themselves from the risk of criminal liability (Ragozino 1995, p.467). In short, it is a type of constructive liability, now out of fashion in English law. As with the identification doctrine, it simply perpetuates the personification of companies myth. Instead of finding one person with whom the company can be identified, one finds several people. The doctrine ignores the reality that the real essence of the wrongdoing might not be what A,B,C and D did but the fact that the company had no organisational structure or policy to prevent A, B, C and D each doing what they did in a way that cumulatively amounts to a crime. Indeed, in the P&O case it is doubtful whether the aggregation of the acts and omissions of the various personnel would have amounted to a corporate crime. The real fault in that case lay with the lack of policy and responsibility for safety within the company. The aggregation doctrine, while employed to an extent in the United States,⁽⁹⁾ has been rejected by English law.⁽¹⁰⁾

(iii) Reactive Corporate Fault

A somewhat different approach to corporate criminal liability has been proposed by Fisse and Braithwaite (see Fisse and Braithwaite 1993 and 1988; and Fisse 1983). Where it is established that the actus reus of an offence has been committed by or on behalf of a company, a court should be empowered to order the company to conduct its own investigation to ascertain who was responsible and then take appropriate disciplinary measures against such persons and corrective steps to ensure the wrongdoing does not reoccur. If the company takes appropriate measures, no criminal liability will be imposed. Criminal liability will only be imposed on the company if it fails to comply adequately with the court order. The culpability of the company is thus not corporate culpability at the time of the crime but culpability in failing to react appropriately to the wrongdoing caused by its employees.

This approach has the advantage of ensuring that companies themselves, rather than the State, have to conduct appropriate enquiries. Not only will this save much public time and money, but, often, it is companies themselves that are best equipped to understand and penetrate their own complex structures. It is also an approach that recognises that one of the main aims of corporate criminal liability is to ensure that companies remedy their defective policies and practices so as to prevent a recurrence of the wrongdoing.

However, the disadvantages of this reactive fault doctrine are manifold. What corrective measures and disciplinary actions will suffice to avoid liability? Would a formal reprimand of an employee coupled with the circulation of an internal memorandum advising staff that certain actions need be taken in future suffice? In the P&O case would various reprimands plus an agreement to install warning lights on ferries have sufficed to avoid liability for the deaths of 192 people? If a company fails to take sufficient steps, what offence would be committed? (sullivan 1996, p.526) If new special offences relating to reactive fault were to be created there is the danger that these would be perceived as "lesser" offences and much of the point of stigmatic criminal punishment would be lost. If, however, as Fisse and Braithwaite seem to advocate, a company would be liable for established offences such as manslaughter, there would be a severe danger of "false labelling" (Sullivan 1996, p.526). The prerequisites for manslaughter, in terms of actus reus and mens rea, are well-established. How can a failure to discipline an employee or a failure to agree to install a safety device possibly be brought within such rules? Indeed, they should not be. It would be highly anomalous if a company such as P&O avoided liability for manslaughter by agreeing to fit warning lights on ferries while another company which was far less blameworthy in causing a death were to be convicted of this serious offence because its remedial actions were thought to be insufficient. How would the level of punishment in such cases be set bearing in mind the basic rule that punishment should generally be proportionate to the seriousness of the offence? Is this proportionality to the original wrongdoing or the failure to take remedial action? If the true basis of the finding of fault were the latter, it would make no sense to fix punishment by reference to the former. In short, the reactive fault doctrine has got the time-frame all wrong. The wrongdoing is the original acts or omissions that caused the harm. Culpability must be assessed by reference to those acts or omissions.

(iv) Vicarious Liability

In the United States a fairly common way of holding companies criminally liable is through the doctrine of respondeat superior or vicarious liability. Under this doctrine if a corporate agent, acting within the scope of his or her employment and with intention to benefit the corporation, commits a crime, liability can be imputed to the company. It is irrelevant whether the company actually receives the benefit (Khanna 1996, p.1490) or whether the activity might even have been expressly prohibited by the company. This doctrine is relatively well established in English law in relation to strict liability offences dealing with matters such as pollution, food and drugs and health and safety at work.⁽¹¹⁾ It has also been applied to hybrid offences which are prima facie strict liability offences but allow a due diligence defence.⁽¹²⁾ However, it is clear that vicarious liability will not necessarily apply to all offences of strict liability.⁽¹³⁾ Whether it does apply or not is a matter of statutory interpretation bearing in mind the policy of the law and whether the imposition of vicarious liability will assist enforcement (see further Clarkson 1996, pp.564-565; Sullivan 1996, pp.522-523).

Leaving aside the obvious point that the present state of English law is highly confused and undesirable in that it is extremely difficult to predict whether vicarious liability can be applied in any particular case, the question remains whether vicarious liability is a sound basis for the imposition of corporate liability. The arguments in favour of vicarious liability are largely pragmatic. It by-passes all the problems associated with the other doctrines such as finding a person sufficiently important in the corporation who has committed the crime. As long as someone (anyone) acting in the course of their employment has committed a crime the company can be held liable. It prevents companies shielding themselves from criminal liability by delegating potentially illegal operations to employees(see Ragozino 1995, p.437, fn.85). In theory, a company can be said to have delegated powers to act, in their respective spheres, to all its employees and accordingly should be responsible for their criminal acts (see Laufer 1994, p.654). It has also been argued that optimum deterrence is achieved through the imposition of vicarious liability (Sullivan 1996, p.523) in that companies "will now know where they stand" (ibid p.541).

There are, however, major problems with the doctrine, especially when applied to crimes involving mens rea. First, there is no empirical evidence to support the proposition that this is the most effective way of achieving deterrence. This is similar to the claim that strict liability offences are justifiable in deterrent terms. In response to these claims it has been pointed out that companies will, at most, only do what is reasonable to prevent harm and strict and vicarious liability could actually operate as a disincentive to companies to engage in socially beneficial enterprises (see Clarkson and Keating 1994, p.200 and references cited therein). Secondly, vicarious liability may be over-inclusive in that a company can be penalised for the fault of an employee for whom the company ought not to be held responsible in that the company may have done everything within its power to prevent the wrongdoing. The company may have adopted clear policies and issued express instructions to avert the wrong. If a maverick, perhaps menial, employee decides to "go it alone" it hardly seems justifiable to hold the company blameworthy for those actions or inactions (see Law Com No.237, para 7.29; Colvin 1995, p.8; Laufer 1994, p.659). Thirdly, the doctrine may be under-inclusive in that a company's policies and practices might be "sloppy" and perhaps even encourage criminal behaviour, yet it might not be possible to pin-point any particular employee who has committed the requisite elements of the crime (see Law Com No.237, para 7.29; Colvin 1995, p.8; Laufer 1994, p.659). Indeed, Laufer cites decisions from the United States where companies have been prosecuted and convicted despite the fact that all employees of the company have been acquitted (Laufer 1994, p.661).

While it is difficult to support the doctrine of vicarious liability for all offences, particularly serious ones such as manslaughter, it is, of course, not difficult to justify the doctrine when applied to strict liability offences (assuming strict liability offences are themselves justifiable). Such offences, dealing with matters relating to pollution, consumer protection, food and drugs and health and safety will undoubtedly be the ones most likely to be committed by companies. For such crimes, no finding of fault on the part of the actor is required. Accordingly, there would seem to be little point in requiring an establishment of fault on the part of the company. Indeed, it is possible to go further here and argue that, because of the enormous power yielded by companies in spheres of potential danger, the role of strict liability should be extended when offences are committed by companies (see Ashworth 1995, p.161). However, as will be argued below, such a differential approach (treating companies and individuals differently) could be counter-productive and contribute to the marginalisation of offences committed by companies.

A possible compromise solution is that proposed by the Council of Europe whereby a company would prima facie be vicariously liable for all offences committed by its employees, but would be afforded a due diligence defence if it could establish that the management was not implicated in the offence and had taken all the necessary steps to prevent the commission of the crime.⁽¹⁴⁾ The main objection to this approach is that it would convert all offences of mens rea committed by companies into hybrid offences - ie, strict liability offences with due diligence defences attached. Again, the consequence of this would be that corporate crime would be perceived as significantly different from other crime; as the normal prerequisites of the crime (say, manslaughter) would not need to be proved, such offences could come to be regarded as lesser offences thus undermining much of the censuring function of the criminal law.

(v) Management Failure Model

The Law Commission has proposed an offence of corporate manslaughter which would be committed when there was a management failure by the corporation which caused a person's death and that failure constitutes conduct "falling far below what can reasonably be expected of the corporation in the circumstances" (Law Com No.237, cl 4(1)). This offence is defined by reference to a management failure (as opposed to a corporate failure) because of the Commission's implicit view that it is people within companies that commit crimes and requirements of their new proposed offence of "killing by gross carelessness" (law Com No.237, cl 2(1)) "cannot appropriately be applied to corporations" (Law Com No.237, para 8.3). Accordingly, the offence is designed without reference to foresight or classical mens rea concepts in order to capture the distinctive nature of corporate wrongdoing. At first sight this appears to be no more than a broadening of the identification doctrine: instead of looking for a failure on the part of an individual or group of high-ranked individuals, one looks for a "management failure". However, the Law Commission goes on to define a management failure as being "a failure to ensure safety in the management or organisation of the corporation's activities" (Law Com No.237, par 8.19). This is potentially more far-reaching and could amount to construing the company's organisation and activities as those of a company itself rather than simply focusing on the actions of individuals within the company. While this clearly represents a step in the right direction, it is, nevertheless, "not enough to speak of 'management' or 'the way its activities are managed or organised' without resurrecting the same old problems: which employees and which systems can be said to be those of the company?" (Wells 1996, p.552). In short, the Law Commission's proposals are helpful but have, as yet, been insufficiently fleshed out.

(vi) Corporate Mens Rea Doctrine

It is often asserted that companies themselves cannot commit crimes; they cannot think or have intentions. Only the people within a company can commit a crime (Sullivan 1995). However, once one accepts that the entire notion of corporate personality is a fiction - but a well-established and highly useful one - there seems no reason why the law should not develop a concomitant corporate mens rea fiction. Most of the other doctrines - identification, aggregation etc. - involve fictitious imputations of responsibility. The real question is not whether the notion of a corporate mens rea involves a fiction, but whether, of all the fictions, it is the one that most closely approximates modern-day corporate reality and perceptions.

Such notions of direct corporate liability (as opposed to attribution doctrines) have been strongly advocated in the United States under various nomenclatures such as the "corporate ethos standard" or "strategic mens rea" (see eg Ragozino 1995, pp.424 and 441-443; Laufer 1994, pp.666 et seq.), introduced in Australia ⁽¹⁵⁾ and most prominently proposed in the UK by Wells (1993). The following doctrine, termed the "corporate mens rea doctrine" draws on all the above. The basic idea here is that all the other doctrines ignore the realities of complex corporate organisations and "the dynamic of organizational processes, structures, goals, cultures, and hierarchies" (Laufer 1994, p.660) which can combine and contribute to an ethos that permits or even encourages the commission of crimes. According to this view, companies can be conceived as culpability-bearing agents ⁽¹⁶⁾ who "act" through their officers and employees and whose "mens rea" is to be found in their corporate practices or policies. For example, for the purposes of manslaughter if a company, such as P&O prior to the Herald of Free Enterprise capsize, fails to institute obvious and necessary safety procedures, the requisite gross negligence for the crime can be found in these corporate practices and (lack of) safety policies. While it is perhaps easy to grasp the notion of a company being grossly negligent in that no subjective mental element is required, it is important to stress that both recklessness or intention can also be found in a company's policies, operational procedures and lack of precautions. If the corporate culture permitted or encouraged the wrongdoing, it may be easy to infer that the corporate body itself must have foreseen the possibility of the harm occurring (Cunningham recklessness) or that it has created an obvious and serious risk of the wrong resulting (Caldwell/Lawrence recklessness) or that the consequence was virtually certain to occur from which intention may be inferred (Moloney/Hancock intention). The important point about this approach is that it is not whether any individual within the company would have realised or foreseen the harm occurring but whether in a properly structured and organised careful company the risks would have been obvious. This is not "objectivising" intention and recklessness and therefore having a different culpability criterion for companies. With human individuals, in the absence of a confession, intention and foresight has to be inferred from objective actions. This can only be done on the basis of what a reasonable person would have foreseen - unless the defendant's state of mind is in some way different to that of a reasonable person because of, say, mental illness or drunkenness (see further Clarkson and Keating 1994, pp.217-221). As companies cannot be mentally abnormal or drunk the result is that juries and magistrates will draw the same inferences as with individuals: if the consequences were objectively likely/virtually certain etc. then the defendant must have foreseen the result and therefore possessed subjective mens rea consistent with section 8 of the Criminal Justice Act 1967. Possibly the only avenue of escape would be for a company to assert that while the risks looked objectively obvious, they had special expertise enabling them to rule out the risk (which would negate both species of recklessness and intention). In the unlikely event of this claim being believed (bearing in mind that the risk clearly did materialise), the company would (rightly) escape liability.

The major objection to the corporate mens rea doctrine is the difficulty of determining whether the policies and practices of a company are sufficiently defective to be adjudged blameworthy to the requisite degree. In Herald of Free Enterprise this could easily have been done. The company had no proper safety procedures, no director responsible for safety and had received and ignored prior warnings of open-door sailings. In other cases, however, particularly where there is no pattern of wrongdoing, it could be more difficult to identify the policies and practices as amounting to mens rea. One method of addressing this problem, adopted in the United States, would be to inquire whether a company had a Corporate Compliance Programme which has been enforced in good faith.

A Corporate Compliance Programme (CCP) is a formal system or programme designed to ensure that all employees know the relevant laws affecting the company's operations and seeking to ensure corporate compliance with the law. Some CCPs in the United States are fairly general codes of conduct governing all the company's activities and operations; others are more specific and aimed at preventing particular crimes such as insider trading (see generally Huff 1996). While such programmes are at present little used in the United States at the substantive level when liability is being determined (largely because vicarious liability is still the norm there), ⁽¹⁷⁾ they are widely used at the sentencing stage. Under the United States Sentencing Commission's Guidelines for the Sentencing of Organisations ⁽¹⁸⁾ companies that commit crimes receive a significant reduction in sentence if they have implemented and enforced a CCP - defined as an "effective program to prevent and detect violations of the law".⁽¹⁹⁾ Further, the existence of a CCP may be critical in the exercise of prosecutorial discretion. The Justice Department has urged United States Attorneys to regard the presence of a CCP as a "significant factor" in deciding whether to prosecute(Huff 1996, pp.1269-1270). What is being argued here is that such CCPs could be utilised in England and Wales as evidence of (lack of) corporate culpability. Obviously, if a crime has been committed by a company with a CCP, this means the CCP has failed. However, in terms of establishing culpability at the substantive stage, the inquiry would then shift to why, given the existence of the CCP, the crime was committed (Ragozino 1995, p.453). For example, it might be that while such a CCP was in existence, it was not rigorously enforced. If an offence were one with a due diligence defence, a company without a CCP could have extreme difficulty in establishing the requisite due diligence. If the crime required proof of mens rea, the absence of a CCP would be important evidence towards the establishment of the requisite degree of blameworthiness discussed above.

(vii) Specific Corporate Offences

The Law Commission has proposed that a new offence of "corporate killing" be introduced into English law (Law Com No.237). This offence, discussed above, would constitute a separate species of manslaughter that could only be committed by companies. In this way problems associated with the ascertainment of corporate culpability, such as proof of intention or recklessness, can be overcome by special definitions only applicable to companies. If the arguments canvassed above relating to corporate mens rea are accepted, there is, of course, no need for special corporate offences. The general principles can be applied. Indeed, there are strong arguments that such general law should be applied. The danger with the Law Commission's proposals is that they could lead to a marginalisation of corporate manslaughter. The offence would not be regarded as serious as "real" manslaughter and much of the law's censuring and symbolic role would be defeated. At present, many companies that kill their employees or members of the public find themselves prosecuted under the Health and Safety at Work Act 1974. The different structure of these offences has led to a perception that these are little more than regulatory offences. Corporate crime is not "as bad" as "real" crime (Clarkson 1996, pp.558-560). For similar reasons, Gobart's proposals (Gobert 1994) for creating corporate offences focusing on the creation of risks likely to lead to serious harm would fail, in fair labelling terms, to communicate the seriousness of corporate crime.

5. Conclusion

The argument in this paper has been that the widely-accepted mechanisms adopted, or canvassed, by English law for the establishment of corporate culpability are both theoretically and practically defective. Companies should be prosecuted and convicted for the same general offences as individuals and subject to the same general rules for the construction of criminal liability. The law should recognise and give effect to the widely-held public perceptions that companies have an existence of their own and can commit crimes as entities distinct from the personnel comprising the company. The best method of assessing whether a company possesses the requisite degree of blameworthiness is through adoption of the corporate mens rea doctrine. While this inevitably will raise problems of how to assess policies and procedures to ascertain whether they reflect the requisite culpability, such a task is not impossible. The answers might not be easy, but at least this approach involves asking the right questions.

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(1) Kite and Others, The Independent, 9 December 1994; Jackson Transport (Ossett) Ltd , Health and Safety at Work, November 1996, p.4.
(2) The HSE role in enforcing the criminal law is, of course, secondary to its role of adopting a compliance strategy and bringing enforcement actions (see Baldwin1995, pp.125-192). However, the fact that it possesses powers of criminal enforcement in the last resort clearly gives it extra "clout" (see Clarkson 1995, p.115).
(3)Op cit, n 1.
(4) Definitions of "small" companies vary. The Health and Safety Commission estimates there are 3.5 million businesses in the UK employing fewer than 50 people and these firms account for 45% of private sector employment (Health and Safety Commission, Newsletter, December 1996, p.2). Freedman (1994, p.567) cites Government estimates using the definition of "small" in the Companies Act 1985, s249(3) that 90% of all companies are "small".
(5) The present author has argued elsewhere that companies can be regarded as culpability-bearing moral agents (Clarkson 1996). These arguments will not be repeated here. For a contrary view, see Sullivan 1996.
(6) Dunford and Ridley (1996, p.6) point out how the media coverage in Kite led to the introduction of the Activity Centres (Young Persons' Safety) Act 1995.
(7) Tesco Supermarkets Ltd v Nattrass [1972] AC 153.
(8) Sullivan does, however, go on to criticise the identification doctrine in its present form.
(9) United States v Bank of England 821 F. 2d 844 (1st Cir. 1987).
(10) R v HM Coroner for East Kent, ex p Spooner and Others (1989) 88 Cr App R 10.
(11) See, for example, National Rivers Authority v Alfred McAlpine Homes East [1994]4 All ER 286 (pollution) and British Steel plc [1995] ICR 586 (health and safety).
(12) Tesco Stores Ltd v Brent LBC [1993] 2 All ER 718. See Wells, 1994.
(13) Seaboard Offshore Ltd v Secretary of State for Transport [1994] 2 All ER 99.
(14) Council of Europe, Liability of Enterprises for Offences, recommendation No R (88) 18 (1990) pp 6-7. Sullivan proposes a similar solution but he would limit the due diligence defence to "non-regulatory offences that carry a stigma" (Sullivan 1996, p.544).
(15) Criminal Code Act 1995. See Rose 1995; Wells 1996, pp.552-553.
(16) This argument is developed in Clarkson 1996,pp.566-569.
(17) However, they have been used on at least two occasions to determine whether a company is liable for the actions of its agents. See Huff 1996, p.1253.
(18) These Guidelines became effective on 1 November 1991.
(19) Sentencing Guidelines, art. 8C2.5 (f). In order to achieve a sentence reduction, the Guidelines list seven criteria that need to be complied with: (1) policies (2) responsibility at high level (3) integrity review (4) effective communication (5) auditing system (6) consistent enforcement (7) meaningful follow-through (Ragozino 1995,p.451, fn 178; Huff 1996, p.1268, fn 76).

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