Corporate Irresponsibility
Irresponsible corporate behaviour can result in harm to individuals, to communities and to the environment. Society tries to protect itself from harm by setting rules for behaviour that everyone agree to abide by as part of living in a society. The price of peaceful co-existence is partial relinquishing of individual freedom.
Rules of behaviour can be formal and written, or informal and unwritten.
Historically, where there is a potential for harm, society has
formalised rules of behaviour into legislation and regulation. Amongst
other things, corporate law institutionalises rules that seek to prevent
corporate irresponsibility, to prevent corporations from doing harm.
In extreme cases, irresponsible corporate behaviour has resulted in
horrific deaths and injuries, extensive environmental damage, or major
economic failures that ruin livelihoods and wreck whole communities.
For example:
In 1984, in the world’s worst corporate disaster, 2,000 people were killed and over 200,000 injured when poisonous gas escaped from a Union Carbide factory in Bhopal, India. Legal proceedings involving the case continued until 1991, when a settlement for US$470 million was reached between Union Carbide and the Indian Government.
In 1987, nearly 200 people died when the Herald of Free Enterprise car ferry rolled and sank in shallow water off the coast of Holland. Despite a damning report from the investigating team, the corporation that owned the ferry avoided being found guilty of manslaughter because of limitations inherent in the relevant law.
In 1998, two people were killed and eight seriously injured when part of an Esso oil refinery exploded at Longford in Victoria, Australia. As a result of the explosion, the entire state of Victoria was without continuing gas supplies for two whole weeks and the company faces a class action by consumers and employers of more than $1bn. Despite an adverse finding by a Royal Commission, Esso continues to deny responsibility, blaming the workers involved for not following procedures.
In 1999, two people died and over a hundred became seriously ill after visiting a newly constructed aquarium in Melbourne, Australia. Legionnaire’s Disease was found in the building’s air-conditioning system. Patronage of the tourist attraction was seriously undermined and the contracting company that installed the system has been since been liquidated under questionable circumstances.
Causes of Corporate Irresponsibility
The causes of corporate irresponsibility are difficult to determine precisely. Irresponsible behaviour can be intentional or unintentional, the result of an act of commission or an act of omission, and taken by the corporation as a whole or by an individual manager. Preventing irresponsible corporate behaviour is therefore not straightforward.
If the behaviour is intentional, then some form of punishment is considered appropriate in a society that respects the rule of law. Punishment is assumed to send a message to other would-be transgressors that society will not tolerate such behaviour. If the behaviour is unintentional, the principle of fairness suggests awareness-raising and education is more appropriate, at least in the first instance.
The results of irresponsible behaviour may be the same whether they are caused by an act or by failing to act. The largely symbolic Australian Criminal Code makes it clear blame is attributable whether an act of harmful conduct is intentionally committed or whether there is simply implicit authorisation of harmful conduct due to tolerating a culture of non-compliance with appropriate standards. The Code also makes it clear corporations can be held liable as a whole, just as can individuals.
Preventing Corporate Irresponsibility
In trying to address the causes of corporate irresponsibility, the Australian Criminal Code focuses on systems of management. It suggests irresponsible conduct can be attributed to inadequate management, control and supervision, or a failure to provide adequate information. Consequently, the remedy should focus on improving internal management systems and on adequate training of those who need to know.
This philosophy is evident in the field of health and safety at work. Since publication of the influential Robens Report on Occupational Health and Safety in the UK in 1972, the dominant approach to managing occupational health and safety has shifted away from direct government prescription of standards towards greater self-regulation. While safety at work has improved over the last few decades, the ‘system’ approach is not without its critics. For example, the causes of individual workplace injuries are not the same as the causes of system failures, and require a different remedy – see Uren, May 2000.
Other strategies for preventing corporate irresponsibility include voluntary codes of conduct by whole industries (for example, the Responsible Care initiative) and by individual companies; instituting systems of auditing; encouraging whistle blowing; improving corporate governance policies and practices; encouraging transparency of information and public reporting; and supporting the role of an investigative media.
In Britain, a group of survivors and relatives of those who died in disasters formed the Disaster Action group have lobbied the British Government to introduce stronger regulations and penalties for corporations guilty of irresponsible behaviour. To date, the Government seems inclined to accede to the extent of introducing the new crime of ‘corporate killing’. See also the Centre for Corporate Accountability
References
Centre for Corporate Accountability
Health and Safety Management Systems, Uren, May 2000