Clough, Jonathan --- "Will the Punishment Fit the Crime? Corporate Manslaughter and the Problem of Sanctions" [2005] FlinJlLawRfm 5; (2005) 8(1) The Flinders Journal of Law Reform 113
WILL THE PUNISHMENT FIT THE CRIME? CORPORATE MANSLAUGTER AND THE PROBLEM OF SANCTIONS
JONATHAN CLOUGH[†]
I INTRODUCTION
Over recent decades there have been repeated calls for, and promises of, a new offence of ‘corporate’ or ‘industrial’ manslaughter. That is, a homicide offence which applies specifically to workplace deaths. Although such an offence has been proposed or recommended in the United Kingdom,[1] Victoria,[2] Queensland,[3] New South Wales[4] and the Commonwealth,[5] it was the Australian Capital Territory which, in 2003, became the first jurisdiction to enact a specific offence of ‘industrial manslaughter’.[6]
There is some ambiguity in the terms ‘industrial’ and ‘corporate’ manslaughter.[7]
For example, ‘industrial manslaughter’ may suggest a homicide offence which applies only in a workplace context; while ‘corporate’ manslaughter may suggest an offence where the defendant is a corporation. The focus of this article is on ‘corporate manslaughter’ in this latter sense. That is, those situations where it is the corporation which is prosecuted. The push for such an offence has broadly been driven by three factors. First, workplace deaths are not generally treated as homicides, but fall within the general duty provisions under workplace safety laws which impose liability for failing to ensure a safe workplace. As the seriousness of the breach is not measured by the consequences of that breach,[8] it is argued that these offences do not adequately reflect the gravity of a breach which leads to the death of an employee.[9] Secondly, where manslaughter prosecutions are brought against corporations, they generally fail except in relation to small companies.[10] Thirdly, there is recognition that the penalties for workplace safety prosecutions are generally inadequate; both in terms of the size of the financial penalties imposed, and the range of penalties available.[11]
The creation of an offence of corporate manslaughter seeks to address all three issues by providing for a workplace homicide offence that facilitates the prosecution of corporations and imposes increased and more effective penalties. It is the third issue, sanctions, which is the focus of this article.[12]
This article begins with a brief overview of the place of an offence of corporate manslaughter within the broader framework of occupational health and safety laws. Such an offence is really an extension of workplace safety regulation generally, and it is argued the need for innovative corporate sanctions applies equally to all offences under workplace safety legislation. There is then a discussion of why it may be desirable to prosecute corporations and how sentencing goals may be achieved in a corporate context. It is argued that these objectives can only be achieved with a range of sentencing options aimed at corporate defendants and these options are then discussed. The conclusion drawn is that the current focus on corporate manslaughter should not distract attention from the recognised need for sentencing reform in relation to workplace safety offences generally.
II THE ROLE OF CORPORATE MANSLAUGHTER IN OCCUPATIONAL HEALTH AND SAFETY LAW
Although varying in their scope,[13] it is clear that the proposed offences all relate to deaths occurring in a workplace context. In order to understand the role of sanctions in relation to corporate manslaughter, it is therefore necessary to understand the role of such an offence in the broader context of workplace safety.
In structure, the regulation of occupational health and safety broadly follows the regulatory pyramid advocated by Fisse and Braithwaite.[14] That is, self-regulation forms the base of the pyramid with a series of increasingly coercive and severe sanctions forming the remaining layers. In this way, voluntary compliance is supported by a desire to avoid the legal consequences which lie further up the pyramid. For example, a workplace safety incident may first be resolved by negotiation.[15] If the issue is not resolved, other more coercive measures may be adopted such as compliance agreements and enforceable undertakings,[16] infringement/penalty notices,[17] improvement/prohibition notices[18] and injunctions.[19]
Criminal prosecution occupies the apex of the pyramid, representing society’s condemnation and exerting downward pressure on the other measures. However if the risk of prosecution is remote, or the threat of criminal sanction is weak, then a vital component of the regulatory pyramid is absent.[20]
‘Rigorous enforcement, and a real threat of prosecution for breach, must always play a fundamental part in ensuring compliance.’[21]
However, the introduction of more serious criminal offences is insufficient unless accompanied by more effective sanctions.
The offence of corporate manslaughter should therefore not be seen in isolation. It is, in effect, an extension of the pyramid already in place and is consistent with calls for greater and more effective use of occupational health and safety prosecutions.[22]
However, despite clearly being a component of workplace safety regulation, all of the proposals to date have placed the offence within the general criminal statutes, rather than within occupational health and safety legislation. While this clearly demonstrates the criminality of the offence, it has the effect of divorcing corporate manslaughter from the broader regulation of workplace safety. Not only may this exacerbate the existing perception that occupational health and safety offences are not ‘real’ crimes,[23] it has the potential to create a bifurcated system of penalties. That is, innovative sanctions aimed at corporate offenders may apply to the offence of corporate manslaughter, but not to other workplace safety offences, or vice versa.
There would appear to be no cogent reason why such sanctions should be applied to an offence of corporate manslaughter, which is reactive in nature, and not to other occupational health and safety offences which precede death or injury.[24] It is therefore important to ensure that there is consistency between the sanctions which may be imposed for workplace safety offences and those which may be imposed in respect of corporate manslaughter. Indeed, it is strongly arguable that the general sentencing statutes should be reformed so that they contains a range of sentencing options for corporate offenders, irrespective of the nature of the offence.[25]
III THE PURPOSE OF PROSECUTING CORPORATIONS
Unlike other areas of corporate regulation, workplace safety breaches are often subject to criminal prosecution rather than civil enforcement action, with corporations commonly the target of those prosecutions.[26]
It is therefore important to understand why corporations may be seen as a suitable subject for prosecution.[27]
The most obvious reason is that corporations are, by their nature, collective enterprises and it will often be the case that a criminal offence cannot be established against an individual employee or officer.[28]
More fundamentally, and irrespective of individual fault, prosecuting the corporation may be the most effective and efficient way to produce change in corporate behaviour. Given the transient nature of individuals within a corporation, punishing individuals may have little or no impact on the corporate culture which gave rise to the offending in the first place.[29] In contrast, punishment of the corporate entity may produce more lasting change by providing an incentive for the corporation to monitor its own processes and utilise its own internal policing mechanisms.[30] This is consistent with the ‘systems’ approach to workplace safety[31] and addresses the fact that workplace deaths are often due to systemic failures within the corporation itself rather than, or in addition to, individual fault.[32] It is therefore apparent that in order to be effective, sanctions aimed at corporate offenders must address the need for organisational change.
Before turning to consider the types of sanctions that might be imposed on corporate defendants it is necessary briefly to address two key issues. First, how traditional sentencing goals apply to corporate defendants. Secondly, how corporations respond to sanctions.
A Sentencing Goals and Corporate Defendants
Discussions surrounding the implementation of corporate manslaughter laws have tended to focus on the retributive nature of criminal punishment, and retribution or ‘just deserts’ is clearly an important factor for many judges in the context of workplace safety offences.[33]
While this focus is understandable, particularly in the context of a homicide offence, it is argued that retribution should be an irrelevant factor in the sentencing of corporations.
Retribution is used here to describe punishment which is calculated upon what is deserved rather than what is necessary as a matter of utility.[34]
To say that the punishment of corporations should not be retributive is not to ignore the justifiable feeling of many people that corporations deserve punishment, nor to deny that a company may be blameworthy in its own right. While it is accepted that corporations should be punished, the inescapable fact is that retribution cannot be exacted in any meaningful way where the offender is a corporation. By its very nature the corporate entity does not, and cannot, suffer or feel shame.[35] While the criminal law clearly has an important educative role, both in reflecting the seriousness of an offence and shaping public perception,[36] it is suggested that this is more appropriately considered in the context of deterrence rather than denunciation.
Accordingly, the approach taken in this article is that the punishment of corporations for corporate manslaughter, or indeed for any workplace safety offence, is utilitarian in nature. The objective to be achieved is to help ‘secure the health, safety and welfare of persons at work,’[37] the assumption being that this can be achieved by ensuring compliance with the legislation.[38]
The relevant sentencing aims are those of deterrence and rehabilitation, both of which may equally be applied to corporate offenders.[39]
For example, the imposition of a fine may cause a corporation to avoid certain conduct in the future, and may also cause other corporations to avoid similar behaviour, thereby achieving specific and/or general deterrence. The sanction may induce the corporation to change its internal structures and procedures to ensure future compliance with the law and in this way the corporation can be said to have been rehabilitated.[40]
B The Impact of Sanctions on Corporate Behaviour
If the purpose of punishing a corporation is to rehabilitate and to deter, then it is necessary to have some understanding of the way in which corporations are likely to react to punishment. The traditional corporate sanction, the fine, fits well within a neo-classical economic model of corporate behaviour.[41] Such theories see the corporation as a rational actor which engages in a cost-benefit analysis. That is, a corporation will avoid criminal behaviour where the expected costs of the crime exceed the expected benefits.[42]
The costs associated with committing a crime are, in essence, the likely penalty to be imposed and the likelihood of being caught and successfully prosecuted. The benefits of such conduct may be tangible; for example, financial reward, or intangible; such as increased corporate prestige. The role of the criminal law is thereby reduced to increasing the costs of unlawful conduct to such an extent that the benefits are outweighed.[43]
While some corporate behaviour may no doubt be reduced to a cost-benefit analysis, its general application is unrealistic.[44] It sees the corporation as a ‘rational actor’ behaving in a similar way to individual decision makers, and ignores the complexities of organisational behaviour. Corporations will not always act rationally and the cost-benefit calculations posited are extremely artificial, requiring monetary values to be attached to the various costs and benefits associated with the particular activity and the probability of detection and prosecution to be calculated.[45]
In contrast, behavioural theorists recognise that a corporation is made up of human actors with their own agendas and interests.[46] Such theories recognise that corporations develop an internal sociology of their own which impacts upon the behaviour of individual personnel. This ‘corporate personality’ or ‘corporate culture’ is seen both formally, in the company’s policies and procedures, but also informally. It is a dynamic process with the corporate culture affecting the actions of individuals, and the actions of individuals affecting the corporate personality. Corporate culture may exist independently of individual employees or officers and may continue to exist despite changes in personnel.
The potential for a criminal culture to develop within a corporation is exacerbated where there is a disjunction between the interests of individual managers or employees and the interests of the corporation. This is particularly so where a corporation is divided into largely autonomous divisions and the control of the board is concerned primarily with budgetary matters and strategic planning, the implementation of these directions being left to management of the particular division.[47]
For example, while a corporation may outwardly claim to be concerned with occupational health and safety, if the pressure on individual managers is to meet unrealistic financial or time pressures, then there may be a temptation for corners to be cut and worker safety compromised.
IV SENTENCING OPTIONS FOR CORPORATE OFFENDERS
What we learn from both models of organisational behaviour is that a multi-faceted approach to sentencing corporations is required. For a company to be rehabilitated or deterred, the penalties must address the peculiarities of corporate structures. Economic theory tells us that we must increase the costs, both tangible and intangible, of engaging in illegal conduct so that it outweighs the benefits. Further, contrary to economic theory, a corporation will not always act rationally and more complex factors may be at work than a simple cost/benefit analysis would suggest. Behavioural theory tells us that we must also consider the individuals within the corporation and ensure that they are deterred as well as adequately supervised. There is a need to ensure alignment between the interests of the corporation and its employees and a more sophisticated approach to sentencing is required if such behaviour is to be addressed.
As with individual offenders, there is clearly a need for sentencing judge to be able to draw upon a range of sanctions, targeted at corporate defendants, in order to achieve sentencing objectives relevant in the particular case.[48]
We will now consider the various sentencing options which could be imposed.
A Fines
In large measure, the hostility directed towards cases dealing with workplace deaths has been at the fines which have been imposed. Even if significant for a workplace safety offence, they often seem derisory both in relation to the fact that a worker has been killed, and also in comparison to the wealth of the corporate offender. For example, the $2,000,000 fine imposed on Esso Australia Pty Ltd, the largest for a workplace offence in Australian history, must be seen in the context of a corporation which, it was reported, was earning approximately $1,000,000 per day from its Bass Strait operations[49] and whose parent company, Exxon Mobil Corp, reported net income for the previous year of just under $US18 Billion.[50] The deterrent effect of a fine will therefore vary greatly with the size and nature of the corporation. Larger companies are obviously more able to absorb large financial penalties, and are also better able to quarantine risky enterprises in under-capitalised subsidiaries. There is therefore a danger that for some corporations a fine will simply be seen to be a cost of doing business; a ‘public morality tax’.[51]
It has long been recognised that fines for occupational health and safety offences are low, particularly in comparison to the maximum penalty prescribed in the legislation.[52]
The maximum fine which may be imposed on a corporation for breach of the general duty provisions varies from $500,000 in New South Wales to $100,000 in South Australia.[53]
In Victoria, the average fine imposed for a breach of the general duty provision in the Magistrates Court in 2002/2003 was $17,947, while in the County Court it was $38,100.[54] Although a common response is to simply increase the maximum penalties applicable, for a number of reasons it is questionable whether this alone will have the desired outcome.
First, sentencing is a complex process, and there are a range of factors which contribute to the apparently low fines for workplace safety offences.[55] In particular, sentencing judges are bound by the principle of proportionality which states that the punishment ‘should never exceed that which can be justified as appropriate or proportionate to the gravity of the crime considered in the light of its objective circumstances’.[56] Penalties at, or approaching the maximum, will generally apply to only the most egregious offences, where the offender shows little or no remorse, and has a prior history of offending. Therefore, simply increasing the maximum fine applicable does not necessary result in fines approaching that maximum.[57]
In addition, workplace offences are commonly tried in the Magistrate’s/Local Court and are therefore subject to the jurisdictional limits of the court, irrespective of the maximum penalty prescribed. In contrast, corporate manslaughter offences would be tried in the County/District or Supreme Court and would therefore not be subject to such limitations.
There is also the general sentencing principle that a fine greater than that which is warranted by the gravity of the offence should not be imposed because of the wealth of the offender. That is, the penalty is proportionate to the offence and not to the wealth of the offender.[58] Consequently, although capacity to pay is a relevant factor in determining an appropriate penalty, it can only act as a mitigating and not an aggravating factor. Whatever merit such a principle may have in respect of individual offenders, it is questionable whether it should apply to corporate offenders where the threat of imprisonment is not available as a last resort. It is arguable that, at least in the case of corporate offenders, the defendant’s financial capacity should be taken into account even where this has the effect of increasing the amount of the fine.[59] This would also require the sentencing judge to be presented with detailed financial information about the company, which is not necessarily the case.[60]
In addition, given the enormous range in liquidity of corporate defendants, it is arguable that there should be some mechanism for adjusting the size of the relevant maximum according to the relative size of the corporation. For example, the level of fine could be based on a percentage of assets, revenue, or profit.[61]
Even assuming that sentencing judges would be prepared to impose fines approaching these maxima, the maximum fine that can meaningfully be imposed is limited by the wealth of the corporate offender; what has been described as the ‘deterrence trap’.[62]
Unlike individuals where there may be other options such as imprisonment, once a certain monetary level is reached the company will become insolvent and the fine will likely go unpaid. While it is generally recognised that large penalties are necessary in order to deter large corporations, the difficulty lies in imposing a sufficiently large fine to influence the management and/or shareholders of a company to exercise control, while not being so large as to cripple it.
Even where a company is able to absorb a large fine, there is the problem of ‘overspill’. Fines, unlike other penalties, need not be discharged personally and in the case of corporations this ability to pass on the burden has significant consequences. The burden does not fall upon managers of the company who may be in a position to effect organisational change. Instead, the cost of the fine may be passed on to:
• shareholders due to reduced share price;
• creditors due to reduced capital of the company increasing credit risk;
• employees if the fine is severe enough to result in cutting of staff; and
• consumers through increased prices.[63]
Of these, it is the impact on individual officers or employees and their families which can be truly devastating and which is likely to have the greatest limiting effect on the size of penalty imposed. Job losses will generally be an unacceptable consequence of large corporate penalties, and serves to reinforce the need for a range of alternative sanctions.[64]
Even if these limitations were to be remedied, fines are a blunt instrument for encouraging corporations to achieve internal change and prevent future offending. The corporation is simply required to pay the fine, and whether this will result in structural change, the scapegoating of individuals or have no effect at all is entirely up to the corporation. There is therefore a need for a range of sanctions which are better able to achieve sentencing objectives in relation to corporate defendants.
B Adverse Publicity
One of the arguments in favour of introducing an offence of corporate manslaughter is that it brings the stigma of a homicide offence to the conviction. As with individual offenders, the stigma of a criminal conviction may have significant deterrent effect, both specific and general, and may encourage rehabilitation.[65] This recognises the fact that the ‘cost’ of engaging in certain conduct may be measured in different ways. While a direct monetary penalty is the most obvious way of increasing the costs to a corporation of engaging in criminal conduct, for many large corporations their public image is extremely valuable, making them particularly vulnerable to the stigma of criminal conviction.
The strongest motivator identified by research is the fear that the adverse publicity, loss of confidence and regulatory attention subsequent to a serious incident will cause curtailment of operations, imposition of additional costs, loss of corporate credibility and loss of business/interruption of operations.[66]
What is advocated here is not adverse publicity which is incidental to conviction, but rather publicity as a formal court-ordered sanction designed to have a punitive impact upon the corporation.[67]
Such provisions are now found in a number of Acts in Australia, most relevantly for our purposes in the Crimes Act 1900 (ACT) in relation to the offence of industrial manslaughter.[68] Under s 49E(2), in addition to any other penalty, a corporation found guilty of industrial manslaughter may be ordered to
(a) take any action stated by the court to publicise—
(i) the offence; and
(b) take any action stated by the court to notify 1 or more stated people of the matters mentioned in paragraph (a).[69]
(ii) the deaths or serious injuries or other consequences resulting from or related to the conduct from which the offence arose; and
(iii) any penalties imposed, or other orders made, because of the offence;
The punitive effects of adverse publicity are likely to be greatest in relation to offences such as corporate manslaughter which are clearly perceived as criminal. One can easily imagine the likely deterrent effect of a major corporation being required to advertise, perhaps in newspapers or on television, the fact that it has committed corporate manslaughter and was thereby responsible for the deaths of its employees. Alternatively, it could be required to publish a notice in its annual report or distribute a notice to shareholders of the corporation.[70]
The impacts of adverse publicity on a corporation may arise in a number of ways.[71]
It may inflict monetary loss upon a corporation by reducing sales of its product or reducing its share value. This impact could be further enhanced by requiring the corporation to specify all of the brands which it owns, as often the name of the parent company is not well-known to consumers.
More significantly, perhaps, are non-financial impacts such as negative impact on corporate prestige and standing in the market. Such impacts may be of more concern to some companies than a direct financial loss because of the associated loss of personal prestige to many officers and employees. These are likely to fall most heavily on senior personnel who will often have a greater interest in corporate reputation than other employees. Such sanctions may therefore have a greater chance of producing internal reforms. Adverse publicity may also have a general deterrent effect upon other corporations which would not wish to see their reputation tarnished in a similar way.
The principal criticism of adverse publicity orders is that, by their very nature, they are unpredictable in their effect as it is impossible to know in advance how the market will respond.[72]
However, this is true of all sentencing options. Unpredictability does not preclude us from sentencing individuals and nor should it stop us from sentencing corporations. There is no suggestion that adverse publicity orders be mandatory. However, in those cases where they are likely to have a deterrent effect, either general or specific, they are an appropriate sanction notwithstanding a degree of unpredictability.
C Corporate Probation
It has already been noted that workplace deaths are often due to a systemic failure within the organisation, rather than the fault of an individual.[73] The sanctions discussed so far, if they are to have any rehabilitative effect at all, leave it to the corporation to decide how it will respond to the sanction. In some cases, particularly serious offences involving death or serious injury, it may be desirable to enforce change by subjecting the corporation to a period of probation.
‘Probation’ is used here in a general sense to describe penalties which involve the offender agreeing to comply with certain undertakings and being subject to a period of supervision. When imposed on individuals, such conditions may range from a condition to be of good behaviour for a specified period, right up to treatment and other rehabilitative conditions. Equivalent sanctions may be imposed on corporations and if the corporation breaches the conditions imposed, it may be brought back for re-sentencing.
Corporate probation should be distinguished from other regulatory tools such as enforceable undertakings which may be negotiated with regulators.[74]
Although the defendant corporation should of course be heard on the matter of sentence, corporate probation is a criminal sanction and not a negotiated undertaking. In general, the conditions of corporate probation fall into one of two categories; remedial or rehabilitative.
1 Remedial Conditions
Remedial conditions are those conditions which are imposed on a corporation in order to ensure that adequate reparations are made. That is, rather than simply imposing a fine, the corporation is required to undertake remedial action.[75]
It is apparent that in many cases a corporation is in a better position than an individual to ‘make amends,’ a view adopted by the United States Sentencing Commission which states that, as a general principle, an organisation should be required to take all appropriate steps to provide compensation to victims and otherwise remedy the harm caused or threatened by the offence.[76]
While the imposition of remedial conditions has obvious application in the context of environmental damage, where the corporation may have sufficient resources and expertise to carry out clean-up work, its application in the context of workplace safety offence is less clear. The conditions imposed are likely to be less concerned with making reparation for the particular harm caused, than with requiring the corporation to engage in activities which are of broader community benefit. For example, engaging in an education campaign relating to workplace safety or being required to ‘develop and operate a community service.’[77] This raises the important question of whether remedial conditions should only be imposed where they are necessary to repair the harm caused by the offence.
There is arguably some symbolic significance in a corporate defendant engaging in such activity and it may appear, at least superficially, to ensure that the corporation puts something back into the community. However, where the sanction does not relate to making reparations it is, in effect, an alternative monetary penalty. This argument was persuasively stated by the United States Sentencing Commission which stated that, unlike an individual, a corporation
can perform community service only by employing its resources or paying its employees or others to do so. Consequently, an order that an organization perform community service is essentially an indirect monetary sanction, and therefore generally less desirable than a direct monetary sanction. However, where the convicted organization possesses knowledge, facilities, or skills that uniquely qualify it to repair damage caused by the offense, community service directed at repairing damage may provide an efficient means of remedying harm caused.[78]
While it may be argued that by being required to carry out the work itself the punishment is then internalised within the organisation and this may in turn have a greater impact on organisational change than a fine,[79] it is an extremely imprecise way of effecting such change. Even if employees of the company are involved in discharging the conditions, it is doubtful whether they will be the appropriate employees in terms of organisational change. More likely is the scenario that management will simply insulate itself from the effect of the penalty with work being passed on to innocent employees. There is also the concern that the corporation may derive positive publicity from the work, although this may be addressed through the use of adverse publicity orders.[80]
The contrary position has been adopted in Crimes Act 1900 (ACT) section 49E(2)(c) which provides that in relation to industrial manslaughter offences, the court may order the corporation, in addition to any other penalty, to do stated things or establish or carry out a stated project for the public benefit ‘even if the project is unrelated to the offence’.[81] Failure to comply with such orders without reasonable excuse may, in addition to contempt proceedings, result in the Commissioner for Occupational Health and Safety making application for authorisation to complete the order so far as is practicable and to publicise the corporation’s failure to comply.[82]
2 Rehabilitative Conditions
Of potentially greater significance in relation to workplace failures resulting in death or serious injury are conditions which seek to ensure that ‘changes are made within the organization to reduce the likelihood of future criminal conduct’.[83]
Possible conditions suggested by the United States Sentencing Guidelines include:
• developing and submitting to the court a program to prevent and detect violations of law, including a schedule for implementation;
• notification of the corporation’s employees and shareholders of its criminal behaviour and its program to prevent and detect violations of law; and
• periodic reporting to the court or probation officer regarding the organisation’s progress in implementing the program to prevent and detect violations of law.[84]
A modest version is found in Occupational Health, Safety and Welfare Act 1986 (SA), section 60(2) which provides, in relation to continuing or repeat offences, that the court may, in addition to any penalty it may impose, order that person to take such steps as are specified in the order and within the time specified in the order to comply with the Act.
A more comprehensive example is found in Trade Practices Act 1974 (Cth), section 86C(2)(b) which provides that the court may order a person to be subject to a ‘probation order’, which is defined as an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order. It includes:
• an order directing the person to establish a compliance program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and
• an order directing the person to establish an education and training program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and
• an order directing the person to revise the internal operations of the person's business which lead to the person engaging in the contravening conduct.[85]
For such measures to be effective a number of factors must be taken into account and could be the subject of pre-sentence reports.[86] First, the cause of the offending must be defined as clearly as possible. For example there may be little point imposing such structural reforms if the offence was committed by a ‘rogue individual’. Secondly, the conditions imposed must be tailored to the particular organisation. Finally, there must be effective monitoring of compliance by the appropriate regulatory agency.[87] The idea of such intense scrutiny by a regulatory agency would no doubt have the additional benefit of acting as a considerable deterrent to other potential offenders.
Corporate probation, whether remedial or rehabilitative, has a number of advantages as a sanction. It is flexible and may be adapted to different offences and different corporations. It is more likely to induce organisational change and is therefore more likely to produce individual accountability because in changing its structures the corporation will need to address those individuals responsible for the offence. It may also play a role in raising community awareness of corporate crime.
The main disadvantage is the danger of excessive costs and intrusiveness into the operations of the company, particularly in the context of rehabilitative conditions. However while probation conditions may, in some cases, impose an unsustainable burden upon the corporation which is ultimately borne by others, in cases where the corporation would have difficulty paying a large fine the ability to discharge the penalty by way of community service or other conditions may be a desirable alternative.[88]
The potentially significant administrative difficulties and costs associated with this process could be reduced by requiring the corporation to investigate the offence internally, undertake disciplinary action and produce a satisfactory compliance report.[89]
Problems of overspill may also be addressed to some extent by provisions such as Crimes Act 1900 (ACT) section 49E(5) which provides that in imposing such a penalty,[90] the court must take into account, as far as practicable, the financial circumstances of the corporation and the nature of the burden that compliance with the order will impose.[91] Further, the total cost to the corporation of compliance with an order or orders in relation to a single offence must not exceed a prescribed maximum, including any fine imposed for the offence.[92]
D Incapacitation and Restraint
As outlined above, a principal rationale for the introduction of an offence of ‘corporate manslaughter’ is that it recognises certain workplace-related deaths as homicides, rather than as particularly grave examples of failing to ensure a safe workplace.[93] In the context of individual offenders, a conviction for homicide would ordinarily result in a sentence of imprisonment.[94] It could therefore be argued that the corporate equivalent of imprisonment should be imposed in respect of corporate manslaughter convictions.
While a corporation cannot be imprisoned in the literal sense, the essence of imprisonment is restraint[95] and there are a number of ways in which the business of a corporation may be restrained. For example:[96]
• ceasing certain commercial activities for a particular period and/or in a particular geographic region;
• revocation or suspension of licences;[97]
• disqualification from certain contracts, especially government contracts;[98] or
• freezing the corporations profits.
While it has been suggested that the period of incapacitation or restraint may be equivalent to the period of time for which an individual would be sentenced to imprisonment for the same offence,[99] it is argued that such an analysis is overly simplistic and potentially misleading. It seeks to find correlation between two incommensurables and perpetuates the notion that corporate sentencing is merely a shadow of individual sentencing. The period of imprisonment imposed upon an individual is determined by a synthesis of factors, together with reference to the established sentencing range, in order to achieve sentencing aims for the individual. This bears no relation to the period of restraint which should be imposed upon a corporation in order to achieve equivalent sentencing aims within a corporate context.
Given the gravity of the offence of corporate manslaughter, it may even be argued that the corporation should be subject to the corporate equivalent of capital punishment; that is, deregistration. This could be done indirectly, by stripping the corporation of all its assets,[100] or directly by formal deregistration. Although currently the rules relating to deregistration of a company in Australia are relatively limited and do not allow for deregistration of a company because of criminal conduct,[101] it would be possible to amend legislation to allow the court to order the relevant authority to institute deregistration proceedings upon conviction.[102]
However, the advantage of both sanctions is also their greatest disadvantage. While restraint of business is likely to have a considerable deterrent effect, and deregistration may have great symbolic appeal, the problem of overspill is likely to be considerable and, in the case of medium to large corporations, would often be too great to justify such sanctions.[103] In the context of smaller companies, there is little to be gained by deregistering the corporation unless some limitation is placed upon company officers to prevent them simply forming a new corporation; the so-called ‘Phoenix company.’[104] For example, Criminal Code Amendment (Workplace Death and Serious Injury) Bill 2004 (Cth) s 380.8 provides that where a person is found guilty of certain offences, the court may prohibit that person from acting as an officer of a corporation for a specified period of time. Such provisions could be modified to include a person who was a director of a corporation which was found guilty of a specified offence.
V CONCLUSION
The controversy surrounding the offence of corporate manslaughter should not distract attention from the fact that such an offence is merely the most serious of a range of workplace safety offences. All of these offences share the common goal of seeking to improve workplace safety through deterrence and rehabilitation. The implementation of these goals is unnecessarily hampered if sanctions imposed on corporations are inadequate or ineffective. There is broad recognition of the need not only for increased penalties, but also more effective sanctions aimed at corporate defendants.[105]
This is so irrespective of whether an offence of corporate manslaughter is enacted. Therefore one of the important consequences of this debate is that it may lead to much needed sentencing reform, thereby improving the effectiveness of workplace prosecutions.
[†] Senior Lecturer, Faculty of Law, Monash University. This article was originally presented as a paper at the Industrial and Corporate Manslaughter Seminar, University of South Australia, 12 March 2004. It is based, in part, on Jonathan Clough and Carmel Mulhern, The Prosecution of Corporations (2002) ch 5.
[1] Home Office, Reforming the Law on Involuntary Manslaughter: The Government’s Proposals (2000). Despite repeated Government assurances, there are still doubts as to whether legislation will ultimately be passed in the United Kingdom. For a useful summary of the current situation, see the Centre for Corporate Accountability: <http://www. corporateaccountability.org/Updates/ manslaughter.htm> .
[2] Crimes (Workplace Deaths and Serious Injuries) Bill 2001. This Bill was ultimately defeated in the Legislative Council and the Government has indicated it does not intend to introduce new legislation; see Chris Maxwell QC, Occupational Health and Safety Review (2004) 356.
[3] Department of Justice and Attorney-General, Dangerous Industrial Conduct, Discussion Paper (2000). The issue is also being considered by the Tasmanian Law Reform Institute: <http://www.law.utas.edu.au/reform/work_in_progress.html#corpmans> .
[4] New South Wales Parliament Legislative Council General Purpose Standing Committee No 1, Serious Injury and Death in the Workplace (2004) 144.
[5] Although The Greens have introduced the Criminal Code Amendment (Workplace Death and Serious Injury) Bill 2004 (Cth), the current Federal Government is opposed to an offence of industrial manslaughter, as demonstrated by the Occupational Health and Safety (Commonwealth Employment) Amendment (Promoting Safer Workplaces) Bill 2004 (Cth) which seeks to exclude the operation of industrial manslaughter laws to the extent that they apply to the Commonwealth.
[6] Crimes Act 1900 (ACT) pt 2A. These provisions commenced 1 March 2004; Crimes (Industrial Manslaughter) Act 2003 (ACT) s 2.
[7] General Purpose Standing Committee No 1, above n 4.
[9] Although in some cases a greater penalty may be imposed where the breach causes death; see, for example, Occupational Health and Safety Act 1989 (ACT) s 49 and Workplace Health and Safety Act 1995 (Qld) s 24.
[10] Perhaps the most well-known example was the failed prosecution of P&O European Ferries in relation to the sinking of the Herald of Free Enterprise; R v HM Coroner for East Kent; Ex parte Spooner (1989) 88 Cr App R 10 and R v P&O European Ferries (Dover) Ltd (1991) 93 Cr App R 72. Also see Attorney-General’s Reference (No 2 of 1999) [2000] EWCA Crim 91; [2000] QB 796 and R v AC Hatrick Chemicals Pty Ltd (Unreported, Supreme Court of Victoria, Hampel J, 29 November 1995).
[11] Richard Johnstone, Occupational Health and Safety, Courts and Crime (2003) ch 6. Also see Maxwell, above n 2, 363, Department of Justice and Attorney-General, above n 3, 1 and 7, Robert Laing, Review of the Occupational Safety and Health Act (WA), Final Report, (2002) 135, Department of Industrial Relations (Qld), Review of the Workplace Health and Safety Act 1995, Issues Paper (2001) 19–20, General Purpose Standing Committee No 1, above n 4, 149.and Brian Stanley, Review of Workers Compensation and Occupational Health, Safety and Welfare in South Australia (2002) vol 3, 115–16.
[12] For a more general discussion of the role of corporate manslaughter see Celia Wells, Corporations and Criminal Responsibility (2nd ed, 2001) ch 6 and Karen Wheelwright, ‘Corporate Liability for Workplace Deaths and Injuries — Reflecting on Victoria’s Laws in the Light of the Esso Longford Explosion’ (2002) 7 Deakin Law Review 16.
[13] While some apply to deaths of employees only (Crimes Act 1900 (ACT) ss 49C and 49D, Crimes (Workplace Deaths and Serious Injuries) Bill 2001 (Vic) ss 13, 14 and 14C and Criminal Code Amendment (Workplace Death and Serious Injury) Bill 2004 (Cth) ss 380.4, 380.5 and 380.7), others extend to deaths of members of the public: Department of Justice and Attorney-General, above n 3, 11 and draft Involuntary Homicide Bill, Home Office, above n 1, Annex.
[14] Brent Fisse and John Braithwaite, Corporations, Crime and Accountability (1993) 85–87. The application of this theory in the context of workplace safety is discussed in detail in Neil Gunningham and Richard Johnstone, Regulating Workplace Safety: System and Sanctions (1999) ch 6.
[15] For example, Occupational Health and Safety Act 1985 (Vic) s 26.
[16] Occupational Health and Safety Act 1989 (ACT) div 7.3 and 7.6 and Workplace Health and Safety Act 1995 (Qld) pt 5.
[17] Occupational Health and Safety Act 2000 (NSW) s 108 and Workplace Health and Safety Act 1995 (Tas) pt 6A.
[18] Occupational Health and Safety Act 1989 (ACT) divisions 7.4 and 7.5, Occupational Health and Safety Act 2000 (NSW) pt 6, Work Health Act (NT) pt IV division 1, Occupational Health, Safety and Welfare Act 1986 (SA) pt 6, Occupational Health and Safety Act 1985 (Vic) pt 6 and Occupational Safety and Health Act 1984 (WA) pt VI.
[19] Occupational Health and Safety Act 1989 (ACT) division 7.7.
[20] Gunningham and Johnstone, above n 14, 201–06.
[22] Johnstone, above n 11, 184.
[23] Richard Johnstone, ‘From Fiction to Fact-Rethinking OHS Enforcement’ (Working Paper No 11, National Research Centre for OHS Regulation, 2003) 45–46.
[24] Ibid 42–43.
[25] Jonathan Clough and Carmel Mulhern, The Prosecution of Corporations (2002) 220–21. Also see New South Wales Law Reform Commission, Sentencing: Corporate Offenders, Report No 102 (2003).
[26] Johnstone, above n 11, 103–05.
[27] Clough and Mulhern, above n 25, 4–9.
[28] Fisse and Braithwaite, above n 14, 36–41.
[29] M D Ermann and R J Lundman, ‘Corporate and Governmental Deviance’ in M D Ermann and R J Lundman (eds), Corporate and Governmental Deviance (1996) 5.
[30] Brent Fisse and John Braithwaite, ‘The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability’ [1988] SydLawRw 3; (1988) 11 Sydney Law Review 468, 489.
[31] Gunningham and Johnstone, above n 14, ch 2.
[32] See, for example, United Kingdom Department of Transport, MV Herald of Free Enterprise Report of the Court No 8074 (1987), Justice Richard, The Westray Story: A Predictable Path to Disaster (1997) and The Esso Longford Gas Plant Incident: Report of the Longford Royal Commission (1999).
[33] Johnstone, above n 11, 195.
[34] Fisse and Braithwaite, above n 30, 503.
[35] Glanville Williams, Textbook of Criminal Law (2nd ed, 1983) 974–75. It has been argued that to attempt to use criminal sanctions to morally condemn an amoral entity is reminiscent of ‘deodand’, the medieval practice of punishing animals and objects which had offended; see A W Alschuler, ‘Ancient Law and the Punishment of Corporations: Of Frankpledge and Deodand’ (1991) 71 Boston University Law Review 307, 312–13.
[36] Johnstone, above n 11, 194.
[37] Occupational Health and Safety Act 1995 (Vic) s 6(a).
[38] Johnstone, above n 23, 3.
[39] Although empirical evidence on deterrence in this context is ambiguous, it clearly has some effect and plays an important role in an ‘integrated and graduated enforcement response’; see Johnstone, above n 23, 14.
[40] Fisse and Braithwaite, above n 14, 32–34.
[41] See generally Richard Posner, Economic Analysis of Law (4th ed, 1992) and J T Byam, ‘The Economic Inefficiency of Corporate Criminal Liability’ (1982) 73 Journal of Criminal Law and Criminology 582.
[43] J C Coffee, '"No Soul to Damn: No Body to Kick": An Unscandalized Inquiry into the Problem of Corporate Punishment' (1981) 79 Michigan Law Review 386, 393.
[44] For a general critique of economic analysis and corporate criminal liability see J C Coffee, ‘Corporate Crime and Punishment: A Non-Chicago View of the Economics of Criminal Sanctions’ (1980) 17 American Criminal Law Review 419.
[45] Fisse and Braithwaite, above n 14, 88–92.
[46] For an excellent summary of organisational theories see ibid ch 4.
[47] Coffee, above n 43, 397–400.
[48] Gunningham and Johnstone, above n 14, ch 7.
[49] P Gregory and M Shaw, ‘Esso Fined a Record $2M’ The Age (Melbourne), 31 July 2001, 1.
[50] Exxon Mobil, Annual Report (2000).
[52] Above n 11. Also see United Kingdom Health and Safety Executive, Health and Safety Offences and Penalties (2003) 9.
[54] Representing 17.94 per cent and 15.24 per cent of the maximum penalty respectively; Chris Maxwell QC, Occupational Health and Safety Review, Discussion Paper (2003) 74. Also see Workplace Relations Ministers’ Council, Comparative Performance Monitoring, Comparison of Occupational Health and Safety Arrangements in Australia and New Zealand (2nd ed, 2002) 92.
[55] Productivity Commission, National Workers’ Compensation and Occupational Health and Safety Frameworks (2004) 48.
[56] Hoare v R [1989] HCA 33; (1989) 167 CLR 348, 354 (Mason CJ, Deane, Dawson, Toohey and McHugh JJ).
[57] C R Alexander, J Arden and M Cohen, ‘Regulating Corporate Criminal Sanctions; Federal Guidelines and the Sentencing of Public Firms’ (1999) 42 Journal of Law and Economics 393, 395.
[58] Richard Fox and Arie Freiberg, Sentencing: State and Federal Law in Victoria (2nd ed, 1999) 374–75.
[59] Criminal Justice Act 1991 (UK) s 19.
[60] Fox and Freiberg, above n 58, 368. The issue of pre-sentence reports is discussed in New South Wales Law Reform Commission, above n 25, 190–92.
[61] Richard Fox, ‘Corporate Sanctions: Scope for a New Eclecticism’ (1982) 24 Malaya Law Review 26, 38.
[63] Coffee, above n 43, 401–02.
[64] In response to these limitations, a number of alternative forms of fine have been proposed, the most notable being that of ‘equity fines’; Coffee, above n 43, 413–24 and Brent Fisse, Sanctions Against Corporations: Economic Efficiency or Legal Efficacy? (1986) 15–18. While such an idea may have merit in that it avoids or reduces many of the problems of deterrence trap and overspill, even its proponents recognise that it is likely to be seen as far too interventionist in the workings of the market and has 'little chance of political adoption': J C Coffee, ‘Making the Punishment Fit the Corporation: The Problems of Finding an Optimal Corporation Criminal Sanction’ (1980) 1 Northern Illinois University Law Review 3, 21.
[65] See generally Brent Fisse, ‘The Use of Publicity as a Criminal Sanction Against Business Corporations’ [1971] MelbULawRw 5; (1971) 8 Melbourne University Law Review 107 and Brent Fisse and John Braithwaite, The Impact of Publicity on Corporate Offenders (1993).
[66] M Wright, Factors Motivating Proactive Health and Safety Management (1998) 12, cited in Neil Gunningham, CEO and Supervisor Drivers: Review of Literature and Current Practice (1999) 17.
[67] See generally New South Wales Law Reform Commission, above n 25, 160–70. This should also be distinguished from other orders, such as corrective advertising, which is designed to have a remedial, rather than a punitive function.
[68] These provisions appear to be based on Crimes (Workplace Deaths and Serious Injuries) Bill 2001 (Vic) s 14D. Also see Criminal Code Amendment (Workplace Death and Serious Injury) Bill 2004 (Cth) s 380.9(2).
[69] Also see Occupational Health and Safety Act 2000 (NSW) s 115 and United States Sentencing Commission, Federal Sentencing Guidelines Manual and Appendices (2003) § 8D1.4.
[70] Example provided in the legislation in relation to Crimes Act 1900 (ACT) s 49E(2).
[71] These are discussed in more detail in Fisse and Braithwaite, above n 65, 232–36, 243 and 308 and Fisse, above n 65, 117–19.
[72] Fisse, above n 65, 139–140. Also see C R Alexander, ‘On the Nature of Reputational Penalty for Corporate Crime: Evidence’ (1999) 42 Journal of Law and Economics 489.
[73] See text accompanying n 32.
[74] Johnstone, above n 23, 37–42.
[75] Although not strictly a sanction, it is also worth noting the ability of the court to make orders for compensation or restitution; the difference being that a remedial condition actually requires the corporation to undertake a particular activity, rather than simply providing financial compensation or restitution; New South Wales Law Reform Commission, above n 25, 171–76.
[76] United States Sentencing Commission, above n 69, § 8B1.1. There may also be efficiencies by not requiring remedial orders to be made in separate civil proceedings, particularly where individuals do not have the means to pursue civil action against the corporate offender. For example, in Director of Public Prosecutions v Esso Australia Pty Ltd [2001] VSC 401 (Unreported, Supreme Court of Victoria, Cummins J, 3 October 2001) a compensation order was granted where the applicant’s right to sue for damages in respect of workplace injuries had been removed by statute.
[77] Example given in relation to Crimes Act 1900 (ACT) s 49E(2)(c).
[78] United States Sentencing Commission, above n 69, §8B1.3.
[79] Brent Fisse, ‘Community Service as a Sanction Against Corporations’ (1981) Wisconsin Law Review 970, 977 and 1004–1005.
[80] See text accompanying n 65–72.
[81] Also see Crimes (Workplace Deaths and Serious Injuries) Bill 2001 (Vic) s 14D, Criminal Code Amendment (Workplace Death and Serious Injury) Bill 2004 (Cth) s 380.9(2) and Occupational Health and Safety Act 2000 (NSW) s 116.
[82] Crimes Act 1900 (ACT) s 49E(7).
[83] United States Sentencing Commission, above n 69, §8D1.1.
[84] Ibid §8D1.4(c). Also see Criminal Code (Can) s.732.1.
[85] Trade Practices Act 1976 (Cth) s 86C(4).
[86] J A Geraghty, ‘Structural Crime and Institutional Rehabilitation: A New Approach to Corporate Sentencing’ (1979) 89 Yale Law Journal 353, 366.
[87] Criminal Code (Can) s 732.1 (3.2) provides that the court must consider whether it would be more appropriate for another regulatory body to supervise the development or implementation of the policies, standards and procedures referred to in that order.
[88] L M Gattozzi, ‘Charitable Contributions as a Condition of Probation for Convicted Corporations: Using Philanthropy to Combat Corporate Crime (1987) 37 Case Western Reserve Law Review 569, 580–81.
[89] Fisse, above n 64, 25 and R S Gruner, ‘To Let the Punishment Fit the Organization: Sanctioning Corporate Offenders Through Corporate Probation’ (1988) 16 American Journal of Criminal Law 73, 82–84.
[90] This provision also applies to publicity orders under s 49E(2)(a)(b).
[91] The court is not prevented from making an order under sub-s (2) only because it has been unable to find out the financial circumstances of the corporation: s 49E(6).
[92] Crimes Act 1900 (ACT) s 49E(4). Also see Occupational Health and Safety Act 2000 (NSW) s 116(3).
[93] See text accompanying n 8.
[94] Paul Mullaly, Victorian Sentencing Manual (1999) [28207]. This is reflected in the sentences for individual officer offences. For example, both ss 49C and 49D Crimes Act 1900 (ACT) carrying maximum penalties for individuals of 20 years imprisonment.
[95] US v Allegheny Bottling Co, 695 F Supp 856, 859–60 (1988).
[96] These examples are taken from New South Wales Law Reform Commission, above n 25, 116.
[97] For example, certification required for the operation of certain plant and equipment; Occupational Health and Safety (Plant) Regulations 1995 (Vic).
[98] For example, in the United States a corporation can be disqualified from contracting with the United States Government as a result of indictment or conviction; Federal Acquisition Regulation, 48 C FR 9.407. This has been seen in an informal context with proposals for a Federal Government boycott of James Hardie products as a results of alleged inadequate funding of compensation funds for asbestos related diseases caused by the company’s products; ‘Latham Joins James Hardie Boycott’ The Age (Melbourne), 24 September, 2004.
[99] New South Wales Law Reform Commission, above n 25, 116.
[100] United States Sentencing Commission, above n 69, §8C1.1.
[101] Corporations Act 2001 (Cth) s 601AB.
[102] See, for example, US Model Penal Code § 6.04(2).
[103] Problems of overspill are discussed earlier. See text accompanying n 63.
[104] See generally, Law Reform Committee, Parliament of Victoria, Curbing the Phoenix Company (1995).