Dorchester Dumble Corporate Crime Csr Issue102


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Further work on Corporate Harm with a different perspective.

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Dorchester Dumble Corporate Crime Csr Issue102

  1. 1. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeCorporate Responsibility - CrimeAuthors: Martin Dorchester is the Business Managing Director: MD Interims Ltd andPaul Dumble CEnv MIEMA is a Waste Systems Specialist and IEMA CSR SIG memberworking for SMEC International Pty in the Middle East.Abstract:Is corporate crime simply a result of a natural interplay with Government as marketswax and wane in the context of political risk management that exists to control theinevitable corporate harm? Or is it as a consequence of the elitist diffusion of powerand perhaps a deviant subculture? This paper examines these issues in relation tokey recent and historical incidents that have brought corporate crime into focus andthe positioning of corporate social responsibility as an initial international responseto more regulation led systems that may be required in the future.Introduction:Corporate crime specifically relates to illegal actions within a jurisdiction by acorporation. The corporation is a business entity that Has a separate legal identity from that of the individuals that undertake its activities, or Is identified by association with of a group or groups of individuals (e.g. Directors, Partners or Owners).Corporate crime can take many forms that are not exclusive and includes: White-collar crime (Sutherland, 1983) - committed by employees of a corporation which includes; o Fraud, theft, unauthorised activities State-corporate crime – where the activities of the business entity are not in compliance with the State law or where the activities of the business entity lead to harm. Impacts of such activities include; o Deaths in the workplace, work related diseases, deaths in communities, environmental damage, tax avoidance. Organized crime - where criminals set up what appears to be legitimate businesses to hide criminal activities such as; o Money laundering, racketeering, illegal drugs, andThis paper focuses on the Government interface with “white collar crime” and state-corporate crime. 1
  2. 2. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeThe ‘hidden figure’ of corporate crimeDefining corporate crime has real difficulties and much corporate harm remainseither unregulated or non-criminalised. The following statistics highlight the realscale of corporate crime: About 5.65milion tonnes of oil have been spilled into our seas and oceans from tankers in the period from 1970 to 2009 (ITOPF, 2010). 2006 Ivory Coast – Dumping of hazardous waste leading to an alleged 15 deaths and 30,000 injuries (McElroy & Pflanz, 2009). 2.2 Million people per year die as a result of work related injuries or disease (Zarocostas, 2005 – citing International Labour Organisation 2001 data). 37% of the US population have been the victims of some form of corporate fraud or theft (Rebovich et al, 2002). It is estimated that $50 billion per year in tax revenues are lost per year to tax havens (Pussey, 2007). 4.2 million cases of all food poisoning cases in the UK (9.2% of consumers) were attributed to food consumed outside the home in 2000 (Food Standards Agency, 2002). The world’s gross criminal product has been estimated at 20 percent of world trade. (de Brie, 2000).Although some of these numbers look large, the data provided for deaths in theworkplace for example is from many tens of thousands of companies and normallythe impact of a single company is generally very small. However, even from this briefreview of a small subset of corporate harm data it is possible to draw twounequivocal conclusions: 1. People are killed and harmed globally each year on a huge scale resulting from corporate activity. 2. On the basis of a small number of ‘known’ corporate frauds and thefts, the extent – in terms of numbers of people affected and total economic losses – of such harms is vast.Distribution of and influence of powerThere are a number of theories on pluralism which relates to the diffusion of powerto different groups – Dahl (1961) or elite pluralism where sections of society areexcluded. C Wright Mills (1956) suggests that there is a Power Elite, comprising ofthe business community, the army and the government and these elites dominateand run society in their own interests:In different ways and levels corporations can affect and influence the processes ofcriminalisation and regulation. Muncie et al (2010) suggest a number of ways that 2
  3. 3. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crimecorporations operate to affect the process of criminalisation: Corporations can anddo engage in direct interventions in Policy making, lobbying of governments and policy makers being a prime example. Work actively within government, representing interests on quasi- government organisations and committees.It is interesting to note that the new Coalition Government of the UK has announceda policy programme that includes the regulation of lobbying, a commitment toaddress “white collar crime” (UK Government, 2010). Corporations can covertlyintervene in the policy making process by agenda setting, mobilising bias and by notmaking decisions. The case of asbestosis is a prime example of this.Tweedale (2000) records that although the UK Government was aware in 1907 thatasbestosis was a terminal disease it was not until 1969 that any effective legislationwas put in place. It is suggested that a number of covert methods were used to dothis including; The co-opting of the medical profession, Suppression of knowledge, manipulation, Financial pressures, as well as Lying to workers and regulators.A corporation’s ability to influence or defer or even help write its own regulationsenables it to avoid criminalisation (Mokhiber, 1999). They can often try to deferlegislation through intensive lobbying illustrated by a report that “six lobbyists forevery member of Congress as healthcare industry heaps cash on politicians to waterdown legislation” (McGreal, 2010) in opposition to President Obama’s healthcareinsurance reforms (a tactic which failed to prevent subsequent legislation) or wherean industry sector lobbies Government to encourage a softer approach to childhoodobesity through for example the adoption of a voluntary codes of practice for drinksprovided in schools (School Trust Fund, 2009).By involvement the political process, corporations gain status and may appear to belaw abiding citizens, the politicians become responsive to the logic of the businesscase and feel that business is more likely to respond to compliantly in addressing keyissues. However it is clear from many examples and studies cited in this report,legislation is often introduced to manage the damage that has occurred because ofcorporate harm rather than as a pre-emptive strike to prevent such damage. Suchactions by Government seek to change the bad practices or as Habermas (1984)might see it from a sociological point of view excise the deviant subculture as for 3
  4. 4. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crimeexample shown in recent reports as banking Directors from RBS and Northern Rockare fined and prevented from taking senior roles in the sector (BBC News, 2010b).It is interesting the strong defence the banking institutions are putting forward toseek prevent legislation that may inhibit market growth. Is this symptomatic ofdeviant sub culture reacting, protectively and in unison against to such a change? Anexample of corporate good practice (some may rightly argue that this has not beenexecuted in an exemplary manner) may be seen in the way BP have managed therecent Deepwater Horizon Rig disaster in the Gulf of Mexico by acceptingresponsibility and liability for the oil spill clean-up at the earliest opportunity (Philips,2010), with BP Executives making themselves available for media interviews onmainstream news channels (BP, 2010). In terms of political power, the issue is doesthe elitist pluralist diffusion of power; Provide a normal legitimate process of adaption and mitigation to corporate harm caused? or Provide a platform for an embedded deviant elitist sub culture bent on “business as usual” serving to the self interest of its members?This has important consequences for the wider confidence and common values thatunderpin Corporate Social Responsibility systems.Theft and fraudThe cost of theft and fraud is significant as shown in examples above. Mohkiber(1999) estimates that every year, healthcare fraud costs Americans between $100and $400 billion. Other examples of illegal activities include Corporate price fixing (Slapper and Tombs, 1999; Croall, 2001) Overcharging and illegal gifts to Government personnel by the defence and pharmaceutical industry (Clinard, 1990) and, Market manipulation by Guinness (Punch, 2000).Evidence here would seem to suggest that corporations commit acts of theft andfraud, yet as in the case of Guinness they escape being criminalised. However, McBarnet (2006) reports that even with reported losses in excess of $70 billion atEnron, only six people have been sent to prison for periods of three to five years andnotes that the ability of corporations to keep things off the agenda can be clearlyseen in: The circumvention of the financial reporting used in its accounts, The problems with regulation, especially around tax, and The collusion amongst some of the world’s leading organisations. 4
  5. 5. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeMcBarnet (2006) cites ethics in explaining how many leading corporations wereinvolved in the Enron scandal! Although they may have operated within the word ofthe law it can be argued that they acted against the spirit of the law. The bankingcrisis in the UK may be seen in a similar light, where unethical business practices,supported by alleged collusion with the credit rating agencies (BBC News, 2010a)provides the basis for a similar diffusion of the harm.Violence and disastersWillemse (2010) comments on the technical solutions and financial aspects of theDeepwater Horizon Rig explosion in the Gulf of Mexico. Various early estimates putthe leaking oil at 1000 to 5000 tonnes a day (Norris et al; 2010). This catastrophicevent is anticipated to impact on the wetlands and with a ban on fishing stretchingbovver 45,000 sq miles along the coastlines of Texas, Florida, Mississippi, Alabama,and Louisiana where there are millions of migratory birds and fish spawning. Therehave been industry comparisons with previous spills including Exxon Valdez (36,000tonnes, Prince William Sound, Alaska, 1989), Lxtoc-1 (465,000 tonnes, Gulf ofMexico, 1979) and others. The tragedy of the 11 workers that were killed when therig exploded is included in what a BP Executive described as a modest environmentalimpact (Blizzard, 2010). The full extent of this disaster remains to be seen as the oilquantities leaked look set to exceed 150 million litres, with two major options toquell the leak having failed (Weaver & Harris, 2010).Table 1: Acute health impacts for the Tasmin Spirit Oil Spill in 2003 (Aftab, 2003)Acute health impacts % of population (n = c300,000) Notes Data from a total of c500,000 medicals carried out. thHeadache 16% Peaked 3 to 4 week after initial oil spill nd thFever 15% Peaked 2 to 4 week after initial oil spillCold, rhinitis, nasal congestion 52% decreasing to 32% which Respiratory tract symptoms persisted for some time after showed acute exacerbation the spill. immediately following spillsIrritation/ skin rash No data available as data Some cases with severe bulbous collected in different formats rash, resulting from lack of treatment availableGastrointestinal 70% of population (Diarrhoea) Slight increase of blood in vomit n=50 – only 50 persons and stool. surveyedAcute anxiety 29% reducing to 22% The higher figure recorded in the initial surveyDepression 15% initially increasing to 23% Impact reflects mental burden on population of poor economic status. 5
  6. 6. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeAftab (2003) reporting to the Pakistan EPA and UNDP identified significant acutehealth impacts (shown in Table 1) of the Tasmin Spirit oil tanker spill (67,000 tonnes)on those within 10 km of the coastal areas contaminated by the spill that are mainlydependant on the environment for their livelihoods or subsistence. Essam Ahmed(2010) has provided personal experiences of the devastating impacts on thelivelihoods of relatives in the coastal regions affected in the early stages of theDeepwater Horizon incident.Estimates in the year 2000, from the International Labour Organisation (ILO) are that2.2 million people died as a result of work-related injuries or disease per year(Zarocostas, 2005), that there are annually approximately 270 million occupationalinjuries and 160 million victims of work related illnesses annually (ILO, 2005). Thescale of corporate harm becomes overwhelming. Is it therefore then that:‘Companies then get away with “murder” because the law and the courts are notgeared to organisational deviance and corporate violence’ (Punch, 2000, p243) or aresult or impact of the distribution (Tombs, 2008) or the diffusion of power.Punch (2000) asserts that there is growing evidence that business, kills, maims andpoisons and cites as examples; the explosion at the Union Carbide factory in Bhopal,India (Shrivastava, 1987), the Ford ‘Pinto’ automobile case (Swiggert and Farrell,1980/81), the Herald of Free Enterprise in 1987 and the issue of Thalidomide(Knightley et al, 1980). The issues here are; Have these corporations learned from their experiences of the past? Have the bad practices or deviant sub cultures been excised through subsequent regulation? Has this approach been affective or has the problem moved elsewhere?Let’s examine the first question - Do corporations learn from their experiences?Huijer (2005) reports on oil tanker spillages and reviews data collected over 30 years.The average number of oil spills and quantities of oil spilled from tankers hasdecreased in each decade as new international (Marpol Convention, 1978,International Management Code for the Safety of Ships and for Pollution Prevention“The ISM Code”, July 1998) and national legislation has made a significant positiveimpact as shown below.In any serious crime there needs to be an underlying motive. In corporate crimethere is corporate liability, which is the extent a corporation as a legal person is liablefor the acts and omissions of the people it employs. In serious cases such ashomicide, unless the act is deliberate and malicious (motive) and there is intent tocause harm, usually in relation to an individual or individuals (vicarious liability). It is 6
  7. 7. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crimemuch more difficult to pin the blame on a corporation or people within theorganisation with specific job roles or decision making responsibilities in relation tothe harm caused. Even in jurisdictions where there are regulations, companies mayseek to export the problem somewhere elsewhere there are less stringent regulationand standards to maximise profit.The 2006 Ivory Coast dumping of a reported 500 tonnes of hazardous waste at 12sites around the Ivorian Port of Abidjan leading to the alleged deaths of 15 peopleand injuries to 30,000 victims (McElroy & Pflanz, 2009) provides an example ofwhere there were a series of events that led to this disaster. In a statement providedby their solicitors, Trafigura, one of the companies involved insists that the “slopswere not dumped by Trafigura but by a licensed independent contractor, CompagnieTommy, which had been appointed in good faith by Trafigura on the basis that itwould carry out its responsibilities safely and legally. Tommy had beenrecommended to Trafigura by a longstanding and experienced shipping agent inAbidjan”. The company also claim that chemical analysis of the slops has shown that“it is simply not possible that this material could have led to the deaths andwidespread injuries alleged”. (Trafigura Statement, 2009). It is understood thatTrafigura is paying £1000 to each of the 30,000 victims (Amnesty, 2009) and moneyto the Ivorian Government to cover clean up costs, a total of $198 million (Ormsby,2009).Other versions of events have been widely reported in the media and in a UNDACreport (Gelas et al, 2006) on the incident that do not support the company position.European media coverage was largely silenced by court injunctions at one stage andwere prevented reporting parliamentary proceedings in the UK in relation to a draftreport produced by scientific consultants Minton, Treharne & Davies, the “MintonReport” which drew conclusions based on “limited” information that the slops were"capable of causing severe human health effects" (Leigh, 2009). The case forcompensation was tried in the UK Courts and not the Ivory Coast undermining athird world country’s ability to determine its own rights and values, avoiding whatcould have been severe criminal penalties on those responsibleCompare the corporate actions of the Ivory Coast case with the current actions of BPresponding to the Deepwater Horizon Rig explosion which appears to be open to theliabilities of the incident beyond the statutory limit and paying out initial claims(Philips, 2010), yet the company was not directly involved. The Obama Governmentis now focusing the regulators role of “cozying up” to the oil sector as thegovernment and industry and set about addressing liability issues (Blizzard, 2010,Philips, 2010), as the costs borne by BP exceed $940million (BBC News, 2010d ). Here 7
  8. 8. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crimewe see a natural corporate interplay and communication with Government seekingto address the issues that seemed initially to be sadly missing in the Ivory Coast case.GlobalisationThe concept of globalisation in corporate terms can be used to imply the way thateconomic forces have shifted power and authority away from national governmentstowards external, transnational capital. (Drake et al, 2010). Nader (1999) suggeststhat the world is ‘witnessing its subjugation to the large corporate model ofeconomic development, the large corporate model of technology and the largecorporate model of culture itself.’ In terms of the global economy, manytransnational corporations are now operating in the ‘global south’, exporting goodsand services there, leveraging the inequalities of power in labour and consumermarkets and operating in countries where the laws in relation to the workplace andenvironment are less well developed than in most westernised economies. (Muncieet al, 2010).Corporations operate in Export Processing Zones (EPZs) such as Saipan, whereimmigration controls and labour rights are controlled differently. Corporations areable to pressure countries into removing worker rights (Michalowski et al, 1987) andinfluence government decision making to make specific economies more attractiveto them by influencing social and environmental regulations, taxes and incentives.Tombs and Whyte (2003) argue that ‘it is governments that still decide when, howand to what extent corporations should be regulated.’ Muncie et al (2010) suggestthat EPZ’s reflect a wider phenomenon known as the ‘race to the bottom’ wherefierce completion between nations leads to the situation where regulatory standardsare deliberately reduced. This pressure to reduce standards may result fromconditions applied from institutions such as the International Monetary Fund orWorld Bank and is more often experienced by developing countries.Markets and market cyclesThere instinctively seems to be a relationship between the market cycle and thecorporate crime. Deliberate and malicious crimes will occur any time throughout themarket cycle as the opportunities for deviant behaviour arise. Table 2 helps reviewthe impacts and outcomes of some of the case studies reviewed by this paper. Theissues related to transparency seem to provide a good indicator of something moreengrained than simply bad practice (errors and omissions). Transparency can bemeasured simply by the openness of information and communication in addressingcorporate harm and provides a key indicator (not proof) of deviant practices. 8
  9. 9. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeTable 2: Review of key issues related to corporate harmIncident or Likely cause Transparen Significant Market cycle and Outcomeissue cy Event costsOils spills Bad practices, Yes Yes Growth to International andfrom oil bad design maturity nationaltankers 1970 (Huijer, 2005) ($ billions, regulation Huijer,– 2009 5.65 million 2005 (Timescale tonnes of oil 40 years) ITOPF, 2010)Hazardous Bad practices, No Yes N/A Compensation,waste Indications of ($198 million – Localdumping – Deviant Ormsby, 2009, 15 GovernmentIvory Coast subculture deaths alleged - officials resign.2006 (Leigh, 2009) McElroy, D., (BBC News, 2006) Pflanz, M. (2009) (4 years).Financial Bad practices No Yes Growth of NationalCrisis 2007- Indications of financial services Regulation,date deviant sub ($11.9 trillion – international co culture Conway, 2009 operation sought (BBC News quoting source (HM Government 2010a) IMF) 2010). Individuals dismissed or banned (BBC News 2010b)BP Issues over Yes Yes Market Reform ofDeepwater bad design or development off regulator (NorrisHorizon practice shore drilling US. et al, 2010),incident 2010 (Philips 2010) (Estimate up to liability being $12 billion, 11 debated (Philips deaths – Mason, 2010) 2010). BP costs $940 million+ on 30 May 2010, (BBC news, 2010d)ENRON Bad practices. No Yes N/A Criminal2001 Deviant sub ($70 billion – proceedings culture widely reported) Industry (McBarnet, regulation (Mc 2006) Barnet 2006)In the case of oil tanker spillages we can see the significant harm caused by oil spillsfrom the early 1970’s and the impact of international and national legislation withthe 1978 MARPOL Protocol coming into effect in 1983 with an overall drop in thetotal oil spilled from tankers at sea. In 1990, as a response to the Exxon Valdez spill inPrince William Sound, the USA introduced the Oil Pollution Act 1990. This had adramatic impact throughout the nineties which was followed by the ISM Code thatwas introduced by the IMO in July 1998. This demonstrates how poor design and bad 9
  10. 10. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crimepractices of one type of corporate harm can be controlled internationally (Huijer,2005). Volume of oil spilled from tankers 1970 - 2009. Data Source: ITOPF (2010) 700 600 500 400 300 Volume/ 000s tonnes 200 100 0 2006 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2009It is clear that when a market area represents significant growth (hence increasedrevenues for Government or inward investment) there are clearly defined synergiesbetween Government and corporate entities. Unless increased or significant harm iscaused Governments tend to give corporate in expanding markets a free hand andhold off from any regulatory interventions. A good example is in the IT sector whereinterference by Governments has been resisted but international security issues andabuse of the web based systems have erode this position for the US Government(Mc Carthy, 2010).Muncie (2010) sees that the need to attract inward investment by developingnations provides leverage for less regulated enterprise zones and a greater risk ofcorporate harm. As evidence of harm increases as new markets are developed,Governments tend to take a voluntary, rather than regulatory approach to limitdetrimental market growth such as the Voluntary Code of Practice on EmployingMigrant Workers/ Overseas Staff in Great Britain (BiTC, 2008).Regulation put in place often as a response to significant incidents of corporate harmthat are identified throughout the market cycle. E.g. Sarbanes-Oxley Act oncorporate governance in the wake of the Enron scandal - McBarnet (2006), Lawspassed in senate for regulation of banks in USA - BBC News (2010c). At the other end 10
  11. 11. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crimeof market spectrum we have the mature industries with defined innovativestrategies that are highly regulated as shown by Walsh (2010) in looking at theimpact of the financial crisis and regulatory burden on the future of thepharmaceutical Industry.This political interplay, allocation of responsibility (liability) or power diffusion is akey factor in determining criminality and the extent or seriousness of the criminalitythat may result from corporate harm. This is better understood in risk basedmanagement systems where the risks are identified, managed and controlled. Ineffect the corporate system under the pluralist model is an extension of politicalpower base, but this power can be withdrawn with different levels of effectivenessand rapidity at Global and national level into the political arena in the form ofregulation.PolicyPolicies are position statements sometimes called “White Papers” and proposedactions requiring discussion described as “Green papers” by the UK Government(House of Commons, 2010) that may be adopted in formal legislation and regulationusually over a period of up to 5 years or the lifetime of an elected Government.When a policy is implemented it usually becomes legislation, but may take other lessformal forms such as; A code of practice which may be mandatory or voluntary Standards such as risk based management systems based on international standards including ISO14001 (Environment), OHAS18000 (Heath & Safety), ISO9000 (Quality) which may relate to a product, process, good or management practice Self regulation – a common feature usually linked to standards or voluntary systems including ethical auditing systems such as SEDEX (2010). Guidance (possibly in relation to existing laws that may have some currency in relation to an issue).A number of policies have been implemented to redress the balance of powerbetween corporations and society. McBarnet (2006) suggests that Enron had putethics, culture and the spirit of the law on the corporate professional and regulatoryagenda, and as a result of this and other financial issues, the US governmentintroduced the Sarbanes-Oxley Act on corporate governance.Pussey (2007) suggests that as a result of the high profile financial cases such as BCCIand Barings both the United Nations and The Basle Committee on Banking cametogether to produce the Vienna Convention 1988 and the Basle Concordat whichaddressed the issue of money laundering. Further policies from The Financial Action 11
  12. 12. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeTaskforce were introduced to further combat money laundering and after theterrorist attacks of September 11th. This was then enlarged to include the issue ofterrorist financing.The Huijer (2005) study shows the impacts of the Marpol Convention on oil leakagesfrom tankers discussed earlier follows the same tried and trusted model of a treatyfollowed by national interventions, though this process did take over 30 years.Corporations have been able to avoid criminalisation in what Muncie et al (2010)describe as the attempt to close the ‘space between laws’. If powerful corporationscan leverage their financial, political and economic power to influence governmentand government policy, if they can operate across borders and ignore or flout thelaws and conventions of their resident country, then how can policy redress thebalance?In terms of policy Muncie et al (p159, 2010) state that: ‘International law has so farfailed to develop universal legal stands for corporations.’ However the establishmentof the Norms on the Responsibilities of Transnational Corporations and OtherBusiness Enterprises with Regards to Human Rights, published by the UNCommission on Human Rights and adopted by the UN in 2003 provides a policyresponse that attempts to redress the balance in the distribution of power betweencorporations and society. The Norms include: General obligations: States have primary responsibility for ensuring that transnational corporations and other businesses respect human rights. Corporations also have an obligation to promote and respect human rights, including vulnerable groups and indigenous peoples: Rights to equal opportunity and non-discriminatory treatment: Corporations have the responsibility to ensure equality rights are derived from international instruments and national legislation, including international human rights law. Rights to security of person: Corporations should not benefit from war crimes, crimes against humanity, genocide, torture, forced labour and security provision shall observe international human rights norms. Rights of workers: Corporations shall not use forced labour, shall respect the rights of children, provide a safe working environment, provide wages commensurate with the provision of adequate living conditions and finally corporations shall ensure freedom of association. Respect for national sovereignty and human rights: Corporations shall recognise and respect international laws, national laws and the regulatory environment and respect the countries’ policies which they operate in and do so with transparency. 12
  13. 13. Martin Dorchester & Paul Dumble: Corporate Responsibility - Crime Corporations shall not offer, condone or engage in any acts of bribery and corruption. Corporations shall refrain from any activity which supports or encourages abuses of human rights nor should they provide goods or services that can be used to abuse human rights. Corporations shall respect the rights of people and contribute to the realisation of a better and improved standard of physical and mental health as well as improved education, housing and civil rights. Obligations with regard to consumer protection: Corporations shall market their products in line with fair business standards and not produce, distribute, market or advertise harmful or potentially harmful products for use by consumers. Obligations with regard to environmental protection: Corporations shall observe national laws and regulations relating to the preservation of the environment and also seek to conduct their activities in a manner contributing to the wider goal of sustainable development. (Adapted from UNCHR, 2003)From reviewing these obligations it is possible to note responses to the power thatcorporations can leverage. In terms of corporations leveraging their ‘economicattractiveness” to influence countries to relax their employment and equality lawswe can see that there are obligations concerning equal opportunity and non-discriminatory treatment. We can clearly see the global foundations of theframework for corporate and social responsibility.In terms of pollution and incidents such as the Union Carbide factory there are nowclearly stated global obligations concerning the environment. Instruments such asExport Processing Zones can now be challenged as the obligations cover workersrights, standards of living. The policy also covers consumer protection, therebyaddressing incidents such as the Cadbury’s and salmonella outbreak in 2006. Thereis a very clear link between the act and the corporate harms that corporations inflict.It must be noted though that these are obligations not legal sanctions. Corporationscomply voluntarily with the principles of the policy and these principles must belegally sanctioned in national courts or through international instruments. A numberof significant challenges can therefore be made. The first challenge concerns the useof Export Processing Zones: as an example of what Muncie et al (2010) has referredto an Export Processing Zone such as Saipan operates within and without of the US.Saipan, it is claimed can only operate because the American government allows it todo so. 13
  14. 14. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeThe principle of the norms can only be sanctioned by national or international lawand here is a prime case of a nation state saying one thing, i.e. adhering andsupporting international human rights, and doing another. Examples of this can beseen in China, and Nielsen (2007) asserts that there are over 260 EPZs in 67countries. Another significant challenge facing the norms is the ‘economic” needthat, those developing countries have and the pressure that loans from the IMF andthe World Bank impose.Many developing countries need to encourage large corporations to come into theirmarkets to drive prosperity, build infrastructure and so on. A method of doing this isto make the regulatory system as amenable as possible, thus negating many of theobligations concerning workers rights and consumer’s rights. At the same timepressure from loan agreements can induce countries to provide what are consideredmore favourable business conditions. However, we see the retail industry seeking toestablish best practices through the voluntary development of the SEDEX (SupplierEthical data Exchange) scheme which now covers over 22,000 company sitesemploying about 8.5 million workers (Sedex, 2010) in trying to address ethical globalsupply chain concerns.It can be argued that underpinning the norms would require a global or internationalform of jurisprudence. Given the variance in laws between countries, the variance inthe value sets between people, the variance in the uptake or interpretation ofhuman rights between countries there is, and will continue to be great difficulty inharmonising what is criminal and what is not in a global business environment.Punch (2000) and Mokhiber (1999) assert that corporations are seen as legitimatebusinesses and clean cut executives pursuing business are not seen as criminal andthey also have the financial, legal and social power to bargain their way out oftrouble. Punch (2000), Mokbiber (1999) and McBarnet (2006) see the use ofcorporate power as an enabler to avoid sanctions (which can be viewed as policyresponses) and criminalisation: be it through plea-bargaining into civil courts, selfand increased regulation, mobilisation or making deals with the government. Punch(2000) goes further than this though, and suggests that there are more facets to thedistribution of power that enable corporations to avoid criminalisation citing keyfactors such as: Legal systems that have great difficulty in tracing decision making from the boardroom to the scene of the disaster or accident, it is very difficult to make an explicit connection between corporate policies and violent outcomes, and The law is fundamentally focused on the individual and not the organisation at a structural as well as an ideological level. 14
  15. 15. Martin Dorchester & Paul Dumble: Corporate Responsibility - CrimeDiscussion and some conclusionsTo increasing criminalise corporations for the harm that they cause will requiresignificant cultural, ideological and structural change. It is clear that bringingcorporate actions into line to address harm on a global scale requires a long time andlot of patience supported by clear international agreements and commitments thatcan be eventually transposed to national law level.We have seen examples of corporate harm that may be described as a deliberate actthat leads to obvious demonstrable harm through deaths and injury and/or can betraced through theft, fraud and selfish financial gain – this is our deviant elitist subculture referred to earlier. This clearly is an area where the criminal law withpunitive consequences can be brought to bear to excise the wrongful behaviour anddeviant practices.Other types of corporate harm do not rationally fit this model. In situations where itis clear that significant harm has been caused, but the malicious motives to committhe crime are not obvious or simply not there, it is difficult to place the blame onindividuals within a corporate entity that seem simply observers (rather than playerswith deliberate motives) to such damaging or tragic events.The race to globalise is based on short to medium term gain (high returns) withsignificant and what seems in hind sight (often inexplicably) accepted gain againstthe pain of any harm (governments would refer to this as the balance of risk),provides a key driver for global corporate expansion. The diffusion of power throughthe corporate entities offers a method to spread, mitigate and in essence control therisks through an iterative process where governments and corporate entities jostle ina power struggle that waxes and wanes with Governments as the markets take theirnatural cyclical progression. The punishments here are generally economic to deterfuture reoccurrences and to ensure adopted bad practices are changed and broughtunder proper control.The UN has set out a universal global framework for good corporate practice. Todaywe recognise this as corporate social responsibility that now takes different formswithin corporate entities on a voluntary basis. In essence, it represents a process ofpower exchange between government and corporate sector that in time is likely tobecome increasing enforceable with future global treaties and national legislation. Itis complex and far reaching corporate obligation that Muncie et al (p159, 2010)recognise is not in place and history indicates will take many decades to translateinto effective global regulation. 15
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