Martin Dorchester & Paul Dumble: Corporate Responsibility - Crime

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Corporate Responsibility - Crime

Authors: Martin Dorchester is the Business Managing Director: MD Interims Ltd and

Paul Dumble CEnv MIEMA is a Waste Systems Specialist and IEMA CSR SIG member

working for SMEC International Pty in the Middle East.

Abstract:

Is corporate crime simply a result of a natural interplay with Government as markets

wax and wane in the context of political risk management that exists to control the

inevitable corporate harm? Or is it as a consequence of the elitist diffusion of power

and perhaps a deviant subculture? This paper examines these issues in relation to

key recent and historical incidents that have brought corporate crime into focus and

the positioning of corporate social responsibility as an initial international response

to more regulation led systems that may be required in the future.

Introduction:

Corporate crime specifically relates to illegal actions within a jurisdiction by a

corporation. 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, and

This paper focuses on the Government interface with “white collar crime” and state-

corporate crime.

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The ‘hidden figure’ of corporate crime

Defining corporate crime has real difficulties and much corporate harm remains

either unregulated or non-criminalised. The following statistics highlight the real

scale 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 the

workplace for example is from many tens of thousands of companies and normally

the impact of a single company is generally very small. However, even from this brief

review of a small subset of corporate harm data it is possible to draw two

unequivocal 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 power

There are a number of theories on pluralism which relates to the diffusion of power

to different groups – Dahl (1961) or elite pluralism where sections of society are

excluded. C Wright Mills (1956) suggests that there is a Power Elite, comprising of

the business community, the army and the government and these elites dominate

and run society in their own interests:

In different ways and levels corporations can affect and influence the processes of

criminalisation and regulation. Muncie et al (2010) suggest a number of ways that

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corporations operate to affect the process of criminalisation: Corporations can and

do 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 announced

a policy programme that includes the regulation of lobbying, a commitment to

address “white collar crime” (UK Government, 2010). Corporations can covertly

intervene in the policy making process by agenda setting, mobilising bias and by not

making decisions. The case of asbestosis is a prime example of this.

Tweedale (2000) records that although the UK Government was aware in 1907 that

asbestosis was a terminal disease it was not until 1969 that any effective legislation

was put in place. It is suggested that a number of covert methods were used to do

this 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 regulations

enables it to avoid criminalisation (Mokhiber, 1999). They can often try to defer

legislation through intensive lobbying illustrated by a report that “six lobbyists for

every member of Congress as healthcare industry heaps cash on politicians to water

down legislation” (McGreal, 2010) in opposition to President Obama’s healthcare

insurance reforms (a tactic which failed to prevent subsequent legislation) or where

an industry sector lobbies Government to encourage a softer approach to childhood

obesity through for example the adoption of a voluntary codes of practice for drinks

provided in schools (School Trust Fund, 2009).

By involvement the political process, corporations gain status and may appear to be

law abiding citizens, the politicians become responsive to the logic of the business

case and feel that business is more likely to respond to compliantly in addressing key

issues. 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 of

corporate harm rather than as a pre-emptive strike to prevent such damage. Such

actions 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

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example shown in recent reports as banking Directors from RBS and Northern Rock

are 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 to

seek prevent legislation that may inhibit market growth. Is this symptomatic of

deviant sub culture reacting, protectively and in unison against to such a change? An

example of corporate good practice (some may rightly argue that this has not been

executed in an exemplary manner) may be seen in the way BP have managed the

recent Deepwater Horizon Rig disaster in the Gulf of Mexico by accepting

responsibility and liability for the oil spill clean-up at the earliest opportunity (Philips,

2010), with BP Executives making themselves available for media interviews on

mainstream news channels (BP, 2010). In terms of political power, the issue is does

the 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 that

underpin Corporate Social Responsibility systems.

Theft and fraud

The cost of theft and fraud is significant as shown in examples above. Mohkiber

(1999) estimates that every year, healthcare fraud costs Americans between $100

and $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 and

fraud, yet as in the case of Guinness they escape being criminalised. However, Mc

Barnet (2006) reports that even with reported losses in excess of $70 billion at

Enron, only six people have been sent to prison for periods of three to five years and

notes that the ability of corporations to keep things off the agenda can be clearly

seen 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.

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McBarnet (2006) cites ethics in explaining how many leading corporations were

involved in the Enron scandal! Although they may have operated within the word of

the law it can be argued that they acted against the spirit of the law. The banking

crisis 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 disasters

Willemse (2010) comments on the technical solutions and financial aspects of the

Deepwater Horizon Rig explosion in the Gulf of Mexico. Various early estimates put

the leaking oil at 1000 to 5000 tonnes a day (Norris et al; 2010). This catastrophic

event is anticipated to impact on the wetlands and with a ban on fishing stretching

bovver 45,000 sq miles along the coastlines of Texas, Florida, Mississippi, Alabama,

and Louisiana where there are millions of migratory birds and fish spawning. There

have been industry comparisons with previous spills including Exxon Valdez (36,000

tonnes, Prince William Sound, Alaska, 1989), Lxtoc-1 (465,000 tonnes, Gulf of

Mexico, 1979) and others. The tragedy of the 11 workers that were killed when the

rig exploded is included in what a BP Executive described as a modest environmental

impact (Blizzard, 2010). The full extent of this disaster remains to be seen as the oil

quantities leaked look set to exceed 150 million litres, with two major options to

quell 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)

Data from a total of c500,000

medicals carried out.

Notes

Headache 16% Peaked 3 to 4th

week after

initial oil spill

Fever 15% Peaked 2nd

to 4th

week after

initial oil spill

Cold, rhinitis, nasal congestion

52% decreasing to 32% which

persisted for some time after

the spill.

Respiratory tract symptoms

showed acute exacerbation

immediately following spills

Irritation/ skin rash No data available as data

collected in different formats

Some cases with severe bulbous

rash, resulting from lack of

treatment available

Gastrointestinal 70% of population (Diarrhoea)

n=50 – only 50 persons

surveyed

Slight increase of blood in vomit

and stool.

Acute anxiety 29% reducing to 22% The higher figure recorded in

the initial survey

Depression 15% initially increasing to 23% Impact reflects mental burden

on population of poor economic

status.

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Aftab (2003) reporting to the Pakistan EPA and UNDP identified significant acute

health 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 mainly

dependant on the environment for their livelihoods or subsistence. Essam Ahmed

(2010) has provided personal experiences of the devastating impacts on the

livelihoods of relatives in the coastal regions affected in the early stages of the

Deepwater Horizon incident.

Estimates in the year 2000, from the International Labour Organisation (ILO) are that

2.2 million people died as a result of work-related injuries or disease per year

(Zarocostas, 2005), that there are annually approximately 270 million occupational

injuries and 160 million victims of work related illnesses annually (ILO, 2005). The

scale of corporate harm becomes overwhelming. Is it therefore then that:

‘Companies then get away with “murder” because the law and the courts are not

geared to organisational deviance and corporate violence’ (Punch, 2000, p243) or a

result or impact of the distribution (Tombs, 2008) or the diffusion of power.

Punch (2000) asserts that there is growing evidence that business, kills, maims and

poisons 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 has

decreased 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 positive

impact as shown below.

In any serious crime there needs to be an underlying motive. In corporate crime

there is corporate liability, which is the extent a corporation as a legal person is liable

for the acts and omissions of the people it employs. In serious cases such as

homicide, unless the act is deliberate and malicious (motive) and there is intent to

cause harm, usually in relation to an individual or individuals (vicarious liability). It is

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much more difficult to pin the blame on a corporation or people within the

organisation with specific job roles or decision making responsibilities in relation to

the harm caused. Even in jurisdictions where there are regulations, companies may

seek to export the problem somewhere elsewhere there are less stringent regulation

and standards to maximise profit.

The 2006 Ivory Coast dumping of a reported 500 tonnes of hazardous waste at 12

sites around the Ivorian Port of Abidjan leading to the alleged deaths of 15 people

and injuries to 30,000 victims (McElroy & Pflanz, 2009) provides an example of

where there were a series of events that led to this disaster. In a statement provided

by their solicitors, Trafigura, one of the companies involved insists that the “slops

were not dumped by Trafigura but by a licensed independent contractor, Compagnie

Tommy, which had been appointed in good faith by Trafigura on the basis that it

would carry out its responsibilities safely and legally. Tommy had been

recommended to Trafigura by a longstanding and experienced shipping agent in

Abidjan”. 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 and

widespread injuries alleged”. (Trafigura Statement, 2009). It is understood that

Trafigura is paying £1000 to each of the 30,000 victims (Amnesty, 2009) and money

to 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 UNDAC

report (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 and

were prevented reporting parliamentary proceedings in the UK in relation to a draft

report produced by scientific consultants Minton, Treharne & Davies, the “Minton

Report” which drew conclusions based on “limited” information that the slops were

"capable of causing severe human health effects" (Leigh, 2009). The case for

compensation was tried in the UK Courts and not the Ivory Coast undermining a

third world country’s ability to determine its own rights and values, avoiding what

could have been severe criminal penalties on those responsible

Compare the corporate actions of the Ivory Coast case with the current actions of BP

responding to the Deepwater Horizon Rig explosion which appears to be open to the

liabilities of the incident beyond the statutory limit and paying out initial claims

(Philips, 2010), yet the company was not directly involved. The Obama Government

is now focusing the regulators role of “cozying up” to the oil sector as the

government and industry and set about addressing liability issues (Blizzard, 2010,

Philips, 2010), as the costs borne by BP exceed $940million (BBC News, 2010d ). Here

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we see a natural corporate interplay and communication with Government seeking

to address the issues that seemed initially to be sadly missing in the Ivory Coast case.

Globalisation

The concept of globalisation in corporate terms can be used to imply the way that

economic forces have shifted power and authority away from national governments

towards external, transnational capital. (Drake et al, 2010). Nader (1999) suggests

that the world is ‘witnessing its subjugation to the large corporate model of

economic development, the large corporate model of technology and the large

corporate model of culture itself.’ In terms of the global economy, many

transnational corporations are now operating in the ‘global south’, exporting goods

and services there, leveraging the inequalities of power in labour and consumer

markets and operating in countries where the laws in relation to the workplace and

environment are less well developed than in most westernised economies. (Muncie

et al, 2010).

Corporations operate in Export Processing Zones (EPZs) such as Saipan, where

immigration controls and labour rights are controlled differently. Corporations are

able to pressure countries into removing worker rights (Michalowski et al, 1987) and

influence government decision making to make specific economies more attractive

to them by influencing social and environmental regulations, taxes and incentives.

Tombs and Whyte (2003) argue that ‘it is governments that still decide when, how

and to what extent corporations should be regulated.’ Muncie et al (2010) suggest

that EPZ’s reflect a wider phenomenon known as the ‘race to the bottom’ where

fierce completion between nations leads to the situation where regulatory standards

are deliberately reduced. This pressure to reduce standards may result from

conditions applied from institutions such as the International Monetary Fund or

World Bank and is more often experienced by developing countries.

Markets and market cycles

There instinctively seems to be a relationship between the market cycle and the

corporate crime. Deliberate and malicious crimes will occur any time throughout the

market cycle as the opportunities for deviant behaviour arise. Table 2 helps review

the impacts and outcomes of some of the case studies reviewed by this paper. The

issues related to transparency seem to provide a good indicator of something more

engrained than simply bad practice (errors and omissions). Transparency can be

measured simply by the openness of information and communication in addressing

corporate harm and provides a key indicator (not proof) of deviant practices.

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Table 2: Review of key issues related to corporate harm Incident or

issue

Likely cause Transparen

cy

Significant

Event

Market cycle and

costs

Outcome

Oils spills

from oil

tankers 1970

– 2009

Bad practices,

bad design

(Huijer, 2005)

Yes Yes

Growth to

maturity

($ billions,

5.65 million

tonnes of oil

ITOPF, 2010)

International and

national

regulation Huijer,

2005 (Timescale

40 years)

Hazardous

waste

dumping –

Ivory Coast

2006

Bad practices,

Indications of

Deviant

subculture

(Leigh, 2009)

No Yes N/A

($198 million –

Ormsby, 2009, 15

deaths alleged -

McElroy, D.,

Pflanz, M. (2009)

Compensation,

Local

Government

officials resign.

(BBC News, 2006)

(4 years).

Financial

Crisis 2007-

date

Bad practices

Indications of

deviant sub

culture

(BBC News

2010a)

No Yes Growth of

financial services

($11.9 trillion –

Conway, 2009

quoting source

IMF)

National

Regulation,

international co

operation sought

(HM Government

2010). Individuals

dismissed or

banned (BBC

News 2010b)

BP

Deepwater

Horizon

incident 2010

Issues over

bad design or

practice

(Philips 2010)

Yes Yes Market

development off

shore drilling US.

(Estimate up to

$12 billion, 11

deaths – Mason,

2010). BP costs

$940 million+ on

30 May 2010, (BBC

news, 2010d)

Reform of

regulator (Norris

et al, 2010),

liability being

debated (Philips

2010)

ENRON

2001

Bad practices.

Deviant sub

culture

(McBarnet,

2006)

No Yes N/A

($70 billion –

widely reported)

Criminal

proceedings

Industry

regulation (Mc

Barnet 2006)

In the case of oil tanker spillages we can see the significant harm caused by oil spills

from the early 1970’s and the impact of international and national legislation with

the 1978 MARPOL Protocol coming into effect in 1983 with an overall drop in the

total oil spilled from tankers at sea. In 1990, as a response to the Exxon Valdez spill in

Prince William Sound, the USA introduced the Oil Pollution Act 1990. This had a

dramatic impact throughout the nineties which was followed by the ISM Code that

was introduced by the IMO in July 1998. This demonstrates how poor design and bad

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practices of one type of corporate harm can be controlled internationally (Huijer,

2005).

It is clear that when a market area represents significant growth (hence increased

revenues for Government or inward investment) there are clearly defined synergies

between Government and corporate entities. Unless increased or significant harm is

caused Governments tend to give corporate in expanding markets a free hand and

hold off from any regulatory interventions. A good example is in the IT sector where

interference by Governments has been resisted but international security issues and

abuse 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 developing

nations provides leverage for less regulated enterprise zones and a greater risk of

corporate harm. As evidence of harm increases as new markets are developed,

Governments tend to take a voluntary, rather than regulatory approach to limit

detrimental market growth such as the Voluntary Code of Practice on Employing

Migrant Workers/ Overseas Staff in Great Britain (BiTC, 2008).

Regulation put in place often as a response to significant incidents of corporate harm

that are identified throughout the market cycle. E.g. Sarbanes-Oxley Act on

corporate governance in the wake of the Enron scandal - McBarnet (2006), Laws

passed in senate for regulation of banks in USA - BBC News (2010c). At the other end

0

100

200

300

400

500

600

700

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

20

06

20

09

Volume of oil spilled from tankers 1970 - 2009. Data Source: ITOPF (2010)

Volume/ 000's tonnes

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of market spectrum we have the mature industries with defined innovative

strategies that are highly regulated as shown by Walsh (2010) in looking at the

impact of the financial crisis and regulatory burden on the future of the

pharmaceutical Industry.

This political interplay, allocation of responsibility (liability) or power diffusion is a

key factor in determining criminality and the extent or seriousness of the criminality

that may result from corporate harm. This is better understood in risk based

management systems where the risks are identified, managed and controlled. In

effect the corporate system under the pluralist model is an extension of political

power base, but this power can be withdrawn with different levels of effectiveness

and rapidity at Global and national level into the political arena in the form of

regulation.

Policy

Policies are position statements sometimes called “White Papers” and proposed

actions requiring discussion described as “Green papers” by the UK Government

(House of Commons, 2010) that may be adopted in formal legislation and regulation

usually 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 less

formal 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 power

between corporations and society. McBarnet (2006) suggests that Enron had put

ethics, culture and the spirit of the law on the corporate professional and regulatory

agenda, and as a result of this and other financial issues, the US government

introduced the Sarbanes-Oxley Act on corporate governance.

Pussey (2007) suggests that as a result of the high profile financial cases such as BCCI

and Barings both the United Nations and The Basle Committee on Banking came

together to produce the Vienna Convention 1988 and the Basle Concordat which

addressed the issue of money laundering. Further policies from The Financial Action

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Taskforce were introduced to further combat money laundering and after the

terrorist attacks of September 11th. This was then enlarged to include the issue of

terrorist financing.

The Huijer (2005) study shows the impacts of the Marpol Convention on oil leakages

from tankers discussed earlier follows the same tried and trusted model of a treaty

followed 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 corporations

can leverage their financial, political and economic power to influence government

and government policy, if they can operate across borders and ignore or flout the

laws and conventions of their resident country, then how can policy redress the

balance?

In terms of policy Muncie et al (p159, 2010) state that: ‘International law has so far

failed to develop universal legal stands for corporations.’ However the establishment

of the Norms on the Responsibilities of Transnational Corporations and Other

Business Enterprises with Regards to Human Rights, published by the UN

Commission on Human Rights and adopted by the UN in 2003 provides a policy

response that attempts to redress the balance in the distribution of power between

corporations 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.

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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 that

corporations can leverage. In terms of corporations leveraging their ‘economic

attractiveness” to influence countries to relax their employment and equality laws

we can see that there are obligations concerning equal opportunity and non-

discriminatory treatment. We can clearly see the global foundations of the

framework for corporate and social responsibility.

In terms of pollution and incidents such as the Union Carbide factory there are now

clearly stated global obligations concerning the environment. Instruments such as

Export Processing Zones can now be challenged as the obligations cover workers

rights, standards of living. The policy also covers consumer protection, thereby

addressing incidents such as the Cadbury’s and salmonella outbreak in 2006. There

is 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. Corporations

comply voluntarily with the principles of the policy and these principles must be

legally sanctioned in national courts or through international instruments. A number

of significant challenges can therefore be made. The first challenge concerns the use

of Export Processing Zones: as an example of what Muncie et al (2010) has referred

to 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 to

do so.

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The principle of the norms can only be sanctioned by national or international law

and here is a prime case of a nation state saying one thing, i.e. adhering and

supporting international human rights, and doing another. Examples of this can be

seen in China, and Nielsen (2007) asserts that there are over 260 EPZs in 67

countries. Another significant challenge facing the norms is the ‘economic” need

that, those developing countries have and the pressure that loans from the IMF and

the World Bank impose.

Many developing countries need to encourage large corporations to come into their

markets to drive prosperity, build infrastructure and so on. A method of doing this is

to make the regulatory system as amenable as possible, thus negating many of the

obligations concerning workers rights and consumer’s rights. At the same time

pressure from loan agreements can induce countries to provide what are considered

more favourable business conditions. However, we see the retail industry seeking to

establish best practices through the voluntary development of the SEDEX (Supplier

Ethical data Exchange) scheme which now covers over 22,000 company sites

employing about 8.5 million workers (Sedex, 2010) in trying to address ethical global

supply chain concerns.

It can be argued that underpinning the norms would require a global or international

form of jurisprudence. Given the variance in laws between countries, the variance in

the value sets between people, the variance in the uptake or interpretation of

human rights between countries there is, and will continue to be great difficulty in

harmonising what is criminal and what is not in a global business environment.

Punch (2000) and Mokhiber (1999) assert that corporations are seen as legitimate

businesses and clean cut executives pursuing business are not seen as criminal and

they also have the financial, legal and social power to bargain their way out of

trouble. Punch (2000), Mokbiber (1999) and McBarnet (2006) see the use of

corporate power as an enabler to avoid sanctions (which can be viewed as policy

responses) and criminalisation: be it through plea-bargaining into civil courts, self

and increased regulation, mobilisation or making deals with the government. Punch

(2000) goes further than this though, and suggests that there are more facets to the

distribution of power that enable corporations to avoid criminalisation citing key

factors 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.

Martin Dorchester & Paul Dumble: Corporate Responsibility - Crime

15

Discussion and some conclusions

To increasing criminalise corporations for the harm that they cause will require

significant cultural, ideological and structural change. It is clear that bringing

corporate actions into line to address harm on a global scale requires a long time and

lot of patience supported by clear international agreements and commitments that

can be eventually transposed to national law level.

We have seen examples of corporate harm that may be described as a deliberate act

that leads to obvious demonstrable harm through deaths and injury and/or can be

traced through theft, fraud and selfish financial gain – this is our deviant elitist sub

culture referred to earlier. This clearly is an area where the criminal law with

punitive consequences can be brought to bear to excise the wrongful behaviour and

deviant practices.

Other types of corporate harm do not rationally fit this model. In situations where it

is clear that significant harm has been caused, but the malicious motives to commit

the crime are not obvious or simply not there, it is difficult to place the blame on

individuals within a corporate entity that seem simply observers (rather than players

with deliberate motives) to such damaging or tragic events.

The race to globalise is based on short to medium term gain (high returns) with

significant and what seems in hind sight (often inexplicably) accepted gain against

the 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 through

the corporate entities offers a method to spread, mitigate and in essence control the

risks through an iterative process where governments and corporate entities jostle in

a power struggle that waxes and wanes with Governments as the markets take their

natural cyclical progression. The punishments here are generally economic to deter

future reoccurrences and to ensure adopted bad practices are changed and brought

under proper control.

The UN has set out a universal global framework for good corporate practice. Today

we recognise this as corporate social responsibility that now takes different forms

within corporate entities on a voluntary basis. In essence, it represents a process of

power exchange between government and corporate sector that in time is likely to

become increasing enforceable with future global treaties and national legislation. It

is 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 translate

into effective global regulation.

Martin Dorchester & Paul Dumble: Corporate Responsibility - Crime

16

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