Keep corporate liability under the spotlight

For over 30 years I was a detective in the Metropolitan Police and National Crime Squad and towards the end of my career in the force I spent a number of years working in EU accession states supporting them to clean up their institutions. Time and again I saw vibrant countries ruined by corruption and met citizens who despaired of their power to hold institutions to account or challenge corrupt business deals.

On the doorstep this May I heard the same complaint – though thankfully, to a lesser extent. There is a widespread perception that big businesses are ‘getting away with it’, that companies involved in financial wrongdoing – whether tax evasion, fraud, or out-and-out bribery and corruption - are not being adequately punished. 

This is why I was dismayed when in answer to  my question on 9 September, the Justice Minister revealed that Action 36 of the UK’s otherwise excellent  Anti-Corruption Plan has come to an end: the government is no longer planning on widening corporate criminal liability because ‘there have been no prosecutions under the model Bribery Act offence’  and ‘there is little evidence of corporate economic wrongdoing going unpunished.’ 

I question whether this is actually the case and I hope to be asking the Minister for a stronger explanation this week.

The Conservative manifesto committed the government to making it a crime for companies to fail to put in place measures to stop economic crime. That commitment was (presumably) based on a recognition that there is a serious public confidence issue that companies involved in financial wrongdoing are not be called to account or adequately sanctioned.

Public concerns are not unfounded. The Law Commission and international bodies such as the  OECD have identified our corporate liability laws as inadequate to the task, and when the  Serious Fraud Office begins calling for reforms to corporate liability, we know we have a problem.

The fact is that our corporate criminal liability laws are out of date and don't match the reality of how large multinational firms operate in an era where subsidiaries span continents and employ thousands of individuals worldwide.

At the moment, the larger a company is the harder it is to prove that the company’s senior executives were the ‘directing mind and will of the company’ that has committed wrongdoing. In fact the current system creates a perverse incentive for larger companies to insulate their board members from knowledge of wrongdoing. The law as it stands does not promote good corporate governance.

Moreover, that smaller companies are far more likely to be prosecuted because the link between operational wrongdoing and the board is closer and easier to prove, is simply unfair.

Our corporate liability laws are not fit for purpose and in calling Action 36 to a halt, the Ministry of Justice have lost an opportunity to capitalise on the current political will to tackle corruption and has failed the public who are keen to see corporates, however big, face justice and clean up. 

To restore the public’s confidence that we are serious about tackling economic crime we need to revive Action 36.

Byron Davies was elected Member of Parliament for the Gower in May 2015 and is a member of the All-Party Parliamentary Group on Anti-Corruption.