Business Liability

1. Business Liability Brad Long

2. Elements of the Debate Can corporations be held liable for immoral or illegal acts? Are the the kind of entity to which one could attribute guilt? Does it possess the capacity for intent and a guilty mind? Can corporate executives be held liable for immoral or illegal acts? Which ones? Must they be of sufficient status and authority to be said to possess the governing will and direction of the company? Assuming liability can be attributed to companies and/or corporate executives, what form of punishment is warranted? How will it be effective?

3. Liability of Corporate Executives Bishop: Starting point of this analysis are the goals and constraints that affect the pursuit of those goals. Reward systems in corporations built around pursuit of goals, not observation of constraints. While violation of constraints is discouraged, employees are only encouraged to pursue the goals.

4. Negative Information Blockage Bishop: Results in temptation to not observe constraints as they (by definition) hinder the achievement of goals and hence reduces one’s reward. Only one person along hierarchy leading up to corporate executives needs to succumb to this temptation for the information to not reach the corporate executives.

5. Alternatives for Executive Liability • Bishop: • Given that negative information blockage exists, to what extent than may corporate executives be held responsible for criminal or immoral acts? • Based on their effort to prevent NIB; had sufficient steps been taken to encourage information flow to the top? OR • Based on the results: whatever steps had been taken to prevent NIB were obviously insufficient.

6. B) “Professional Responsibility” Bishop: Executives, in their role as executives, have a professional responsibility to perform their job well and achieve certain results… not sufficient to say that they tried and failed, just as such a position is not supported in most other professional and personal pursuits. Professional responsibility especially applicable when innocent third parties are affected by actions, such as disasters which affect innocent citizens. This violates moral responsibilities in society.

7. In Support of Executive Liability Bishop: When avoidable acts are committed which have a tragic (and immoral) result, this provides evidence that the executive failed to overcome NIB and obtain the information required to fulfill their professional responsibility. Doing one’s best is not sufficient, but achieving results is what matters. Corporate executives are therefore liable for disasters which result form the actions of their company.

8. Fane Robinson Case regarding whether companies can be held liable. Trial Judge: A corporation cannot commit a criminal act because it cannot possess a guilty mind. While it can do wrong things, it cannot intent to do them, even if so authorized. Appeal Judge: The acting and directing will of the corporate executives is the acting and directing will of a corporation. As such, it is capable of committing criminal offenses. Therefore, it should also be criminally responsible.

9. Andrews Weatherfoil Case regarding who within the company can represent its directing will. Trial Judge: The corporation can be convicted on counts of bribery and corruption because of the actions of its ‘servant’ (Sporle). Appeal Judge: Only the actions of employees with sufficient status and authority may be attributable to the company itself; not every servant is a responsible agent.

10. Safety Kleen Canada Ltd. First of two charges; case regarding whether companies may be held liable for employee negligence. Trial Judge: Employee (Howard) and SKCL both convicted with failure to complete a manifest. Appeal Judge: Appeal based on whether executives (directing will and mind of SCKL) exercised due diligence for preventing negligence on behalf of employees. They did not establish a system of compliance and verification to ensure employees did not engage in prohibited acts. As such, SKCL did not exercise due diligence and appeal dismissed.

11. Safety Kleen Canada Ltd. Second of two charges; case regarding who within the company can represent its directing will. Trial Judge: Employee (Howard) and SKCL both convicted with giving false information to provincial officer. Appeal Judge: Appeal based on identification theory…whether Howard had been delegated decision making power re. design and implementation of corporate policy (ie. could he be considered as a proxy for corporate identity). Appeal dismissed as his guilty mind cannot be equated to SKCL guilty mind. Howard was carrying out corporate policy and had no authority for decisions outside of his own (broad) job responsibilities.

12. Theoretical Foundation Recall French: The corporation as a moral person…the power structure and decision making process of organizations sanctions acts committed by individuals as corporate acts. Companies may be held morally responsible. Are companies abstractions? Can a company be morally responsible or must such responsibility lie with individuals?

13. Corporate Liability in the headlines! • Rash of corporate wrongdoings makes this highly relevant! But who/what is liable: • corporations • executive employees • all employees • shareholders • volunteer Boards of Directors • paid Boards of Directors • customers • etc…

14. Reflective Questions When you are corporate executives, will you be prepared to accept responsibility? Do you think executives today are generally accepting this responsibility? When designing jobs and delegating to employees, what will you have to consider? What are the characteristics, if any, of an individual that may properly be viewed as the directing will of a company? May a company be held morally responsible?

15. Questions?? Comments?? Next Class: assuming executive and/or corporate responsibility: Corporate Punishment Poff Chapter 10 & 11 Thank You!!