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Companies as if they mattered

The police are investigating possible crimes at News International committed by the company, not just by a bunch of individuals. It is sometimes claimed that the most effective deterrent to crimes committed while operating a company is the individual prosecution of senior management figures. And of course this is a real deterrent. But the question remains, what of the company itself? Should it go free?

It is of course difficult to prosecute companies for crimes, particularly since a key requirement will be to identify a controlling mind of the company for the alleged offence. But the law was changed recently in the UK to make at least corporate manslaughter easier to prosecute. In contrast the prosecution of companies under civil law is more common, but usually effectively dismissed by management as just a cost of doing business.

The News of the World is claiming that the effect of a prosecution would be catastrophic, causing worldwide licences to be at risk and threatening the whole Murdoch empire. (And that is just a prosecution, not even a conviction – they may, after all, be found innocent.) It is just as well the Crown Prosecution Service does not feel that this is a valid consideration, as otherwise large businesses would be effectively above the law.

And it may also be worthwhile for initiatives such as the Ecocide project to include corporate commission of ecological rights abuses within its remit.

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Maybe companies are not people after all!

A Pennsylvania judge has ruled that companies, while they may be legal persons, should not enjoy all the rights that human persons have.

It was in the context of  questioning the right to privacy of a fracking company, which had argued that a compensation agreement it  had made was a private matter and so need not be disclosed.

But the impact of the decision, while it may be  helpful for anti-frackers, is also likely to question the common assumption that companies enjoy human rights in a wide variety of fields. And this could affect not only matters of privacy and confidentiality but also judgments on free speech (think of the Nike-Kasky case).

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Royal Charters: the way forward for voluntary self-regulation?

It looks like the new UK press regulation regime will both be voluntary and have teeth. It will have the power to impose significant sanctions on those who break their own rules.

So why can’t other industry sectors adopt this approach – alcohol production, gambling and retailing perhaps? At the moment, where self-regulation exists at all, it is weak and ineffectual like the Press Complaints Commission. If companies don’t like the rules, they either ignore them or change them. Not much to respect there.

What it took to change press regulation was a huge scandal. So can similar scandals  in other sectors be avoided by establishing meaningful self-regulation first?

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What are banks for?

Right across the world there is an epidemic of poor behaviour from the banking sector. Facilitating money laundering, interest rate fixing and mis-selling of products are big in the news right now. And these are the activities of organizations that were once known as ‘pillars of the community’, not criminal gangs. Yet there is very little mention of these issues in sustainability and responsibility reports from the big banks. Why so?

The challenge is that these issues go to the heart of the social purpose of banks; they concern its core business. Banks really are supposed to take in money (but not from criminals). They are supposed to set interest rates (but not to fix them). And they are even meant to sell financial products (but not hoodwink people into contracts clearly against their interests).

Being at the heart of their social purpose, you would expect a responsibility report to deal with them. Yet that same fact is perhaps also why they do not.

Some other issues which are important usually are covered to some extent in responsibility reporting. The environment and staff issues come into this category. But then, they are not seen to be integral to the core business of banking. Doing banking, however wrongly, must be part of their core business – and perhaps that is why it is too threatening to talk about.

So it will be interesting to see which banks have the courage to report properly on the problems of the finance sector in the next round of responsibility reports.

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Leaden responsibilities

If lead is the cause of crime, who is left with the responsibility?

George Monbiot has highlighted research that seems to show convincingly that lead leads to crime (after a gap of 20 years). That raises some key questions for personal responsibility and for corporate responsibility.

Simply put: if the reason you committed a crime is the lead you were exposed to, then how much can you be blamed? The balance of the justice system is likely to be further shifted towards rehabilitation (or even detoxification), rather than punishment.

But will it go the other way for some companies? Innospec is still busy selling lead tetraethyl, one of the main sources of ambient lead. Should that be allowed to continue? And what about all those companies that used to sell it in the past? Should they be held to account for the crimes eventually caused by their sales? In the light of the South African asbestos case, it looks as though ignorance of the link will not be a good enough excuse to avoid liability. And as Dow Chemicals and Bhopal shows, the moral liability, in any case, will linger.

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Making corporate responsibility personal responsibility

Taking personal reponsibility for bank failure is one way the size of banks could be limited. And according to the director of financial stability at the Bank of England, there might be a need to do so.

One way to limit both company size and appetite for risk is to tie the fortunes of directors and shareholders directly to the fortunes of their company. This could be accomplished by removing limited liability for companies above a certain size. Removing limited liability would mean that directors and shareholders would be personally liable if things go wrong. So removing it above a certain size of company would provide strong pressure to keep a company under the size limit and generally to behave with more caution.

But what about other companies? Non-bank companies may not be quite so structurally important to the economy, but if Walmart or Tescos collapsed, people would go hungry…

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Governance of the AA1000 Standards

AccountAbility has just released a document on the current and proposed governance for the AA1000 series standards. Is this what is needed?

My view is that the Community Interest Company framework is a good move. However the intellectual property associated with the standards should be moved into the CIC.

Also, there is no mention of the role of stakeholders in supporting and developing the standards. Where is the multi-stakeholder input? This may not be quite so formally built in to the legal constitution, but it does need formal recognition within the governance structure.

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Should Rio+20 focus on accountability?

The Stakeholder Forum has called for accountability to be central to Rio+20. We definitely need a Framework Convention on Accountability. That’s the easy part.

And I think it could draw from the consensus, established by ISO 26000, on the crucial issues that any responsible organisation should face – the core subjects and the underlying issues.

But Rio will be an inter-governmental affair, and as Halina Ward has pointed out, ISO does not have that kind of global legitimacy.

Yet the establishment of truly global consensus must be achieved through a process of dialogue. ISO 26000 should be a voice in that process.

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Watching Over Accountability

Adam Curtis’ new series All Watched Over by Machines of Loving Grace is riveting. In the second episode, as he describes in an article, his key theme is that the idea of a ‘system’ which  came out of the early work on computers assumes that systems are static. And that it is therefore inevitably socially repressive. But the idea of a system has also been a central concept for ecology and so, his argument runs, the very idea of an ecosystem is inherently repressive. Moreover the accompanying idea, that individuals can act autonomously without overt (political) control and nevertheless achieve coherent results, he suggests is a dangerous illusion because  power will find a way to exercise itself with or without accountability.

Riveting but wrong.

The concept of a ‘system’ is far older than computer science. It derives from the ancient Greek meaning ‘to cause to stand together’. The underlying concept throughout the ages has been the inter-connectedness of a series of parts of a whole. What early computer science did was to provide a particular form of analysing systems that was convenient for computers but not necessarily accurate for the living world.

If, as the early cybernetic systems assumed, a system has to be static, then it is indeed a poor foundation for thinking about society, which is constantly changing. But system theorists today are well aware of ‘chaotic’ effects, dynamic equilibria and discontinuous change. That may or may not make it a useful tool to understand society, but it is the best we have to understand the rest of nature.

But the real problem is that Curtis also seems keen to undermine the idea that humanity is part of a greater whole. If we are not really connected to the world, and perfectly free to behave as we like without any consequences, then there is no incentive to respect our dependency on the rest of nature. But that is precisely the situation we are in now – with, most likely, disastrous results for all of us.

Curtis’ arguments might be all too appealing to a company that wanted to ignore the impact that it had on the wider world. Coupled with the free market idea that unregulated economic activity always automatically produces the best possible outcome, it delivers a heady ideology that fully justifies business as usual.

However Curtis is right to point to the dangers of a lack of accountability in any social system. I wonder whether he sees fit to exercise that sort of accountability himself in relation to his filmed subjects?  My guess is that a number of his contemporary examples of ‘autonomous subjects’, such as the UnCut protestors, would object strongly to his representation of them.

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Puma to settle scores with nature – but will it all add up?

Puma the sportswear manufacturer has revealed details of its environmental P&L, the first step to a full sustainability accounting. This is not the first time it has been attempted, as the examples of Bulmers, Forum for the Future and Anglian Water show. But it is the first time such a large company has done it and publicly said that it matters.

There are a number of interesting features of this atempt:

  • the CEO has publicly said that valuing ecosystem services is important to the business as it will prepare the business for inevitable future regulation
  • it underlines that the nearer the supply chain gets to nature, the greater its impact. This is probably quite widely applicable across quite different sectors and true for social as well as environmental impacts.

However there are some disappointing aspects to the initiative as well. The assumption appears to be that future regulation will materialise, because otherwise ecosystem services will be destroyed. However it needs wisdom on the part of politicians if regulation is to be applauded, rather than the next act in the tragedy of the commons.

Perhaps most troubling is the expectation that sustainability somehow involves netting off gains (such as financial profit) against losses (to the environment or society). This sounds very logical, until you realise that this is exactly the thinking of orthodox economists. And it has led us to the desperate situation we are in today.