Corporate Harm: Measurement and Impact - Essay Example

Running head: Corporate harm: Measurement and impact Corporate harm: Measurement and impact s Awidely quoted definition of a corporation was that made by Chief Justice Marshall of the United States in 1819. He referred to corporation as "an artificial being, invisible, intangible, and existing only in contemplation of the law."(Grossman & Adams, 1993, p.11-12) In other words, a corporation is a powerful, untouchable, artificial being endowed by law with the rights, powers, and 'duties' of a natural person. to a large extent, corporations shape our customary practices as the sources of the toothpaste we use deodorant we wear and food we eat. Like natural persons, a corporation may own property, incur debts, and be party to a lawsuit. In contrast, unlike natural persons, a corporation may not vote and cannot be imprisoned. Legally it is the corporation, and not its representatives that engage in business activity. However, natural persons, usually own a corporation and do determine and carry out its policies. At the same time these natural persons, individually, own none of the property of the corporation (Koontz & Fulmer, 2000, pp. 136). Such companies generate capital for the economy and their investors whilst creating job opportunities for the masses however, this power is seldom coupled with uniformed responsibility. With the increasing giant corporations in the world the trend of corporate harm and corporate crime are also increasing. There is a fine line between both the notions. Corporate harm is defined as all the activities of the corporations, which do not come under legislation but create adverse effects on employees, stakeholders and environment. For Example the increasing workload on the employees of corporations are causing numerous health problems to the employees such as high blood pressure and heart diseases (Health and Safety Executive, 1993). Examples of Corporate harm include: Making the employees working without off. Non provision of food at canteens. Least or clocked off lunch hours. Unpaid breaks. Low per hour payment. Forcing the employees to behave in prescribed way. Limitless time of customer enquiries. Absence of refreshing activities for employees.(Wazir, 1999) Corporate harm is often very difficult to measure. The reasons are: It involves many variables. The situations in which the corporate harm takes place vary to great extent. Corporations find it important to serve their purpose neglecting the purpose of all the other parties involved. The situations can not be generalised and the degrees cannot be suggested to the extent at which the corporations are found guilty (Coleman, 1987). In some of the cases the immediate responsibility lies on the shoulders of an individual. But still it is very difficult to decide whether the action was the result of the individual or was effected by the organisation structural pressure. For instance in the case of Clapham rails disaster 35 people died, the accident was the result of loose wire, which displayed yellow light rather than red light. The technician violated the British rail standard procedure and left an old wire loose. It was a technical fault by the technician, which caused such a severe accident. But there are many factors on the part of corporation, which played part in the accident and are not taken into consideration while undertaking the inquiry and in other words which are invisible. Such as lack of training provision to the staff, stretched working hours, lack of knowledge about technical standards due to non-provision from the Corporation. As in the case of Waterloo Area Re-signalling scheme 28% workers were working from 13 weeks without any off. Technician had taken 1 day off in proceeding 3 months. Although all these practices are not restricted under legislation but played significant role in the event. Many social factors such as lack of knowledge, cultural backwardness, lack of training facilities and social structure, improper check and balance procedures also play an important role in multiplying such events. As in the case of the Bhopal accident in India in 1984, the leak accident happened due to the poor maintenance, improper planning, and lack of proper enforcement of laws and regulations regarding safety. Despite all the reasons the Company also avoided to take responsibility. (Pearce and Tombs, 1993) In business 'what gets measured gets managed'. Research carried out by RoSPA suggests that the variability in accident rates across UK organisations as a population is so great that any attempt to analyse accident statistics in studies, which consider less than 1,000 organisations are statistically meaningless. In other words, the variability of accident rates in UK industry is so large that the probability of making an error in the interpretation of the results is nearly 100 per cent. A further criticism that can be levelled is that, most often issues such as work related ill health and unsafe conditions are neglected as compare to other, such as the unacceptable exposures to health hazards. Health damage is generally a bigger issue than accidental injury but these are harder to identify and quantify. HSE estimate that early death from past exposure to hazardous working conditions is at least one (if not perhaps two) orders of magnitude greater than death due to workplace accidents (although much of this occurs after those affected have ceased employment). Some may seek to argue that good health and safety management which produces a low a lost time injury rate is more likely to address health protection as well. But an absence of accidents cannot be taken to imply neither a low rate of work related ill health since neither modelling nor data are available to support this. (Director action on Safety and Health, 2004) A corporate disregard for the social and ethical can be lethal with both long and short term consequences culminating in social harms. Many corporations have and will escape responsibility for such harms due to the sheer difficulty that exists in identifying them. Clarkson (1999), justly asserts one of the core issues with identifying corporate harm is 'the fact that private civil litigation depends upon an identifiable victim with the necessary resources to commence litigation (which) weakens the deterrent impact of civil litigation.' In case of the U.K corporate ethics law three types of violations are possible: (1) non-serious ones that have a direct effect on health or safety but will not generally result in death or serious physical harm. For example, residents in Stratford have been suffering from the construction of the nearby Channel Tunnel Rail Link by Swedish Construction Company Skanska. Although the private contractor claims that 'The environmental standards adopted [in Stratford] are at the forefront of those commonly applied to major infrastructure projects', local people have complained about the way piles of rubble removed from the tunnel have been simply piled next to the station. As a result, clouds of dust have, at times, engulfed nearby houses. Despite a series of complaints since May 2005, including a petition signed by 50 local residents, Skanska have yet to address the matter. (News in Brief, 2005) (2) Serious violations that are likely to result in death or serious harm. For a recent example of this we can look to the US, where, an explosion in a West Virginia mine fatally wounded 13 miners. International Coal Group who owns the Sago mine had, since acquiring the site in 2004, been 'cited 276 times', 208 of which they received in 2005. The U.S. Mine Safety and Health Administration cited serious injury or death as probable outcomes in 97 of the violations, if they were not rectified; 21 citations had been for inadequate ventilation systems, which were crucial in reducing the amassing of methane gas, explosive above certain levels. The matter is still under investigation as the corporation claims a bolt of lightning caused it. (Bowling, 2006) (3) Wilful violations where the employer deliberately and knowingly violates the law and makes no reasonable effort to eliminate hazardous conditions. Harsh labour conditions in the toy industry for people in developing countries such as China have also led to much criticism, revealing "hidden costs" to popular toys such as those based on Harry Potter, Star Wars, Pokemon, Barbie, etc. (War on want, 2002) Perhaps the greatest potential dangers lie in the many health hazards that often are hidden in our complex environment. It is estimated that there are approximately 2 million chemical compounds in existence, but scientists have developed information of the toxicity of only about 100,000.5 Of these, some 13,000 are known to be toxic and 1,500 are suspected of causing cancer. (U.S News and World Report, 1977) but often corporations will not take responsibility. Aluminium toxicity, is an example of this. Associated with dementia, osteoporosis and Alzheimer's disease, aluminium is present in water supplies, deodorant and indigestion mixtures, to name a few. In 1988 there was the 'Camelford Incident' in Cornwall where tonnes of aluminium sulphate 'inadvertently' contaminated the water supplies of 100,000 people. Gold fish perished, people fell ill and hair washed, using the supply, turned green. Initially, the water supply Company rejected accountability and advised consumers to add orange juice to dilute the taste. The suggestion itself increased chances of aluminium consumption as citric acid reacts with it. At the time the Department of Health asserted that aluminium was not toxic and that effects were 'imaginary'. Aluminium toxicity has since; not only been proven to affect humans but the environment through 'acid' rain. Here arise issues of causation, as it may be impossible to trace this problem to a single source but the effects of it remain and will continue to affect societies for as long as it is used in processing or production even if withdrawn it is likely leave a legacy (Phillip Day, 2003). There is much controversy with respect to the trade-off between economics and health. The cleaning of the environment is quite costly and employers contend that the perfectly safe environment is not possible. The need for some type of effective cancer policy was underscored in an epidemiological study showing that in several British cities with a heavy concentration of petroleum refineries, there were significantly higher rates for cancer of the lung, the nasal cavity and sinuses and the skin. (Martin, 1978) According to Wikipedia Encyclopaedia (2005): Corporate crime refers to criminal practices by individuals that have the legal authority to speak for a corporation or company. These can include presidents, CEOs, managers, directors and chairmen, sales people, agents, or anyone within a company that has authority to act on behalf of the firm. Examples of criminal behaviour in most jurisdictions include: antitrust violations, fraud, damage to the environment in violation of environmental legislation, exploitation of labour in violation of labour laws, and failure to maintain a fiduciary responsibility towards shareholders. These complexities in identifying corporate crimes. Invisibility, unaccountability and inappropriate sanctions are worsened by the 'class bias of courts'. Businessmen, will more often than not, avoid legal action probably owing to the fact that they are able to influence it. (Slapper and Tombs, 1999:3). It is usually in intense circumstances that corporate crime is identified but identification is no guarantee for conviction. Once a corporate crime has been identified, there is the tendency for the corporation to act as the blanket under which the above-mentioned 'individual authority' seizes operation. But as Clarkson (1998) maintains 'it is the individual within the company who is the culpable agent deserving punishment'. It is granted, that whilst corporations reject individual responsibility, punishable omissions are limited; but the implications of pursuing individuals can prove two-fold. For example, in the case of the Herald of Free Enterprise capsize in 1987 where 187 people were killed. Despite insistence from families of the victims that P&O directors ought to take responsibility a jury returned a verdict of unlawful killing against the crewmen. Lord Justice Sheen headed a public inquiry in which he recognised 'a disease of sloppiness' and laxity at all positions of the company's hierarchy. In 1989, the CPS charged P&O with corporate manslaughter and seven staff members with manslaughter; the case collapsed but became an exemplar for cases of corporate manslaughter. Furthermore, the lack of safety policies and departmental co-ordination were regarded as the reason behind the tragedy. Nevertheless, these requirements are still left to the corporations and there are little or no ramifications for inadequate achievement. If it can be argued that, by birth, individuals agree to a social contract (Hobbs, 1651: Wikipedia) then surely, by establishment, a corporation should do the same. For certain breaches of this, 'social contract', individuals will be subject to criminal sanctions, however, civil liability is common practice against offending companies (Clarkson, 1998). Clarkson rejects Khanna's (1999) argument that civil liability, ultimately, serves the same purpose as criminal liability by maximising deterrence and stigmatising through penalties; stating that civil and criminal liabilities differ in four ways. Firstly, the requirement proofs beyond reasonable doubt. Secondly, in administration: through enforcement agencies. 'Thirdly, criminal punishment involves stigma and censure'. And finally, that criminal liability serves as a deterrent to the offender and wider society. Corporations resolutely focus on maximising profits and a 'legal obligation to act in the best interests of their shareholders. By and large, this excludes acting ethically or socially responsibly'(Slapper and Tombs, 1999). (Shah, 2002) states that some Trans-national corporations make more in sales than the GDPs (Gross Domestic Product) of many countries. In fact, of the 100 hundred wealthiest bodies, 51 percent are owned by corporations. While this can be seen as a success story from some viewpoints, others suggest that these and other large corporations are largely unaccountable for the many social and environmental problems that they leave in their wake, and that their size means that their effects are considerable. It is not that every single corporation is inherently bad or greedy, but commonly, the very large, multinational corporations who naturally have vested interests in international development and trade policies (like any group) are able to deploy enormous financial resources in an attempt to get favourable outcomes. The political power that is therefore held by such a small number of people impacts the planet significantly. As a result a few of these corporations make up some of the most influential sources of political and economic power. Naturally, with such influence it is not clear 'who' the regulator is. And as Clarkson's (1999) earlier quote suggests money and power, in corporate activity, are paired. And where profit supersedes safety and power supersedes regulation there stands the conflict of interests, for the victims of corporate harm. These are for the most part neither wealthy nor powerful although, when they are liability is certainly applied copiously. For example in the case of Enron the former chief accounting officer, Richard Causey was indicted on charges of ' fraud, conspiracy, insider trading, lying to auditors and money laundering for allegedly knowing about or participating in a series of schemes to fool investors into believing Enron was financially healthy' (findlaw.com). The 'victims' in this case were the investors who were identifiable and influential. Violations, which impact on financial systems, are subject to more scrupulous legislative administration, compared with social infringements (snider 1991 cited in Slapper and Tombs 1999:89). Increased attention to corporate crime would mean relating to large companies as 'criminals' (Slapper and Tombs, 1999). An issue, Sullivan (1995 cited in Clarkson, 1998) renders impossible on the basis that 'crimes can only be committed by human, moral agents'. Media attention will focus on financial aspects of corporate crime due to its impact on a political scale and the sensational-factor that is the 'respectable' figures committing crime as well a the belief/knowledge that 'scandal sells'. Scandal, is common reference for this financial aspect but noting the influence of language Slapper and Tombs (1999) note that this sets a' scale' for perceptions, rendering it uncommon/unusual. In the way that social harms such as Health and Safety violations are commonly referred to as 'accidents' which removes the general understanding of a crime rendering most social harms invisible or inconsequential. Investors are often aware of the risks they take and in itself, off-balance-sheet financing is no vice. Companies can use it in perfectly legitimate ways that carry little risk to shareholders. The trouble is that while more companies are relying on off-balance-sheet methods to finance their operations, investors are usually unaware that a company with a clean balance sheet may be loaded with debt - until it is too late. (Morgenson, 2001) Suggested Steps: With the increasing number of cases regarding the corporate harm many scholars and researchers have proposed different ideas and steps in order to punish the responsible. A careful analysis of the choice between liberal reform and radical social change should be done. Although corporations provide extensive benefits to the society but many scholars have exaggerated its benefits without having solid evidences for these. (e.g., Luban, Strudler, & Wasserman, 1992; Stone, 1986; Tomkins, Victor, & Adler, 1992). There is a surge to implement a legal reform in order to deal with the limitless power of corporations in the larger capitalist economy. Hawken (1993) has suggested a drastic step in shape of imposing limitations and penalties and in last resort dissolving the irresponsible corporations. Some of the scholars have emphasised the need of strong accountability for corporations harming the workers or the environment. (Reiman, 1990). Hansmann & Kraakman (1991) find shareholders responsible for the harm a corporation gives others state that corporate leaders should compensate and do every thing, which can be done for the victims. (Bender, 1990). (Flynn, 1987, p. 150) emphasises the need of reducing corporations to a size and scope controllable by local communities; preventing corporations from owning other corporations; recognising the obvious distinction between immense corporate power centres and the more numerous, but less powerful, tiny corporations that are "the alter ego of an individual or small group of individuals." (Kushner, 2003) in his article states that with the increase in the corporate crime the RCO (responsible corporate officer) doctrine is being reconsidered, an important corner stone in criminal law. According to the law the officer should be held liable in substitution of the subordinate for the corporate law violation, since he has the authority and can stop the violation but fails to do so. It also states that the officer can be allocated responsible for the law violation without any need of proof for his participation in crime. It will help in minimising the financial scandals through the increase in the accountability on every level. The strategy of allocation the culprit should include all the people who are responsible. No discrimination should be made in shape of economic status, power or position. Whether they are at individual level, corporate level, or industry level. The process of responsibility allocation should be done in a very cost-effective manner. This process should not put unfair economic burden on the consumer. The procedure undertaken should be fair enough. No discrimination should be made to any person found guilty. It should safeguard the rights of the corporation, the individual and the suspect's rights. All the suspects should be equally treated and on equal grounds. The sanctions on the responsible should not effect the rest of the others who are not found responsible. (Fisse) Another important step, which can be taken, is to introduce awareness programs for the employees and common people regarding the knowledge required for their professions and its standards. The Government should launch web sites regarding these informations. Rules and regulations should be implemented regarding the off and breaks according to the technicality and complexity of the profession. References Bender, L., (1990). 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