The government has announced its latest policy to combat so-called boardroom excess.
Shortly before becoming Prime Minister, Theresa May announced plans to appoint workers to company boards and to make shareholder votes on corporate pay legally binding.
The Attorney General, Jeremy Wright QC, has now added to the mix by issuing proposals to shake up the law on corporate crime. A new criminal finance bill could make directors liable for the acts of a company’s more junior employers. This would greatly extend the scope of directors’ potential liability. Currently, aside from the offence of failing to stop bribery, any senior level prosecution will need to prove that the conduct in question was known to the company’s board. In practice, the difficulty in obtaining such evidence makes a prosecution very unlikely. The proposed new law could remove this hurdle and effectively place the onus on the company to stop the illegal activity happening in the first place.
The director of the SFO, David Green QC, has also spoken in support of a new offence of failing to prevent economic crime. He cited the example of the recent of banker Tom Hayes, who was sentenced to 14 years imprisonment for Libor rigging. However, his employer bank only faced action in the US, where corporate prosecutions are much easier.
These proposals are at a very early stage - the government has yet to issue a formal consultation paper – and there is no guarantee that they will ever become law. It hardly needs saying that Brexit is likely to keep the Prime Minister busy for the foreseeable future. It is also open to question how vigorously any new offence is enforced. The Bribery Act sent shock waves through the corporate world a few years ago but prosecutions under the Act have been few and far between. However, the proposals are a further indication that the current government has big plans to eradicate what it sees as the worst excesses of boardroom culture.
We will be examining these issues and much more in our forthcoming webinar ‘Director’s Duties – how limited is your liability?’ For more details and to register click here.
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