Companies gearing up for the 6 April implementation of the new Corporate
Manslaughter and Corporate Homicide Act 2007 would be wrong to assume that
health and safety and HR departments will bear the brunt of the new rules. There
are key issues that land firmly at the feet of finance directors.
The Act creates a new offence of ‘corporate manslaughter’ (or corporate
homicide in Scotland). Organisations will be guilty of the offence where a
fatality is caused by a ‘gross breach’ of a duty of care and where the actions
of senior management played a significant part in the breach.
What constitutes a gross breach is clearly of fundamental importance and
juries will be directed to consider a range of factors, including the company’s
‘safety culture’, the seriousness of the failure, the risk of death and
adherence to health and safety guidance.
Virtually all workplace deaths will lead to a lengthy corporate homicide
investigation by the police and Health & Safety Executive. Some of these
investigations will lead to prosecution and it is a matter of time before there
is a conviction. For FDs, in particular, there are several key practical
First, as part of the senior management team, they play a significant part in
ensuring that health and safety is managed appropriately at board level and is
given the highest priority, particularly in risky sectors. Clearly though, an
FD’s main health and safety responsibilities revolve around the company
Any police investigation will scrutinise the allocation of resources to
health and safety functions. If corners were cut financially, jeopardising
safety, this will be a powerful factor for the jury to consider in establishing
a company’s guilt. If a company is convicted, cutting corners will also be a
serious aggravating factor in sentencing.
‘Safety spend’ will be analysed in great detail by the police and FDs must
ensure any decisions are properly minuted and documented, so that any financial
decision regarding safety spend or lack of it can be fully supported. Approval
processes, in terms of the overall safety budget and financial requests for
safety generally will have to be carefully looked at and a paper trail must be
in place to show all decisions regarding funding have been properly considered
at the appropriate level.
Playing it safe
How much is spent will depend on the nature of the business, but the law
requires all organisations to do everything reasonably practicable to ensure the
safety of everyone affected by the business’s operation. At the very least, FDs
will have to be able to demonstrate their safety spend was in line with industry
They should check the organisation’s insurance cover to make sure it is
adequate. In particular, the legal costs of a corporate homicide investigation
and trial, including the payment of prosecution costs, could run into millions
of pounds and this should be covered.
There could also be significant business disruption during the investigation
and trial, which could in the worst case scenario result in operations being
shut down by the police to enable them to complete their investigations.
Directors’ and officers’ cover should be reviewed.
The fines for companies found guilty of the new offence are unlimited and
could be huge. The current proposals are for fines in the region of 2.5% to 10%
of gross annual turnover, averaged over a three-year period. Businesses cannot
insure against these fines, and they will come straight off the bottom line.
Accordingly, once a corporate manslaughter investigation has been triggered, FDs
must ensure proper provision is made in the accounts in respect of the criminal
fine and the legal costs.
In addition, there are new powers for the courts to order organisations
convicted under the Act to publicise the fact of the conviction, the level of
fine and the details of the breaches in the national media and through commu
nication with customers, investors and other stakeholders. This is potentially
of even greater long-term damage to bottom line performance and should be a key
concern to FDs.
Finally, it would be a grave error to underestimate the financial impact of a
long and invasive police/HSE investigation, which would inevitably follow a
workplace death. Such a process will involve close scrutiny of health and safety
spending, decision-making and practice, as well as police interviews of key
executives and personnel.
This will sap morale, resources and cast a shadow over the reputation of the
company until it is concluded. Financial decision-makers have a key role to play
in making health and safety a boardroom priority. They will also find themselves
on the front line in any police investigation in demonstrating the
organisation’s commitment to compliance. With stakes this high, you must take
full responsibility for safety.
Practicing safe finance
• Make sure safety management is appropriately and adequately funded. The
funding, and the steps taken to check it, must also be documented
• Safety management should be driven from the board level down, and all duties
and responsibilities at senior management level must be clear, both to the
individuals and from documentation
• Do not delegate inappropriately
• Conduct an immediate audit of the entire safety management system
• Ensure that the safety culture within the organisation is given the highest
• If an incident occurs resulting in serious injury, or a fatality, make sure
that it is properly managed
• Have a procedure in place for dealing with police investigations, these will
be lengthy and very intrusive and will eat up a lot of management time
• Put procedures in place to deal with damage to the company’s reputation, which
could be enormous
• Provision should be made in the accounts for the potentially huge fines and
legal costs which could arise in the wake of an accident
• Carry out an urgent review of your insurance policies to make sure that you
are covered for legal costs in respect of such proceedings
• Make sure that your directors’ and officers’ insurance is adequate
David Leckie is a partner in the commercial litigation
and advocacy team, specialising in health and safety, with Maclay Murray &
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