Magazine article Financial Management (UK)

Editorial Comment

Magazine article Financial Management (UK)

Editorial Comment

Article excerpt

The UK government has announced its intention to publish plans for a new offence of "corporate manslaughter" to be considered in cases where people die as a result of negligence on the part of a company. This has led to debates about whether individual directors will be held directly responsible for deaths of employees or customers. More firms could be affected by this legislation than many would expect--the Royal Society for the Prevention of Accidents reports that about 350 people are killed each year in work-related accidents. The move also raises questions about the guilt of individual directors in the case of disasters such as the Paddington train crash of 1999, which killed 31 people. While extreme cases of corporate negligence can have terrible consequences and should be treated accordingly, the decision reflects the increasing pressure on all companies, and their directors, to be legally accountable for their mistakes--for carelessness as well as for deliberate fraud.

The UK is often accused of following the US, where fast-food chains have been sued by customers who scalded themselves on tea, and by obese customers for selling them the food that made them fat. Sure enough, in the UK stories have emerged of "no win, no fee" lawyers hanging around outside schools encouraging children to sue their teachers. Such stories may sound ridiculous, but employers' liability insurance premiums have rocketed, and this is having the unintended and undesirable effect that many small firms are now uninsured (page 20). At the same time, the Higgs report has come under scrutiny from the FRC (page 6), and increased liability for individual directors is likely to reinforce concerns that companies will struggle to find strong candidates (page 32). …

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