Bill Wilson MSP

Criminal Sentencing (Equity Fines) Bill:  Press Launch of Consultation on Member’s Bill for Innovative Method of Punishing Corporate Crime

“I am suggesting the introduction of a new sentencing option in Scotland (equity fines) to improve the ability to punish companies found guilty of criminal offences under Scots law, and therefore also to deter them from committing criminal acts, including (but not exclusively) those which may result in death and injury to individuals, or damage the environment.”  Bill Wilson MSP

 Acknowledgements

Media coverage

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Scottish Business Crime Centre website

Equity fines proposed for corporate crime

Punishing corporate crime

Launch event

At an event in the Scottish Parliament today, Dr Bill Wilson, SNP MSP for the West of Scotland, launched the consultation for his Member’s Bill to improve the punishment of corporate crime.

Dr Wilson said, “At present companies found guilty of criminal offences, and most notably those resulting in deaths and injuries, often appear to have only trivial penalties imposed.  For example, the fine for criminally causing the death of a worker or member of the public is less than £12,500 in 50% of cases.  There are two main reasons for this.

“Firstly, judges are concerned to avoid putting companies out of business, as in so doing they might possibly be punishing the very employees who were the innocent victims of the companies’ offences in the first place.

“Secondly, companies are allowed to give their own versions of their financial status.   This is equivalent to a judge saying to a housebreaker, ‘You are a very naughty boy.  Now, if you can just tell me what level of fine you can pay.’

“Another problem is that monetary fines may penalise the victims rather than the perpetrators of corporate crime.  There is nothing to stop companies offsetting fines and so maintaining share values and profits, by worsening employees’ pay and conditions.  Meanwhile shareholders heedlessly continue to make money from the corners that companies may cut.

“My proposal seeks to solve these problems by allowing courts (a) to order reports into companies’ financial and other relevant circumstances, and (b) to order convicted companies to issue a set number of new shares.  These shares would then be sold and the proceeds paid to the court.  This form of penalty is known as an ‘equity fine’.

“In effect, an equity fine is a fine which is imposed upon the value of the firm, rather than being imposed upon its running costs.

“The fine could be imposed on any publicly limited company for a range of crimes, although health and safety is the main area of concern in our consultation, other areas, such as environmental crimes, might equally benefit from this approach.”

Dr Wilson was supported by Louise Adamson, representing Families Against Corporate Killers (FACK), and Kathy Jenkins, representing the Scottish Hazards Campaign.

Louise Adamson said, “An annual work-related death toll in excess of 1600 is tragic testimony to the fact that the current system of fining companies for health and safety offences has not served as strict enough punishment or strong enough deterrent.  FACK welcomes these proposals for equity fines which will lay the punishment for corporate offending at the feet of those who are ultimately responsible - those running the business - and we express our hope that this can form part of a package of measures to improve the health and safety of both workers and members of the public.”

Kathy Jenkins commented, “The Scottish Hazards Campaign has consistently called for a wider range of sanctions to be available to the courts.  We know that straight fines are often paid for by workers (through wage freezes/cuts, redundancies, worse working conditions) or by consumers/members of the public.  These proposals for equity fines will ensure that those most responsible for corporate offending bear the cost.  Our campaign is for safer and healthier working conditions.  We believe that equity fines might also prove a more effective deterrent and eventually lead to a reduction in work related injury and death.”

Notes to Editors

1.  Background:  monetary fines — “justice rarely seen to be done”

1. In the large majority of cases in Scotland, companies found criminally responsible for offences that result in death or injury currently have only minimal fines imposed upon them, insufficient to act as effective deterrents.  When it comes to corporate offending, justice, in the sense of fair punishment, is rarely seen to be done.

The average fine, from 2001 to 2005, was:

• For causing injuries or fatalities - £17, 482.67.  
• For fatalities only - £27,760.64.

The median figures for the same period:

• For causing injuries or fatalities: £4,000, i.e. in 50 % of cases companies were fined less than £4,000
• For fatalities: £12,500, i.e. in 50 % of cases companies were fined less than £12,500

2. The fact that there is currently no provision for courts to order inquiries to examine the affairs of small companies is surely a contributing factor to the low level of fines.  This allows companies such as ICL Tech Ltd and ICL Plastics to provide their own information to the courts on the value of the company and remain unchallenged.

3. A further problem with the current system of monetary fines is that companies remain free to find the revenue to pay the fine from within their operating costs.  This means that costs can be passed on to workers and consumers in the form of wage cuts, poorer service or price increases.  In other words, the punishment can bite hardest on those groups that may have been victims of the offence in the first place.

2.  An alternative:  equity fines

The recent ICL/Stockline report suggested an alternative penalty for criminal offences committed by companies, namely equity fines:

“One solution developed by lawyers in the US is to impose fines upon the value of the firm, rather than upon its running costs.  ‘Equity fines’ enable the courts to order offending companies to issue a set number of new shares in the firm that are [placed in a fund administered by the state].  This system punishes those that benefit the most from corporate offending (owners and shareholders) and avoids redistribution of corporate punishments to the most vulnerable groups. Such a system could greatly improve corporate criminal accountability.”

3.  Summary of proposed legislation

1. The proposed legislation would give the courts the option to impose equity fines on public companies found guilty of criminal offences.  It is envisaged as the first stage in the development of a more comprehensive equity fines system which might eventually apply to both public and private companies.

2. A supplementary proposal is to allow courts to order company background inquiry reports to help them set more effective sentences.

3.  Supporters

The proposal is supported by the Centre for Corporate Accountability, Families Against Corporate Killers, the Fire Brigades Union Scotland and the Hazards Campaign.

4.  Additional Notes

The consultation document contains:

· background information
· supporting statements
· detailed discussion of the issues
· the proposed legislation
· information on how to respond

It may be found here:

Errata:  The Y-axis of the graph on p. 30 should not be labelled “Percentage”.  Question 4 on page 17 should read, "How long do you think it will take to gather that information for the courts?"