Select Committee on Home Affairs and Work and Pensions First Report


7  SENIOR MANAGERS

130. The draft Bill only focuses on the way in which the organisation's activities have been managed or organised by its senior managers - management failures lower down in the organisation are not relevant. This "senior manager test" marks a departure from the Law Commission's proposals which looked more generally at failures in the way a company's activities were managed or organised, regardless of the level of management responsible for the failure (see para 18).

131. The Home Office has justified its decision to focus only on senior management failures on the grounds that the offence is designed to criminalize "truly corporate failings in the management of risk, rather than purely local ones".[156] In other words, the Home Office is aiming to target management failings that they believe can be fairly associated with the organisation as a whole. Management failures which are not the responsibility of an organisation's "senior managers" are not considered to be at a high enough level within the organisation to render the organisation itself liable for corporate manslaughter.

132. The senior manager test was the most widely criticised aspect of the draft Bill. We discuss the concerns raised below.

Delegation of health and safety loophole

133. Many witnesses, including an eminent judge, expressed concern that by restricting the offence to a level of "senior managers", the proposals would encourage large companies to delegate health and safety responsibilities to non-senior manager levels in order to avoid corporate liability.[157] The Centre for Corporate Accountability commented, "Of course, if you were a good corporate lawyer, that is what you would be suggesting".[158]

134. It was put to us in evidence that such delegation of health and safety would be seen as senior management failure in itself.[159] However, JUSTICE and the Centre for Corporate Accountability pointed out that if the decision to delegate or the supervision of the delegation was in itself not grossly negligent then the company could not be prosecuted, however serious the management failure was within the company.[160] Ms Sally Ireland, from JUSTICE, told us:

    "It would be hard to establish gross negligence on that basis unless the person to whom you were delegating was evidently incompetent to carry out the functions you were delegating to them. Remember, we are talking about the criminal standard of proof here as well. It would always be open to the senior manager to say, "He was qualified to do the job. He was perfectly responsible and we took the decision that health and safety should be determined at factory level" which sounds reasonable".[161]

135. The Centre for Corporate Accountability also highlighted a survey commissioned by the Health and Safety Executive to find out whether companies had appointed a director in charge of health and safety. It had found that:

    "In relationship to those companies that had delegated responsibility down, one of the main reasons why the companies had done that was because of the forthcoming corporate manslaughter legislation".[162]

136. We are very concerned that the senior manager test would have the perverse effect of encouraging organisations to reduce the priority given to health and safety.

Reintroducing the identification principle

137. Another concern raised in evidence was that the senior manager test was reintroducing the problems of the identification principle, with the requirement of identifying a directing mind simply being replaced by that of identifying senior managers.[163] Ms Sally Ireland from JUSTICE argued:

    "There is too much reference to individuals here…The offence as currently drafted is a sort of hybrid. It punishes the organisation but refers you again and again to individuals and their activities".[164]

138. The Home Office's introduction to the draft Bill claimed that its proposals are more sophisticated. It argued:

    "This does not mean that we have replaced the requirement to identify a single directing mind with a need to identify several, nor does it involve aggregating individuals' conduct to identify a gross management failure. It involves a different basis of liability that focuses on the way the activities of an organisation were in practice organised or managed".[165]

139. However, many witnesses could not see how liability would be imposed under this offence, except on the basis of aggregating the conduct of senior managers. The British Vehicle and Rental Licensing Association wrote:

    "it remains unclear to us how in practice the courts will interpret this…Further clarity is required on how…liability will be imposed other than on the basis of some form of aggregation".[166]

140. We agree that the offence does appear simply to broaden the identification doctrine into some form of aggregation of the conduct of senior managers. This is a fundamental weakness in the draft Bill as it currently stands. By focusing on failures by individuals within a company in this way, the draft Bill would do little to address the problems that have plagued the current common law offence.

"Senior manager" definition

141. Many witnesses believed the restriction of the offence to senior managers would cause legal argument about who did and did not fall under the definition of "senior manager". It was feared that this legal argument might even replace the difficulties of identifying a "directing mind" under the current common law.[167]

142. The draft Bill proposes the following definition of senior manager:

    "A person is a "senior manager" of an organisation if he plays a significant role in:

    (a) the making of decisions about how the whole or a substantial part of its activities are to be managed or organised, or

    (b) the actual managing or organising of the whole or a substantial part of those activities".[168]

This definition incorporates both senior strategic decision-makers and senior operational managers. It has two tests for seniority - first, the person must make decisions about or manage or organise a whole or substantial part of the organisation; and second, the person must play a significant role in decision-making or operational management.

143. Some of the evidence submitted to us suggested that the definition was appropriate, arguing, for example, that a clearer definition was impossible, given the large number of different organisational structures in businesses, and would have to be developed and refined by case law;[169] or that it was desirable to avoid narrowing the definition.[170]

144. However, most witnesses found the definition too vague.[171] The following specific aspects were particularly criticised.

145. No definition of the terms "significant" and "substantial" is given in the draft Bill itself. A large number of witnesses argued that they required further definition.[172] The then Lord Chief Justice and others questioned whether "substantial" was intended to have the narrower meaning, enshrined in criminal law, of "more than trivial" or the broader natural meaning.[173] Some witnesses wondered whether the terms would be applied by reference to the number of staff employed, the turnover or profit or output generated, the space occupied, the importance in terms of the company's reputation or by other reasons.[174]

146. Others believed that the definition would not fit all organisational structures.[175] For example, witnesses pointed out that many businesses, especially smaller ones, tended to have informal hierarchies with blurred management, possibly based on family relationships or friendship,[176] and that in such organisations the position could change even during the course of a single day.[177]

147. Some of the evidence submitted to us expressed concern that individuals who ought to count as "senior managers" would not fall under the definition.[178] Examples given included: (a) clinical managers who were responsible for one area of delivery but would not play a significant role in the making of decisions or operating the whole or substantial part of the NHS; and (b) managers of large construction sites or factories belonging to a company which controlled many such sites[179] (see 'Inequitable application' paras 150 to 154).

148. On the other hand, other witnesses felt that the definition had too broad an application,[180] arguing for example that the definition should only apply to those who manage activities rather than make decisions, as this test was well established in other areas of law.[181] Some suggested that the definition would allow relatively junior levels of management to be treated as senior management whereas it should only apply to those who can make "strategic" decisions, and not those who "organise" activities.[182]

149. We are greatly concerned that the senior manager test will introduce additional legal argument about who is and who is not a "senior manager".

Inequitable application

150. A further criticism of the restriction of the offence to failures by senior managers was that it would apply inequitably to small and to large organisations. The Home Office has admitted that management responsibilities that might fall under the definition in a smaller organisation, such as a retail outlet or factory, might well be at too low a level in a much larger organisation.[183]

151. Some of the memoranda we received commented that such variation in application would replicate one of the main criticisms of the existing law: that it is currently easier to prosecute smaller organisations successfully, as management failure at a site controlled by a small firm could result in liability while the same failure at a site controlled by a larger firm might not.[184] Southlands Nursing Home, for example, wrote about the

    "irony …that by aiming at senior management to catch larger organisations, it actually focuses on smaller firms".[185]

152. We accept that, under the approach taken by the Home Office, some variation in the application of the offence is inevitable and in some cases can be appropriate. For example, it might not be fair to associate a failure by a manager of a very small section of a very large company with the company as a whole, but if this section were the totality of a small company then it might seem just to do so.

153. However, we believe that, in other cases, it does not seem right that a large company should escape liability when a smaller company does not. One such example was drawn to our attention by the Centre for Corporate Accountability and others.[186] This is the case where a person dies in a factory and investigation shows that there had been a very senior management failure that caused the death, which was the responsibility of the most senior people in that particular factory. If this factory were the only unit of business in a small company, the company would be liable. However, if the factory was one of ten owned by a company, it might not be prosecuted (depending on the interpretation of "substantial" - see "senior manager" definition" paras 141-149), unless gross negligence could be shown at head office level.[187] We agree with the Simon Jones Memorial Campaign that this "is setting the bar too high".[188]

154. However, we accept that all these examples are difficult and that others may come to different conclusions. We believe that the Government should be aiming for an offence that applies equitably to small and large companies.

Reputations

155. Some witnesses also argued that restricting the offence to failures by senior managers would be unfair as it would mean that the reputations of the responsible senior managers would effectively face trial without their having the power even to make representations in the proceedings.[189] The Confederation of British Industry, for example, wrote:

    "the inevitable position is that those individuals are to an extent going to be examined as if they themselves were on trial. However, because they are not defendants themselves (unless prosecuted for manslaughter or under the HSWA Act as individuals) they will have no locus before the court to defend or put forward explanations for their actions or omissions".[190]

156. Others also raised concerns that the senior manager test might discourage unpaid volunteers, such as those on Housing Associations or governing bodies of schools, from taking on such roles.[191] The Seren Group and Alarm even warned that the draft Bill might result in a "recruitment crisis". Both added that it would be useful if guidance on volunteer boards could form part of the legislation.[192]

157. Some concerns were also raised that it would discourage candidates for election to councils from standing, as such members only receive an allowance.[193] However, South East Employers noted that the draft Bill had taken "the unique position of a local authority into account" (see "Public policy decisions of public authorities" in Chapter 10).

158. We note that the reference to senior managers might also have the unfortunate effect of discouraging unpaid volunteers from taking on such roles.

Alternatives to the senior manager test

159. We agree with many of the concerns raised about the proposal in the draft Bill that only failures in the way an organisation's activities are organised or managed "by its senior managers" would be relevant for the purposes of the offence. We recommend that the Home Office reconsiders the underlying "senior manager" test.

160. As we have already argued (see Chapter 6 above), we believe the offence should continue to be based on the concept of "management failure". Many witnesses believed this would be sufficient and argued that the Home Office should have retained the Law Commission's proposals.[194] These looked more generally at failures in the way a company's activities were managed or organised, regardless of the level of management responsible for the failure.

161. However, we also heard evidence from the Trades Union Congress and the Centre for Corporate Accountability, that these original proposals might have been too broad.[195] The Centre for Corporate Accountability pointed out that they could have meant that management failure even at supervisory level could result in prosecution of the company.[196] We agree that it does not seem fair to prosecute a company for a management failure at this level.

162. In oral evidence to the Sub-committees, the Parliamentary Under-Secretary of State at the Home Office appeared to accept that there might be difficulties with the senior manager test and expressed the hope that our process of pre-legislative scrutiny might elicit an alternative to this test which did not reintroduce the problem with the original Law Commission's proposals:

    "I suppose one of the things that I was hoping was that your scrutiny might help us to deal with this problem, …you are quite right that the Law Commission's initial arrangement could potentially capture some supervisory level, a shop manager or someone, who is merely following the standard company procedure, and that is not what we intend to be the outcome of this. Is the way that we have framed the test a way which genuinely can capture the major management of an enterprise, those who are profoundly fundamentally responsible? We hope so, but if it does not then we would certainly wish it to. We did not think that management failure at a low level should be able to be caught but our aim is to make sure that wider corporate management failings, those who are actually responsible for the corporate business of the company, should be the right test…If we share a view that it should be at a senior level I would very much welcome advice on how to frame that as the kind of thing which pre-legislative scrutiny can help to drill down into and, I hope, end up with a better Bill as a result of it."[197]

163. We discuss possible alternatives below.

164. A number of organisations suggested different ways of amending the draft Bill to link it to what they considered to a "fairer" level of management at which failure should be before a company is liable for the offence.

165. Some representatives from industry argued that the failures should be targeted at "director" level, as this was a concept already recognised in the law.[198] However, we agree with the Centre for Corporate Accountability that it would be very limiting to say that a company could only be prosecuted if a director had been grossly negligent[199] and believe it would not help to solve any of the problems discussed above.

166. In its initial written evidence to the Sub-committees, the Centre for Corporate Accountability suggested adding an additional basis of liability for the offence so that a company could be prosecuted if (a) there was a grossly negligent management failure within the company that caused the death and (b) a senior manager knew or ought to have known that there was a management failure and did not take reasonable steps to rectify that failure.[200] However, as the Centre itself argued in later supplementary evidence, such a test would add further unnecessary legal complexity.[201] It would also not deal with the problem of inequitable application between small and large companies.

167. The CCA has since suggested a different approach, which redefines a "senior manager" as at "workplace level or above" and includes a concept of aggregation. It suggests that section 2 should be amended as follows:

    "A person is a senior manager of an organisation if:

    "(1) either he plays a significant role at a workplace level within the company in -

      (a)  the making of decisions about how the whole or a substantial part of the workplace's activities are to be managed or organised, or

      (b)  the actual managing or organising of the whole or a substantial part of those activities.

    (2) or is more senior than such a person"

and that section 1(1) should read:

    "An organisation to which this section applies is guilty of the offence of corporate manslaughter if the way in which any of the organisation's activities are managed or organised by its senior managers-

      (a)  causes a person's death, and

      (b)  when aggregated together, amount to a gross breach of a relevant duty of care owed by the organisation to the deceased".[202]

168. It argues that the retention of the term "senior manager" - though at a workplace level - would prevent companies from being prosecuted as a result of gross failures at a very low level of management but that it would capture the intuitive factory examples given in para 153 above.

169. We agree with the Centre for Corporate Accountability: that a company "is not just the senior management" and that allowing grossly negligent failures at non-senior management levels to enable a company to be prosecuted is "the only way to ensure the offence can engage with complex management systems or systemic failures". However, we prefer a different alternative to the test the Centre suggests. We believe that a test should be devised that captures the essence of corporate culpability. In doing this, we believe that the offence should not be based on the culpability of any individual at whatever level in the organisation but should be based on the concept of a "management failure", related to either an absence of correct process or an unacceptably low level of monitoring or application of a management process. The implications of this proposal will be considered (paras 195-199) after a consideration of the draft Bill's proposals on gross breach.


156   Home Office, Corporate Manslaughter: The Government's Draft Bill for Reform, Cm 6497, March 2005, para 14 Back

157   Volume II, Ev 7, 13, 16, 19, 56, 60-61, 81, 86, 111, 132, 187, 198, 200, 211 and 220 and Volume III, Q 501 [Lord Justice Judge] Back

158   Volume III, Q 56 [Mr Bergman] Back

159   Volume III, Q 89 [Mr Donnellan], Q 268 [Mr Day] and Q 376 [Mr Roberts] Back

160   Volume II, Ev 167 and Volume III, Q 57 [Mr Bergman] and Q 480 [Ms Ireland] Back

161   Volume III, Q 480 Back

162   Volume III, Q 56 [Mr Bergman] Back

163   See, for example, Volume II, Ev 13, 198, 211 243-244, 269, 284, and 311. Back

164   Volume III, Q 478 Back

165   Home Office, Corporate Manslaughter: The Government's Draft Bill for Reform, Cm 6497, March 2005, para 27 Back

166   Volume II, Ev 13 Back

167   Volume II, Ev 4, 22, 33, 38, 52, 60, 81, 86, 111, 151, 217, 243, and 287 Back

168   Clause 2 Back

169   Volume II, Ev 87 Back

170   Volume II, Ev 119 Back

171   Volume II, Ev 10, 16, 39, 43, 54, 198, 111, 113, 200, 204, 210, 266, 273, 274, 281 and 300 Back

172   Volume II, Ev 57, 66, 86, 108, 151, 211 and 238. Back

173   Volume II, Ev 57, 63 and 108 Back

174   Volume II, Ev 65 and 189 Back

175   Volume II, Ev 60, 217 and 263 Back

176   Volume II, Ev 41, 113 and 211 Back

177   Volume II, Ev 130 and 210 Back

178   Volume II, Ev 81, 111, 229, and 266  Back

179   Volume II, Ev 22, 167-168 and 233 Back

180   Volume II, Ev 271 Back

181   Volume II, Ev 79 Back

182   Volume II, Ev 238 Back

183   Draft Corporate Manslaughter Bill, para 30 Back

184   Volume II, Ev 22, 63, 81,140, 197, 198, 220 and 311 Back

185   Volume II, Ev 197 Back

186   Volume II, Ev 22, 81 and 311 Back

187   Volume II, Ev 167 Back

188   Volume II, Ev 81 Back

189   Volume II, Ev 131-132 and 252-253 Back

190   Volume II, Ev 252 Back

191   Volume II, Ev 29-30 and 149 Back

192   Volume II, Ev 29 and 149 Back

193   Volume II, Ev 37, 134, 200, 279 and 305 Back

194   Volume II, Ev 8 and 23 Back

195   Volume II, Ev 17 and 154 Back

196   Volume II, Ev 154 Back

197   Volume III, Q 568 Back

198   For example Volume III, Q 377 [Mr Roberts] and Volume II, Ev 271.  Back

199   Volume III, Ev 123 Back

200   Volume II, Ev 167-168 Back

201   Volume III, Ev 125-126 Back

202   Volume II, Ev 126 Back


 
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