Legal developments could be about to change the boundary of corporate responsibility-the definition of responsibility may be changing. Not just in perception, but in the eyes of the regulator.
There are two developments that highlight this:
Exhibit A: US Department of Justice to prosecute individual employees
The US Department of Justice (DoJ) announced a new policy on ‘Individual Liability in Matters of Corporate Wrongdoing’.
The deputy attorney general behind the announcement said: “Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom.”
In announcing this, the message is clear. The punishments for white collar crime will no longer stop at corporate entities, but extend to the individuals responsible.
The rationale is that individual responsibility will act as a greater disincentive to misconduct, will change corporate behaviour, hold those responsible to account, and stop shareholders and companies paying the price for the irresponsibility of individuals.
Notably, it’s a clear response to criticisms that few individuals have been held responsible for corporate scandals and the financial crisis. Large corporates have tended to reach financial settlements to bring an end to the matter. This resolution has been largely unsatisfactory in the court of public opinion.
The move is not without difficulties. Critics shouldn’t expect a bunch of CEOs to be in handcuffs anytime soon. It is, however, an important recognition of public opinion, and the fact that it is ultimately people, not faceless corporations, that make decisions that affect us all.
Exhibit B: landmark case to redefine what it means to be an employer
When’s a worker not an employee? The U.S. National Labour Relations Board has refined its standard for determining joint employer status. The new criteria take account of whether a company shares or codetermines the governing factors and conditions of an individual’s employment.
This stemmed from a relatively obscure case put in front of the Board on recycling collectors in California. It determined that the recycling company was the joint employer of its contracted workforce. The ruling has the potential to disrupt a traditional arms-length relationship between companies and their contracted workforce or the employees of their franchisees.
As an indication of the potential size of the implications, in the US, nearly 3 million people are employed through temporary agencies, and around 8.5 million are employed in US franchises.
This recognises what many of us in corporate responsibility circles have said for a long time. Responsibility doesn’t end where your immediate control stops. Companies are responsible for impacts that span right across the value chain. For example on issues such as health and safety, large oil companies have been expected to report on incidents involving contractors as well as employees for some time.
Again, I wouldn’t expect too many immediate changes. There is significant industry and political opposition to the ruling. However, landmark cases against McDonald’s and Uber are still in the pipeline, which could further raise this issue.
So what do these developments mean for businesses?
In reality, it seems unlikely that they will bring immediate substantive changes. However, it is part of a pattern we have seen for a number of years towards increased scrutiny and demands for high accountability from companies. What it may also do is hone in the focus not just of regulators, but customers and public opinion around a) what it means to be responsible, b) who is responsible c) where the boundaries end and d) whether a company is meeting the expectations in the court of public opinion.