The Ethics Journey - Part 1 

19 November 2019 

Ezekiel Ward

I have recently been asked about how ethics developed within companies, especially multinationals. People who have never touched the topic before seem curious about what happens on this journey. We have sat and talked for hours about where problems came from, how E&C departments emerged and what the 'E&C journey' looks like. I've summarised some of these conversations in two parts – here in the first part on the broader context, and in a second part on how this has played out in companies. I hope you find it interesting.

A broader context

Where we started is crucial. We’ve come a long way from a world where bribes abroad were unregulated, as recently as the early 2000s. Their tax deductibility speaks to how little thought had been given to them. It was academics in development studies, economics and political studies who first structured thinking around what impacts bribes had on society. Their work inspired others, lawyers included, to begin asking their own questions. Some nicely developed thinking on this has been given form by Jane Ellis in a collection of writings, Corruption, Social Sciences and the Law (2019, Routledge).

Corporate liability

The law on corporate liability has itself been on a long journey. The distinct nature of corporate entities and their shareholders goes back to Salomon v A Salomon [1897]. Nonetheless, whilst piercing the corporate veil has proved difficult, the fight has never been given up. The concept of the ‘directing mind’ as described in Tesco v Nattrass [1971] should be vividly recalled by any law student. From where we now stand, that too looks rather like one step back before we can take two forwards – for prosecutors to find the directing mind(s) such as directors, and demonstrate their direct involvement in matters often far down the company hierarchy, is next to impossible. In family and property cases like Green [1993], Mubarak [2001] and eventually Prest [2013], orders were made against company property where it was just and necessary. My point, imperfectly made, is that progress has been varied and jolting.

 

The UK Bribery Act (“UKBA”) stands out for its virtual presumption of liability. Corruption committed by a person associated with the entity is considered to have been done by the company itself. The company is guilty, with a defence of adequate procedures. This is a remarkable model, one that is very tempting to follow in related areas such as fraud and anti-money laundering.

Political questions

The political context deserves a mention here also. We have been through a period of incredible economic growth. When I joined PwC in 2007 the partner giving us our induction speech echoed Gordon Brown’s words that the years of boom and bust were over. Years of uninterrupted growth followed one after the other. The gleeful memory of those years doesn’t hold for long, only months later I was assigned to the investigations team at Lehman Brothers in London, as part of the administration. Public resentment at the behaviour of big businesses, the rescue packages they received and the austerity measures that followed, is still with us. This may help to explain the bursting political engagement we see today. Holding companies accountable feels like more of a priority.

Enforcers

Globalisation and the harmonisation of rules has made life easier for multinationals. Enforcers have followed – prosecutors now cooperate more meaningfully on international cases. My team watched US agents in an Oslo courtroom with interest, knowing that they were showing a genuine interest in our company and the fate of the individuals on trial. That pattern has been repeated countless times these past years.

 

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