Corporate Manslaughter could make firms more risk averse: Blunkett

MP David Blunkett has warned that companies could become more risk averse as a result of the new Corporate Manslaughter and Homicide Act.

Blunkett, who wrestled with the development of the Act for three and half years, said: ‘There is a chance companies could become more risk averse unless people realise there is now greater clarity than before.’

The former Home secretary also reassured that no company with a clear commitment to the protection of its own staff and that of the public has anything to fear from the introduction of the Act from next April.

He continued: ‘The Corporate Manslaughter Act will clarify and codify what should already be good practice. It will ensure that people can clearly see the difference between the former common law duties and the development of the offence of gross negligence under Health and Safety at Work Law, coming together in a way that makes it possible for the senior management of companies to protect those involved more effectively.’

He advised companies to stick to the big picture and seek good legal advice. ‘The more people get bogged down in the detail, the more bewildered and risk adverse people become,’ he said.

Blunkett was speaking to UK business directors at a seminar hosted by Aon and Hugh James on the 2008 Act in London.

“The more people get bogged down in the detail, the more bewildered and risk adverse people become

MP David Blunkett

Aon’s technical director, Thomas Sheffield warned that the challenge would be ensuring the new Act does not lead to frivolous civil claims against directors.

‘What is clear is that in our society which is so risk adverse, it isn’t sensible business risk or enterprise but management accountability, gross negligence and duty of care that we’re dealing with. Previously a senior manager or ‘controlling mind’ had to be identified but now it is the lines of responsibility and decision making processes for which the company will be held to account.

‘It is our common endeavour to protect ourselves and those around us. On present estimates, the objective of preventing the necessity of legal action will be fulfilled with the potential for around only a dozen cases a year coming to fruition. My hope is that it will be much less.

‘It is essential that companies – and this is spelt out clearly in the 2006 Companies Act, Schedule 3, Section 450 – keep records of decisions and actions to be taken. Information is vital to ensuring that knowledge is put to the proper use in protecting both employees and the public.’

Sheffield, highlighted the risks for UK directors. He said: ‘The endeavour of the Act is to provide an improved statutory way to scrutinise a company’s governance and its influence on the public. Rather than placing the sole focus on an individual’s negligence, which has been historically hard to prove, it now emphasises the role of individuals throughout the company. Notwithstanding this, the Act should not be allowed to create a roadmap for frivolous civil actions against directors. As such, directors cannot afford to be complacent. They must check their directors and officers policy to see whether legal cover would be granted if they found themselves in such a situation.’