Enhancing Corporate Governance Through the Criminal Justice Process

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Enhancing Corporate GovernanceThrough the
Criminal Justice Process

• Ian McWalters, SC
• Senior Assistant Director of Public Prosecutions

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• Wrongdoing can only be avoided if those who are
  not wronged feel the same indignation at it as
  those who are.
• Solon
• 638-558 BC

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The Purposes of the Criminal Law

• (a) to forbid and prevent conduct that
  unjustifiably and inexcusably inflicts or
  threatens substantial harm to individuals or
  public interests

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The Purposes of the Criminal Law

• (c) to safeguard conduct that is without fault
  from condemnation as criminal

(d) to give fair warning of the nature of the
conduct declared to be an offence American Law
InstitutesModel Penal Code
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• Our criminal law is also a system of values ...
  in addition to attaching negative consequences to
  undesirable behaviour, a judicial sentence should
  also be imposed in a manner which positively
  instils the basic set of communal values ...
• Lamer CJC in R v M
• (1996) 105 CCC (3d) 327 at 369e-f

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Options for addressingCorporate Governance
Issues

• the creation of civil rights and imposition of
  civil liabilities
• subjecting corporations to regulatory regimes
• applying corporate governance codes of best
  practices and
• criminalizing specific conduct

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The Objects of Punishment

• (1) to exact retribution by society on the
  offender
• (2) to denounce the conduct being punished
• (3) to protect society from the offender
• (4) to deter others from committing the same
  conduct and
• (5) to rehabilitate the offender

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The Essence ofCorporate Governance

• Corporate governance is the system by which
  companies are directed and controlled.
• Sir Adrian Cadbury
• Report on Financial Aspects of Corporate
  Governance in the United Kingdom

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The Broad View ofCorporate Governance

• In its broadest sense, corporate governance is
  concerned with holding the balance between
  economic and social goals and between individual
  and communal goals. The governance framework is
  there to encourage the efficient use of resources
  and equally to require accountability for the
  stewardship of those resources. The aim is to
  align as nearly as possible the interest of
  individuals, of corporations and of society.
• Sir Adrian Cadbury

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Corporate governance is essentially about
leadership

• leadership for efficiency
• leadership for probity
• leadership with responsibility
• leadership which is transparent and accountable.
  
• Commonwealth Association
• for Corporate Governance

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Corporate Governance

• It is about commitment to values, about ethical
  business conduct and about making a distinction
  between personal and corporate funds in the
  management of the company.
• Report of the Committee on
• Corporate Governance of the
• Securities and Exchange Board of India

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What is Stewardship?

• Stewardship is about providing a value and ethic
  based leadership of a company within a corporate
  culture of transparency and accountability.

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Standards andCorporate Governance

• setting standards
• encouraging adherence to these standards
• reviewing the adequacy of these standards
• enhancing these standards

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Standards and theCriminal Justice Process

• the creation of offences - a standard setting
  mechanism
• the enforcement of offences - motivating
  adherence to the standards
• the prosecution of offences - publicizing the
  standards, motivating adherence to them and
  providing an opportunity to review their
  sufficiency
• the punishment of offenders - retribution,
  deterrence and denunciation

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Setting StandardsHaving an Effective Range of
Offences

• Review the effectiveness of the offences
• Ensure the offences cover the field
• Consider a continuing course of conduct offence
• Enact a private sector corruption offence

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UNCACPreamble

• Concerned also about the links between corruption
  and other crime, including money laundering.

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UNCACArticle 21

• An offence that
• is committed intentionally in the course of
  economic financial or commercial activities
• which covers the promise, offering or giving
  solicitation or acceptance of an undue advantage
• (i) to or by a person working for a private
  sector entity
• (ii) for that person in order that he, in breach
  of his duties, act or refrain from acting.

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Prevention of Bribery OrdinanceSection 9

• The offer, solicitation or acceptance
• without lawful authority or reasonable excuse
• of an advantage
• to or by an agent
• for doing an act in relation to his principals
  affairs or business

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• ... we cannot for a moment accept the
  suggestion that bribery in the private sector is
  to be regarded as any less culpable than bribery
  in the public sector
• Hong Kong Court of Appeal
• R v Wong Tat-sang Cr App 529/84

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• It is the duty of the court to make it plain to
  the business community that when situations such
  as this arise there is only one course open to
  the person to whom the offer is made report the
  matter to the authorities.
• Hong Kong Court of Appeal
• Attorney General v Bow Ki-lun anor
• 1995 2 HKCLR 168

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Misconduct in Public Office

• a public official
• in the course of or in relation to his public
  office
• wilfully misconducts himself by act or omission
  for example, by wilfully neglecting or failing to
  perform his duty

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Misconduct in Public Office

• without reasonable excuse or justification and
• where such misconduct is serious, not trivial,
  having regard to the responsibilities of the
  office and the officeholder, the importance of
  the public objects which they serve and the
  nature and extent of the departure from those
  responsibilities

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Misconduct in Private Office?

• applicable only to senior management
• using a criminal offence to raise standards of
  senior management conduct rather than to prompt
  adherence to a minimum standard

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Enforcement of the Law

• a specialist law enforcement agency separate from
  and independent of the rest of government

• special powers for the investigation of serious
  fraud and corruption

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Powers of Investigation

• powers against suspects

• powers against witnesses

• powers against confidential record holders

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The Prosecution of Offenders

• accomplice evidence
• banking records
• business records
• computer records
• expert evidence of forensic accountants and
  bankers and admissibility of reports and use of
  presentational aids
• use of depositions of witnesses who are
  unavailable to attend court

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The Punishment of Offenders

• retribution

• deterrence

• denunciation

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Deterrence

• Law cannot persuade where it cannot punish
• Thomas Fuller

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Denunciation

• A denunciatory sentence represents
• a symbolic, collective, statement that the
  offenders conduct should be punished for
  encroaching on our societys basic code of values
  as enshrined within our substantive criminal law
  
• Lamer CJC in R v M

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The punishmentmust be dissuasive

• Sentences cannot be brought below a level which
  will afford some deterrent against crime and,
  where substantial fraud or corruption is
  concerned, preserve the integrity of Hong Kongs
  commercial reputation.
• Attorney General v Shamsuddin 1987 HKLR 826 at
  page 833G

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Reviewing and Enhancing Standards

• the fact that the misconduct took place acts as a
  catalyst to review the standards
• the fact misconduct cant be punished because it
  is not a crime prompts criminalization
• the existence of flaws in the criminal justice
  process that prevent a just response motivates
  change
• the public nature of the trial process provides
  an opportunity to review standards and laws

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Thank You