ICMLG'14: Accountability in cases of corporate failure

Dr James Lockhart, of Massey University, New Zealand, spoke to the highly topical issue of governance accountability in cases of corporate failure or fraud. After introducing the topic and comparing rules-based and principles-based systems of governance, Lockhart discussed several cases of corporate failure that have occurred in recent years, including:

• Case #1: Approximately 70 finance companies went bust due to mismanagement, resulting in the loss of $850bn of investor's funds. Directors, CEOs and related parties were held accountable through the legal system, and several spent time in jail as a consequence of being found guilty.
  
• Case #2: Twenty-nine employees and contractors were killed in a major industrial workplace accident. The CEO and some other parties were initially charged, however all charges were subsequently withdrawn, in effect removing any accountability.
• Case #3: Hundreds of Asians became sick and six died as a result of contaminated milk products exported from New Zealand. No one, in either the affected country (China) or in New Zealand were charged.

Lockhart's conclusion was telling: if boards and managers lose large sums of money they will be held accountable. However, if lives are lost different accountability rules will apply. The evidence analysed suggests that lives lost are accorded a lower standard of accountability. That seemed odd—tragic even—to Dr Lockhart, and to many members of the audience. 

The question that lingered in my mind as I left the room? How long it will be (or how many more accidents will it take) before something is done about this glaring inconsistency?

Disclosure: James Lockhart is my PhD supervisor. However, the paper he presented was entirely his work and I had no involvement in it.