June 24, 2005
Miscreant Directors Can Give Back to the Community
Posted by Caroline Bradley

In the UK people can be disqualified from acting as corporate directors if they commit offences in the promotion formation or management of a company. This is the same idea as the director bars imposed here under the federal securities laws, although director disqualification often occurs in the UK where directors' actions have harmed creditors. As well as being disqualified from acting as a director for a period of time (which varies with the gravity of the conduct), an ex-director may also be subject to other penalties. One ex-director (an electrician) was recently sentenced to 80 hours of "community punishment". The UK's criminal justice system web site describes community punishment as being appropriate

for people aged over 16, whose crimes have harmed a community, such as drunk and disorderly and anti-social behaviour or criminal damage. It may also be used for serious one-off offences such as high-level drink-driving and driving while disqualified

Community punishment was not designed for corporate directors, but I like the idea that corporate directors who act in anti-social ways might be required to make up for what they have done by putting something back into the communities they have harmed. There is the problem that this strategy is likely to work better in the context of smaller companies that are directly connected with the specific geographic communities they serve (like the electrician's) than larger national or multinational corporations. But perhaps it would be a good idea to emphasise to directors of large corporations that their actions affect real people living in real communities.

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