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Scotland looks to ‘equity fines’ to hit safety flouters

A Member of the Scottish Parliament is proposing that contractors found guilty of causing death or injury in Scotland should be forced to pay a fine via new shares - rather than a cash penalty.

Bill Wilson’s idea is designed to ensure that companies hit with big fines are not forced to lay off workers to find the money.

The so-called equity fine proposed by the Scottish National Party member would give courts the power to scrutinise company books and order convicted firms to issue a set number of new shares. These would then be sold and the proceeds paid to the court.

Dr Wilson, a member of the Scottish Parliament’s cross-party group on human rights and civil liberties, claimed current legislation was too light on firms found criminally responsible for offences that result in death or injury.

Construction accounts for around a third of fatal work accidents in Scotland. Latest figures show that of the 31 killed north of the border, 10 worked in construction.

According to the HSE, there were also 450 major injuries in 2006/07 and 812 over-three-day injuries - both of which had also increased year-on-year.

Dr Wilson said: “In effect, an equity fine is a fine imposed upon the value of the firm rather than upon its running costs.

“The fine could be imposed on any publicly limited company for a range of crimes. Although health and safety is the main area of concern in our consultation, other areas, such as environmental crimes, might equally benefit.”

Courts would also be able to order reports into a company’s status, rather than accepting their own versions of their financial standing.

Critics have argued the reform has limited application as it cannot be used against public bodies or private companies.

The Confederation of British Industry said the case for further legislation was “far from convincing” as the Corporate Manslaughter Act only came into effect in April and needed to be given time to work.
But the MSP said his scheme could be the first stage in developing a more comprehensive system of equity fines which could eventually apply to public companies as well.

Consultation on the proposed legislation will run until the end of November.

HOW AN EQUITY FINE WORKS

In lieu of the monetary fine, the convicted company is obliged to issue a set number of new shares. These are then sold and the proceeds paid to the court.

The equity fine dilutes the value of the shareholding but does not directly affect the operational status of the company.

Avoiding damage to the operational status means the workforce – who may well have been the victims of the offence – are less likely to find themselves in a position whereby the continuation of the company, and thereby their employment, is in jeopardy.

The MSP hopes such fines will act to encourage potential shareholders to consider the histories of companies prior to investment.

Analysis: Fine idea in an area of endless debate

By David Rogers

How to punish firms found guilty of breaching health and safety law is a question that never really gives anyone an adequate answer.

Jail, Draconian monetary fines, shutting firms down - all of these have been floated in recent years.

Certainly shutting some of those who brazenly flout the rules is an option a number of parties would like to be considered, the thinking being that it removes them from the industry at least temporarily. Dr Wilson’s looks like the latest idea.

It seems reasonable in that some of the heftier fines meted out are often to companies that will struggle to pay, and Mr Wilson’s idea is that companies won’t be forced under as a result.

Whether it becomes reality is an entirely different thing. Taking a cue from the HSE, which often gets criticised for stating the obvious, if firms did the right things in the first place there wouldn’t be any need for all this discussion.