Insurance While There Are Abundant

Insurance

While there are abundant problems in the conduct of this company, beginning with the accountants' attitude and behaviour (especially cogent in this era of accounting scandals in the United States bringing accounting propriety issues to top-of-mind status globally, and especially in the G-8 nations). However, the issue that has the greatest ethical impact revolves around personnel issues.

Ethics of gender and age; liability

Currently, Britain doesn't have sex and age discrimination laws in force as strong and demanding as those in the United States or as demanding as those being formulated by the EU; moreover, there is a strong push in the European Union for such legislation region-wide and such intensified statutes are already under consideration in Britain. Indeed, the proposal for a EU directive on "the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (re-cast version) was launched by the Commission in April 2004. The objective of the proposal is to simplify, modernize and improve the Community law in relation to gender equality by putting relevant Directives into a single text

" (womenandequalityunit Web site, 2005).

In fact, the directives are scheduled to go into effect 1 October 2005.

Unfortunately, Perfect Products plc ignored the spirit of the intended law. The company also ignored the demands of British legislation already in place, and the 1976 Equal Treatment Directive that established the principle of equal treatment for men and women "with regard to "access to employment, vocational training, promotion and working conditions. This Directive has now been amended by Directive 2002/73 which installs ECJ case law and strengthens the principle of equal treatment and its practical implementation. The ETAD was published on 5 October 2002 and must be implemented by Member States by 5 October 2005" (womenandequalityunit Web site, 2005).

While it is not a question of equal pay, the decision of the HRM Manager to lay off 300 workers, predominantly mainly over-50 and female workers brings to mind intimations of unequal pay. In fact, there may be a cause of action, depending on the conditions of working because the Equal Pay Act of 1970 makes it "unlawful for employers to discriminate between men and women in terms of their pay and contractual conditions" (womenandequalityunit Web site, 2005).

It is possible that the move violated contractual conditions; the Act applies to both genders, and the women might find a cause of action because of the necessity of comparing their contractual treatment not with that of other women, but with that of men. If they were laid off at greater rates than men were, then it is likely they have a cause of action against Perfect Products plc on that basis.

Physical harm

While the women might well have a cause to proceed against Perfect Products plc in a civil court, criminal action might be possible because of the injury to a worker because of the fire. Moreover, that liability might extend farther than the directors might have imagined.

It may be that the directors and other decision makers in the company banked on the fact that, even if an industrial disaster were to happen, it is unlikely there would be a criminal prosecution of either the company or the directors. In 1997, 67 people were blinded, 1,006 lost limbs or bones, and 303 were poisoned. All took place in circumstances that, outside of the corporate setting, would have resulted in investigation by the authorities, and yet very few were investigated by the police (Bergman 1998).

In the case of the fire injury, possibly the only entity that has no culpability is the insurance company because despite the possibility that they were told to cancel all insurance (this is not clear because of the phrasing of that portion of the case study), they did not cancel it.

As for the liability for the fire injuries, there is sufficient culpability to go round. Director E. obviously bears responsibility for having improperly disposed of a cigarette: In addition, if there was a no-smoking rule in effect, that director would be doubly culpable. Director F, who did not participate in the company closing board meetings, also bears liability, as do the other directors by virtue of their position. Moreover, the issue is complicated by the fact that Perfect Products failed to disclose previous fires. This allowed the insurance broker to deny liability; again, the directors are responsible, ultimately, for this failure, as would be the specific company agents responsible for the decision not to disclose the prior fires.

Despite their ethical and legal responsibility, it is probable the directors will escape prosecution. Bergman (1998) notes, "no direct" or (or even manager) was charged for any offence in relation to last year's 261 sudden deaths" in regard to 1997.

Bergman contrasts the amazing level of impunity with the reality of deaths in workplace accidents. He notes that in 1994 in the West Midlands, four deaths should have resulted in manslaughter prosecutions against a director. "If this was reflected nationwide, last year's deaths alone should have resulted in 35 corporate manslaughter prosecutions," Bergman (1998) noted regarding 1997's statistics.

While experts such as Gary Slapper, professor of law at the Open University, found that one-fifth of deaths he looked at should have been referred for prosecution, the Health and Safety Executive (HSE), which has principle authority for investigating workplace injuries and deaths, is not worried. That organization believes that the lack of legal action simply means that workplace injuries did not result from criminal recklessness or gross negligence (Bergman, 1998).

Even if the HSE did investigate and found the director who discarded the cigarette or any or all of the other directors liable, there is no process for conveying that information to any prosecutorial body (Bergman, 1998); in effect, directors in Britain can do anything they like with little fear of criminal prosecution.

In the case of Personal Products plc, that contention is difficult to support. There is a pattern of negligent attitudes regarding the employees, at best. The fact that directors would choose whom to lay off not based on any business model or demands of continuing production, but rather on the basis that those they perceived as weakest would be likely to give less trouble is itself troubling, and indicative of a cavalier attitude toward corporate responsibility.

Because there is a dispute between the company and its insurers regarding the extensive damages and serious injury to an employee, another potential for spreading the liability is aroused; in the absence of insurance (although it would seem likely Personal Products would litigate that issue), the directors and the shareholders will be liable, one way or another. If the corporate veil can be pierced, they may well -- even Director F -- be held personally liable. In any case, the shareholders are going to be on the receiving end of very bad news, and, indeed, if the company dissolves, on the very worst news.

It is also unclear whether George is a current or former employee. However, even if he as a former employee at the time of the blaze, Perfect Products would bear liability for his injuries "under employer liability cover provided to former workers" (Risk & Liability 2003). However, the point is moot, as the company had no EL insurance although it was compulsory. This opens another scenario in which the liable agent is sought; is it the director in charge, al the directors, the insurance brokers or no one? In fact, it is likely that at this point, the liability would accrue ultimately to the directors, as they are responsible to the shareholders (Foster, 2001), who would end up assuming at least a share of the 'clean up' costs for shutting down the company.

It is unlikely that there would be any attempt to pierce the corporate veil to make the directors personally liable. "The U.K. regards each corporation within an affiliated group as a separate legal entity, subject to piercing of the corporate veil only in exceptional circumstances generally involving intentional acts of deception or efforts to avoid a legal duty. The U.K. courts have demonstrated reluctance to pierce the corporate veil" (Miller, 1998).

The shareholders in most forms of U.K. corporate organization are liable only to the extent of their capital contribution, although a "memorandum obligates the shareholders to pay a specific amount upon the winding up of the company. Finally, the shareholders of the unlimited company have personal liability. In practice there are few such companies because of the significant potential exposure to legal liability" (Miller, 1998).

The insurance company made its share of mistakes as well, and therefore assumes some liability. The Company Secretary would have been acting as the company's agent in signing the insurance documents; failure to read them -- indeed, failure to make certain that all facts were as represented -- could constitute negligence and bring back to the insurers the liability they otherwise might have avoided if they had exercised diligence but failed to discover the prior claims through no fault of their own, or had noted the claims, and had written the policy anyway with, perhaps, higher premiums.

Ace, too, bears some liability. Although they told Perfect Products plc, ostensibly in good faith, that their situation was hopeless and liquidation was the only answer, when Perfect Products decided to ignore their advice and attempt to avoid voluntary liquidation, Ace failed to use diligence in making the case for liquidation; later, when they are notified in writing that Perfect Products intends to cancel insurances, lay off workers and generally attempt to struggle along despite the opinions of two of its own directors that it cannot survive, the accountants fail to respond. In this respect, they are also failing to exercise diligence in carrying out their role as accountants to the company. Indeed, the accountants' liability would have been minimized at that point had they made a second written representation of their findings and recommendation, even recommending strongly against the hopeless efforts the Chairman was almost forcing the company to engage in.