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Enhancing Corporate GovernanceEnhancing Corporate GovernanceThrough the Criminal Justice ProcessThrough the Criminal Justice Process

Ian McWalters, SCIan McWalters, SCSenior Assistant Director of Public ProsecutionsSenior Assistant Director of Public Prosecutions

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““Wrongdoing can only be Wrongdoing can only be

avoided if those who are not avoided if those who are not

wronged feel the same wronged feel the same

indignation at it as those who indignation at it as those who

are.”are.”

SolonSolon

638-558 BC638-558 BC

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The Purposes of the Criminal LawThe Purposes of the Criminal Law

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

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

(d)(d) to give fair warning of the to give fair warning of the nature of the conduct declared nature of the conduct declared to be an offence;to be an offence;

American Law Institute’sAmerican Law Institute’sModel Penal CodeModel Penal Code

The Purposes of the Criminal LawThe Purposes of the Criminal Law

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““Our criminal law is also a system Our criminal law is also a system of values ... in addition to of values ... in addition to attaching negative consequences attaching negative consequences to undesirable behaviour, a to undesirable behaviour, a judicial sentence should also be judicial sentence should also be imposed in a manner which imposed in a manner which positively instils the basic set of positively instils the basic set of communal values ...”communal values ...”

Lamer CJC in Lamer CJC in R v M R v M

(1996) 105 CCC (3d) 327 at 369e-f(1996) 105 CCC (3d) 327 at 369e-f

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Options for addressingOptions for addressingCorporate Governance Issues:Corporate Governance Issues:

the creation of civil rights and the creation of civil rights and imposition of civil liabilitiesimposition of civil liabilities

subjecting corporations to subjecting corporations to regulatory regimes;regulatory regimes;

applying corporate governance applying corporate governance codes of best practices; andcodes of best practices; and

criminalizing specific conductcriminalizing specific conduct

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The Objects of PunishmentThe Objects of Punishment

(1)(1) to exact retribution by society on the to exact retribution by society on the offender;offender;

(2)(2) to denounce the conduct being to denounce the conduct being punished;punished;

(3)(3) to protect society from the offender;to protect society from the offender;

(4)(4) to deter others from committing the to deter others from committing the same conductsame conduct; and; and

(5)(5) to rehabilitate the offender to rehabilitate the offender

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The Essence ofThe Essence ofCorporate GovernanceCorporate Governance

““Corporate governance is the Corporate governance is the

system by which companies are system by which companies are

directed and controlled.”directed and controlled.”

Sir Sir Adrian CadburyAdrian Cadbury

Report on Financial Aspects of Report on Financial Aspects of Corporate Governance in the Corporate Governance in the

United KingdomUnited Kingdom

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The Broad View ofThe Broad View ofCorporate GovernanceCorporate Governance

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

Sir Adrian CadburySir Adrian Cadbury

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““Corporate governance is Corporate governance is essentially about leadership:essentially about leadership:

– leadership for efficiency;leadership for efficiency;– leadership for probityleadership for probity– leadership with responsibility;leadership with responsibility;– leadership which is transparent leadership which is transparent

and accountable. ”and accountable. ”

Commonwealth Association Commonwealth Association

for Corporate Governancefor Corporate Governance

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Corporate GovernanceCorporate Governance

““ It is about commitment to values, It is about commitment to values, about ethical business conduct and about ethical business conduct and about making a distinction between about making a distinction between personal and corporate funds in the personal and corporate funds in the management of the company.” management of the company.”

Report of the Committee on Report of the Committee on

Corporate Governance of the Corporate Governance of the

Securities and Exchange Board of IndiaSecurities and Exchange Board of India

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What is Stewardship?What is Stewardship?

Stewardship is about providing a Stewardship is about providing a

value and ethic based leadership value and ethic based leadership

of a company within a corporate of a company within a corporate

culture of transparency and culture of transparency and

accountability.accountability.

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Standards andStandards andCorporate GovernanceCorporate Governance

setting standardssetting standards encouraging adherence to encouraging adherence to

these standardsthese standards reviewing the adequacy of reviewing the adequacy of

these standardsthese standards enhancing these standardsenhancing these standards

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Standards and theStandards and theCriminal Justice ProcessCriminal Justice Process

the creation of offences - a standard the creation of offences - a standard setting mechanismsetting mechanism

the enforcement of offences - motivating the enforcement of offences - motivating adherence to the standardsadherence to the standards

the prosecution of offences - publicizing the prosecution of offences - publicizing the standards, motivating adherence to the standards, motivating adherence to them and providing an opportunity to them and providing an opportunity to review their sufficiencyreview their sufficiency

the punishment of offenders - the punishment of offenders - retribution, deterrence and denunciationretribution, deterrence and denunciation

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Setting Standards:Setting Standards:Having an Effective Range of OffencesHaving an Effective Range of Offences

Review the effectiveness of the Review the effectiveness of the offencesoffences

Ensure the offences cover the Ensure the offences cover the fieldfield

Consider a continuing course of Consider a continuing course of conduct offenceconduct offence

Enact a private sector corruption Enact a private sector corruption offenceoffence

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UNCACUNCACPreamblePreamble

Concerned also Concerned also about the links about the links

between corruption and other between corruption and other

crime, including money crime, including money

laundering.laundering.

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UNCACUNCACArticle 21Article 21

An offence that:An offence that: is committed intentionally in the course of is committed intentionally in the course of

economic financial or commercial activities;economic financial or commercial activities; which covers the promise, offering or giving which covers the promise, offering or giving

solicitation or acceptance of an undue solicitation or acceptance of an undue advantage:advantage:(i)(i) to or by a person working for a private sector to or by a person working for a private sector

entity;entity;

(ii)(ii) for that person in order that he, in breach of his for that person in order that he, in breach of his duties, act or refrain from acting.duties, act or refrain from acting.

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Prevention of Bribery OrdinancePrevention of Bribery OrdinanceSection 9Section 9

The offer, solicitation or The offer, solicitation or acceptance:acceptance: without lawful authority or without lawful authority or

reasonable excusereasonable excuse of an advantageof an advantage to or by an agentto or by an agent for doing an act in relation to his for doing an act in relation to his

principal’s affairs or businessprincipal’s affairs or business

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““... we cannot for a moment ... we cannot for a moment accept the suggestion that accept the suggestion that bribery in the private sector is to bribery in the private sector is to be regarded as any less culpable be regarded as any less culpable than bribery in the public sector”than bribery in the public sector”

Hong Kong Court of AppealHong Kong Court of Appeal

R v Wong Tat-sang R v Wong Tat-sang Cr App 529/84Cr App 529/84

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““ It is the duty of the court to make it It is the duty of the court to make it plain to the business community that plain to the business community that when situations such as this arise when situations such as this arise there is only one course open to the there is only one course open to the person to whom the offer is made – person to whom the offer is made – report the matter to the authorities”.report the matter to the authorities”.

Hong Kong Court of AppealHong Kong Court of AppealAttorney General v Bow Ki-lun & anorAttorney General v Bow Ki-lun & anor

[1995] 2 HKCLR 168[1995] 2 HKCLR 168

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Misconduct in Public OfficeMisconduct in Public Office

a public official;a public official; in the course of or in relation to in the course of or in relation to

his public office;his public office; wilfully misconducts himself by wilfully misconducts himself by

act or omission for example, by act or omission for example, by wilfully neglecting or failing to wilfully neglecting or failing to perform his duty;perform his duty;

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Misconduct in Public OfficeMisconduct in Public Office without reasonable excuse or without reasonable excuse or

justification; andjustification; and where such misconduct is serious, where such misconduct is serious,

not trivial, having regard to the not trivial, having regard to the responsibilities of the office and the responsibilities of the office and the officeholder, the importance of the officeholder, the importance of the public objects which they serve and public objects which they serve and the nature and extent of the the nature and extent of the departure from those responsibilitiesdeparture from those responsibilities

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Misconduct in Private Office?Misconduct in Private Office? applicable only to senior applicable only to senior

managementmanagement

using a criminal offence to raise using a criminal offence to raise standards of senior management standards of senior management conduct rather than to prompt conduct rather than to prompt adherence to a minimum adherence to a minimum standardstandard

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Enforcement of the LawEnforcement of the Law a specialist law enforcement agency a specialist law enforcement agency

separate from and independent of separate from and independent of the rest of governmentthe rest of government

special powers for the special powers for the investigation of serious fraud and investigation of serious fraud and corruptioncorruption

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Powers of InvestigationPowers of Investigation

powers against suspectspowers against suspects

powers against witnessespowers against witnesses

powers against confidential powers against confidential record holdersrecord holders

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The Prosecution of OffendersThe Prosecution of Offenders accomplice evidenceaccomplice evidence banking recordsbanking records business recordsbusiness records computer recordscomputer records expert evidence of forensic expert evidence of forensic

accountants and bankers and accountants and bankers and admissibility of reports and use of admissibility of reports and use of presentational aidspresentational aids

use of depositions of witnesses who use of depositions of witnesses who are unavailable to attend courtare unavailable to attend court

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The Punishment of OffendersThe Punishment of Offenders

retributionretribution

deterrencedeterrence

denunciationdenunciation

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DeterrenceDeterrence

““Law cannot persuade where it Law cannot persuade where it cannot punish”cannot punish”

Thomas FullerThomas Fuller

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DenunciationDenunciation

A denunciatory sentence represents:A denunciatory sentence represents:

““a symbolic, collective, statement that a symbolic, collective, statement that the offender’s conduct should be the offender’s conduct should be punished for encroaching on our punished for encroaching on our society’s basic code of values as society’s basic code of values as enshrined within our substantive enshrined within our substantive criminal law”criminal law”

Lamer CJC in Lamer CJC in R v MR v M

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The punishmentThe punishmentmust be dissuasivemust be dissuasive

““Sentences cannot be brought Sentences cannot be brought below a level which will afford below a level which will afford some deterrent against crime and, some deterrent against crime and, where substantial fraud or where substantial fraud or corruption is concerned, preserve corruption is concerned, preserve the integrity of Hong Kong’s the integrity of Hong Kong’s commercial reputation.”commercial reputation.”

Attorney General v ShamsuddinAttorney General v Shamsuddin [1987] HKLR 826 at page 833G [1987] HKLR 826 at page 833G

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Reviewing and Enhancing Reviewing and Enhancing StandardsStandards

the fact that the misconduct took place acts the fact that the misconduct took place acts as a catalyst to review the standardsas a catalyst to review the standards

the fact misconduct can’t be punished the fact misconduct can’t be punished because it is not a crime prompts because it is not a crime prompts criminalizationcriminalization

the existence of flaws in the criminal justice the existence of flaws in the criminal justice process that prevent a just response process that prevent a just response motivates changemotivates change

the public nature of the trial process provides the public nature of the trial process provides an opportunity to review standards and lawsan opportunity to review standards and laws

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Thank YouThank You