LAW 534 Lecture Notes - Lecture 7: Corporate Social Responsibility, Bp, Cumulative Distribution Function
22 May 2018
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Lecture 7: Chapter 7
Introduction
• A very useful and innovative chapter
• The main purpose of this chapter is to demonstrate how to integrate legal principles
with risk management
• A primary tool that the authors advance for analysis and presentation is using a matrix
o Familiarize yourself with the basic technique
o Useful – especially for presenting concepts to those unfamiliar with integrating
legal concepts with risk management
• Textbook provides an example of matrix planning as applied specifically to bribery
offences
• At middle of 7-6.4, the textbook provides a very useful approach towards addressing a
specific legal risk
o This is about assessing the risk that the business might not comply with the law
o Note that it is very well possible that a business might want to go beyond the
bare minimum of compliance and exceed those standards for moral /ethical
reasons. That is beyond the scope of the analysis presented in the textbook
but is a great topic worth investigating (example: corporate social responsibility)
o Business students are encouraged to consider general responsibility to society
and whether they can exceed legal minimums where possible
• Note the four-step approach that the authors advance
Step 1: Calculate Probability of Non-Compliance
• Draws back on chapter 4 concepts
• Fouses o fatos fo Peautios take to Aoid the Eet
• Methodology:
o Assign a probability for each of the ten factors
o Find out the cumulative probability (what is the assumption here? – relatively
siple odel…ith eah fato eighted equally
o Textbook uses the example of non-compliant fridges as the hypothetical
• Additional comments:
o Psychology: assessment by individuals can be distorted by ego bias
▪ British Petroleum as example: note the use of injury rates as method of
measuring safety – is this a good method?
o Increasing popularity of matrix analysis (example: antitrust (aka competition law
– and ICC
o Ethics and obeying the law – Authors note it is inappropriate to be weighing risk
of getting caught against permitting illegal activity to continue. The authors
note:
▪ Proper course of conduct is to stop the illegal activity and discuss self-
epotig The isk of gettig aught a ee e pat of the alulatio
of the risk of non-opliae
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▪ Discussion of layes’ obligations
Step 2: Calculation of Potential Gravity of Harm
• This part of the calculation is based upon assessing the potential harm
• But how to evaluate harm if it is not in your area of expertise? Authors state that the
risk assessment has been done at the legislative level and must use that one but it can
be hard to gauge that
• Authos suggested possiilities fo asetaiig legislatue’s assesset of the isk:
o Maximum penalty (i.e. higher it is, the more harmful legislature feels it is)
o Range of actual penalties imposed by courts in past cases
o Need to also assess the olue of the ha as ell
o Textbook example: back to the fridges hypothetical – authors incorporate
potential civil damages and reputational harm into analysis as well
o Notice that the final result is generated by multiplying the gravity of harm and
the volume
o Final result is still just a rough assessment but at least it was guided by principled
approach.
Step 3: Drawing the matrix
• Using the matrix can help establish priorities for the business (example: address the
most serious potential harms)
• R. v. Landen: parallels to matrix analysis
• Recommendations re: internal auditors (who should they report to?)
• See example of priories aligned on matrix re: hypothetical of Wholesale Co.
o Side note: discussion on self-reporting; what if no legal duty to self-report?
• Self-audits and privileges
o Can a self-audit be used against the business by the Crown? I.e. can the Crown
seize it as evidence and use it against the business?
o Authors note the law is not lea o this poit. Assuig that thee is o self-
audit piilege the it is oly poteted if it is:
▪ Solicitor-client privileged (dominant or possibly substantial purpose of
communication was for legal advice) or;
▪ Litigation privileged (dominant purpose of the document was for existing
or anticipated litigation)
Step 4: Identifying Thresholds within the matrix
• Important point made: when there is a high level of potential harm to human health or
safety – weighing the probability of non-compliance is no longer necessary → it
automatically goes to the highest quadrant (i.e. highest priority)
o In other words, even if the probability of harm to life is relatively low, this is
not an acceptable risk for an entity to endorse – textbook at 7-20.7
o Also see s.217.1 of the Criminal Code
• Precautionary Principle and discussion of Ford Pinto case revisited
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