Week Four: Strict/Vicarious Liability

There are a number of crimes that can be committed in the business world that fall under the banner of fraud, bribery, and corruption, and the Corporations Act 2001 (Cth) attempts to address these criminal matters. However, strict or vicarious liability is really what matters in attempts by legislators and the courts to address this continuing problem in the corporate world.

Do you agree or disagree with the above statement?

Strict/vicarious liability means that a superior is liable for the acts of their subordinate, even if the superior is free from personal fault (Vicarious Liability, 2016).

Video 1 – Strict Liability (What is Strict Liability, 2015)

I believe that, although the Corporations Act is trying to establish avenues to prosecute corporations for doing the wrong thing, strict liability is what really matters. If you make corporations personally liable, employers will be tougher on employees, and they’ll implement the necessary controls/culture changes to ensure that the fraudulent behaviour does not occur.

There are four major types of crimes in the business world that fall under the banner of fraud, bribery, and corruption:

1. White-Collar crime (e.g. embezzlement and false accounting);
2. Organised crime (e.g. illegal drugs and services);
3. Computer crime (e.g. unauthorised data access and internet fraud); and
4. Regulatory Offences (e.g. violation or workplace laws and insider trading) (Latimer, P., 2014).

Figure 1 – False Accounting (Whitton, E., 2012)

Strict liability attempts to address these areas. In particular, it addresses false accounting by ensuring there is an appropriate no-tolerance for fraud corporate culture from the top down; and it addresses unauthorised data access by ensuring superiors create and maintain the necessary information controls.

This is an extremely important issue, and I highly recommend management take steps toward reducing their strict liability (i.e. take all measures to fully educate employees and create a no-fraud-tolerance culture) (Evans, L., 2015).

Resources

Evans, L. (2015). How to Protect your Business from Vicarious Liability. Learning Seat. Retrieved April 22, 2016, from http://www.learningseat.com.au/blog/2014/08/21/how-to-protect-your-business-from-vicarious-liability/

Latimer, P. (2014).What is White-Collar Crime? In P. Latimer, Australian Business Law (33^rd Ed.)(EBL Version). Retrieved April 19, 2016 from https://blackboard.qut.edu.au/bbcswebdav/pid-6282895-dt-content-rid-5912336_1/courses/AYB115_16se1/WK_2-240%20What%20is%20white-collar%20crime.pdf

Vicarious Liability. (2016). Investopedia. Retrieved April 21, 2016, from http://www.investopedia.com/terms/v/vicarious-liability.asp

What is Strict Liability? (2015). The Law Show [Video File]. Retrieved April 21, 2016, from https://www.youtube.com/watch?v=J6IK-GykRQE

Whitton, E. (2012). Turning a Blind Eye to White Collar Crime. Independent Australia. Retrieved April 20, 2016, from https://independentaustralia.net/politics/politics-display/turning-a-blind-eye-to-white-collar-crime,4641