11.1 Publicity orders involve the publication of an offender’s conviction and other relevant facts (such as the consequences of the offence), to either a specific group of people or to the general public. In Chapter 5 of this Report, the Commission recommended the adoption of publicity orders as one of the sentencing options that should be made available in sentencing corporations. This chapter discusses the rationale of publicity orders and some legislative precedents that authorise their imposition in Australia and overseas. This chapter also considers various issues that relate particularly to this penalty.
THE RATIONALE OF PUBLICITY ORDERS
11.2 The rationale for such orders stems from the notion of shaming: their purpose is to damage the offender’s reputation.1 The sanction fits in with the general theory about the expressive dimension of the criminal law, that social censure is an important aspect of criminal punishment.2 Criminal penalties must not only aim at achieving deterrence and retribution, but must also express society’s disapproval of the offence.3 One of the deficiencies of the fine as a criminal sanction is its susceptibility to convey the message that corporate crime is less serious than other crimes and that corporations can buy their way out of trouble.4 In contrast, adverse publicity orders may be more effective in achieving the denunciatory aim of sentencing.
11.3 Adverse publicity may:
- threaten the corporation’s good reputation;
- affect consumer confidence in the corporation; and
- compromise the corporation’s autonomy.
11.4 One or a combination of any of these consequences may sufficiently punish a corporation and also deter it from re-offending.
11.5 The written submissions and the consultation meetings undertaken by the Commission were generally supportive of the introduction of publicity orders as a sentencing option for corporate offenders.5
Threat to the corporation’s good reputation
11.6 Adverse publicity may deter corporate crime because corporations generally view their reputation as a valuable asset. Many corporate executives consider corporate prestige as “an independent good or an instrumental good” that assists in enhancing profits and in achieving other objectives. Adverse publicity stigmatises the corporation and consequently diminishes corporate prestige.6
11.7 At least one relatively old empirical study supports the view that the prestige-lowering capacity of adverse publicity is perceived by organisations as significant. Fisse and Braithwaite conducted a survey of seventeen corporations that had experienced extensive negative publicity following conviction. The corporate executives in all but two of the seventeen organisations reported that the adverse publicity had caused a perceived drop of corporate prestige. The study affirmed the view that corporate prestige and reputation are highly valued within large organisations.7
11.8 Corporate prestige is valued both for financial and non-financial reasons. Customer goodwill stemming from the company’s prestige enhances profits as it influences consumers to buy more goods and services. It has been estimated that a corporation’s image accounts for up to four percent of its stock price.8
11.9 A favourable reputation also engenders less tangible benefits. For example, it reflects positively on employees, both on lower level employees who get satisfaction from working with what they deem to be a reputable company, but more so on senior managers, who are often people concerned about their status.9 Negative publicity can affect morale and self-esteem within the organisation. In the study by Fisse and Braithwaite, it was found that adverse publicity is likely to have some potency as a non-financial sanction because of its impact on an organisation’s collective morale.10
Adverse effects on the corporation’s business
11.10 Negative publicity has the potential to affect consumer confidence in the corporation, which in turn may affect the corporation’s business.11 Studies in the United States show that negative publicity about a product’s safety may affect consumer confidence and lead to a decline in sales, profitability, and stock market values.12 Another study suggests that negative publicity surrounding indictments for fraudulent business dealings often results in higher costs of obtaining suppliers.13 The submission from the New South Wales Department of Fair Trading noted that the “reputation of traders, especially corporations, as law abiding persons is a significant factor in their marketplace performance”.14
11.11 With respect to consumer behaviour, it has been suggested that for adverse publicity to have an impact, the publicity must be product-specific. The publicity must link the corporate misbehaviour to flaws in particular products or services. A substantial number of corporate crimes are however, “product independent”. The violation of an environmental protection law for example, may not directly relate to the corporate offender’s goods and services. It is argued that when the company’s product does not pose an immediate threat to consumers, it is uncertain whether the public will be sufficiently angered or concerned to boycott the corporation’s product or services.15
11.12 Others hold the contrary view that adverse publicity generally (whether product specific or not) has the potential to change consumer behaviour towards a corporation.16 An example is the negative publicity suffered by Exxon following the 1989 oil spill. Thousands of consumers returned their Exxon credit cards.17 It might be argued that even if adverse publicity does not result in the voluntary boycott of a corporate offender’s business, it will probably be one contributing factor if a change in consumer behaviour and attitude towards particular products is registered. Such publicity may, for example, provide further justification for an organised consumer movement that targets a particular company and its products.
A threat to the corporation’s autonomy
11.13 Adverse publicity may generate a range of other non-financial consequences for a corporation. Negative publicity may attract further media scrutiny, investigation by regulatory agencies, or lawsuits by those affected by the company’s offence.18 These potential difficulties, in addition to the financial costs of adverse publicity discussed above, may threaten the capacity of the corporation to operate its normal course of business.
USE OF PUBLICITY ORDERS
United Kingdom
11.14 Several provisions were available in 19th century Britain that allowed courts to order the publication of certain details of convicted offenders and their offence (although the sanctions were probably used chiefly against individuals).19 In cases where the offender adulterated bread, a statute provided for the offender’s name, abode and offence to be published in a local newspaper, the cost of publication being defrayed from the fine also imposed.20 In the case of adulteration of seeds, the court could order publication of the offender’s name, occupation, abode, place of business and the particulars of the punishment to be carried out. The cost of publication, in such newspapers as the court thought fit, was to be met directly by the offender. This sanction, however, unlike the bread provisions, was only available for a second or subsequent offence.21 In the case of the sale of contaminated food, the court could, upon conviction for a second offence within a 12 month period, order that a notice of the facts of the offences be affixed to premises occupied by the offender. The offender was also required to pay the costs of affixing the notice.22 In the case of offences relating to weights and measures, the court could “cause the conviction to be published in such manner as it thinks desirable”.23
New Zealand
11.15 Similar provisions were also once available in New Zealand in instances where a person was convicted under the Food and Drugs Act 1947 (NZ). In such cases the court could order the Director-General of Health to publish a notice, in such newspapers or magazines as were thought fit, detailing the “name, occupation, and place or places of business of the defendant, the nature of the offence, and the fine, forfeiture, or other penalty inflicted”.24
United States
11.16 In the United States, the Federal Sentencing Commission Guidelines for Organisational Sentencing allow the court “to order an organization, at its expense and in the format and media specified by the court, to publicize the offence committed, the fact of conviction, the nature of the punishment imposed, and the steps that will be taken to prevent the recurrence of similar offenses”.25
Australia
11.17 In Australia, the Black Marketing Act 1942 (Cth), a statute enacted to protect war time price control and rationing which was in force until shortly after the Second World War, provided that, in the event of a conviction under the Act, a court could require the accused (which could include corporations) to publish details of the conviction at the offender’s place of business continuously for not less than three months. If the convicted person failed to comply with such order, the court could order the sheriff or the police to execute the order and the accused would again be convicted of the same offence. If the court was of the opinion that the exhibition of notices would be ineffective in bringing the fact of conviction to the attention of persons dealing with the convicted person, the court could direct that a similar notice be displayed for three months on all business invoices, accounts and letterheads.
11.18 More recently, adverse publicity as a penal sanction has been adopted in New South Wales and other Australian jurisdictions:
- Under the Protection of the Environment Operations Act 1997 (NSW),26 Occupational Health and Safety Act 2000 (NSW),27 and Fair Trading Act 1987 (NSW),28 courts in New South Wales may order a convicted defendant to publicise the offence and its consequences.
- In Victoria and South Australia, environment protection legislation contains provisions giving courts in those jurisdictions the power to publicise the offence, any environmental or other consequences of the offence, and the penalty imposed.29
- At the Commonwealth level, new sanctions introduced recently to the Trade Practices Act 1974 (Cth) include the publicity order, which is defined as either an order requiring an advertisement regarding the contravention of the Act, or alternatively, disclosure of information in the possession of the offender to certain people (for example consumers and other businesses).30
PARTICULAR ISSUES
Publicity order may have uncertain effects
11.19 One criticism of the use of adverse publicity is that its impact is uncertain and uncontrollable. It has been described as a “loose canon”31 because the penalty’s impact on the corporation cannot be predicted. To a large extent, the effect of a publicity sanction depends on the public’s response (in particular, the market the company caters for) to the company’s criminal activity. This incalculable result contrasts with the imposition of a fine where the penalty is quantified through a specific amount of money that the offender must pay. It is claimed that in extreme cases, adverse publicity may lead to a decline in sales, closure of the company and loss of jobs. If that were to happen, the force of the sanction may fall disproportionately on innocent workers, suppliers and distributors.32
11.20 Case studies conducted by Fisse and Braithwaite showed, however, that serious financial spillovers are likely to be the exception rather the rule. In those cases where spillovers were likely to occur, there was no evidence that the financial impact would fall disproportionately on workers at the bottom of the hierarchy.33 Moreover, there is no evidence that spillover is a greater problem in respect of publicity orders than it is in relation to other sentencing dispositions. The fine in particular can potentially have unforseen and harsh consequences on third parties.34
Courts as propagandists
11.21 It has been suggested that courts should not engage in propaganda campaigns against corporate offenders and, further that they would not in any case know how to harness the benefits of the mass media. Consequently, the courts’ ability to use publicity sanctions to their fullest effect has been doubted.35
11.22 The adoption of publicity orders as a penal sanction need not necessarily burden the courts with the role of propagandist against corporate offenders. Courts should be given a wide discretion as to who should implement the publicity sanction. The convicted corporation, for example, may be ordered to undertake the publicity. Most existing legislative provisions give courts the power to order the corporation to prepare the publicity, subject to any terms and conditions that a court may impose, in addition to its final approval.36
11.23 Alternatively, in cases involving regulatory offences, courts could order a relevant regulatory agency to implement the publicity order, subject to payment of the cost by the convicted corporation. For example, if the offence related to the breach of laws to protect the environment, the court might order the New South Wales Environment Protection Agency to implement the order. This approach will enable courts to rely on relevant government agencies that have developed expertise in public communication and media relations. Such agencies, in view of their regulatory role in the particular area where the offence was committed, would have a sound knowledge of which particular audience should be targeted in implementing the publicity order. This approach also addresses the situation where there are concerns that the corporation will not be effective in being its own detractor.
RECOMMENDATION 12
The court should have the power to order that:
(a) the corporate offender itself carry out a publicity order;
(b) the assistance of any relevant government agency be enlisted for this purpose.
The costs of the publicity order should be borne by the offender.
Getting the attention of the intended audience
11.24 A concern about publicity sanctions is that they may not generate any interest from the general public.37 The public might be indifferent to corporate crime or the nature of corporate offences may be too bland or unintelligible to compel audience interest.38 This concern should not be exaggerated.
11.25 First, public opinion studies undertaken in Australia and overseas indicate that, since the 1970s, corporate crimes have attained greater significance in the mind of the populace. Those that have a tangible impact on identifiable victims are particularly perceived as meriting severe punishment.39
11.26 Secondly, the concern reflects an assumption that adverse publicity is exclusively a sanction directed to a broad audience using mass media, such as newspaper advertisements. However, the general public need not always be the intended audience of a publicity order. The adverse publicity ordered might focus directly on those who are concerned about the corporation’s wrongdoing, particularly those whose goodwill is valued by the company.40 In the case of offences involving goods and services, for example food adulteration, consumers of the product may be notified using mass-media techniques. When the crime is one of environmental pollution, it may be appropriate to target the community surrounding the offending plant.41 Targeting tightly defined demographic groups may better ensure that the publicity reaches its intended audience.
11.27 It may not even be necessary to use the mass media in every case. A court may, for example, order a shareholder mail-out, informing them of the corporation’s conviction. This may prompt the shareholders to press for change in their company. A court might also order publication of the conviction in the company’s annual report. This would inform both the shareholders and those who might be interested in investing in the corporation about its misconduct.
11.28 Some News South Wales statutes that authorise publicity orders recognise that the mass media is not the only means of publicising a conviction and allow for other forms of publicity.42
11.29 To ensure the effectiveness of publicity orders, it is important that legislation gives courts the discretion to stipulate conditions such as the target audience of the publicity, content and the media, or method of implementation.
RECOMMENDATION 13
The courts should have the power to stipulate in a publicity order:
(a) the target audience of the publicity;
(b) the content of the publicity, including the fact of conviction, the nature of the offence, its consequences, the nature of any punishment imposed and such other information the court deems relevant;
(c) the media to be used, or other method of implementation.
Counter-publicity
11.30 A further concern in relation to publicity orders is that the corporation might use counter publicity to thwart the impact of adverse publicity flowing from a court order. Available empirical evidence does not support this hypothesis. The study by Fisse and Braithwaite43 found that corporate attempts to create counter-publicity would likely be the exception rather than the rule. A large majority of the companies in the study that were subjected to adverse publicity made a conscious decision not to resort to anything that could be described as counter publicity. The main reason for not launching counter-publicity was the risk of generating further negative publicity: companies are likely to try to reduce the “time window” of exposure to adverse publicity.44
11.31 Even if counter-publicity is unlikely to occur with frequency, the law should provide a means by which the courts can deal with it when it happens. A possible solution is for the law to give courts the power to restrain the publication or continued publication of any material that, in their judgment, may have the effect of countering a publicity order. Such authority is not intended to give courts the power to censor advertising undertaken by a corporation in the normal course of its business, for example, the advertisement of its products and services, or even general image advertising.45 Rather, it should be used only in extreme cases where the publicity that follows the court-sanctioned publicity is patently intended to counter the effectiveness of the latter.
RECOMMENDATION 14
The court should have the power to restrain the publication or continued publication of any material that may have the effect of countering the intended effects of a publicity order.
Imposing the penalty selectively
11.32 A publicity sanction should not be used in every case where a corporation is convicted of an offence. The routine publication of convictions may have a desensitising effect on the public, which may result in publicity orders losing their efficacy. Situations where a publicity order might be useful include the following:
- Where a judge reduces the monetary penalty because of the corporation’s financial circumstances but the discounted penalty has a tendency to trivialise the offence, the additional penalty of a publicity order may help achieve the objective of expressing the community’s reprobation for the corporation’s wrongdoing.
- Where the corporation has a poor record of compliance with the law, or has demonstrated an inadequate corporate response to past breaches, such as failing to undertake internal disciplinary action or to rectify poor standard operating procedures.46 A publicity order under these circumstances may put pressure on the corporation to take rehabilitative steps that should prevent it from re-offending. It may also be used in conjunction with a probation order as a means of ensuring compliance with the terms of the probation.47
- When the corporation’s customers, creditors and shareholders should be informed as to the violation, or when news coverage has been, or is likely to be, insufficient.48
11.33 The decision to impose this sanction will largely depend on the objectives of the particular sentence, the seriousness of the offence and the circumstances of the convicted corporation. For example, in a submission to the Commission, the Australian Taxation Office wrote that it “fully supported” the introduction of publicity orders, but added that repayment of any tax avoided or evaded should also be required.49 It is unnecessary for the legislation to spell out the situations or set criteria as to when a publicity order might be used. This must be left to the discretion of the court.
FOOTNOTES
1. D Skeel, “Symposium norms and corporate law: shaming in corporate law” (2001) 149 University of Pennsylvania Law Review 1811.
2. See para 2.35, 3.13.
3. See generally the discussion on the objectives of sentencing in Chapter 3 of this Report.
4. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 220. See also para 6.7.
5. J Braithwaite, Submission; Australian Taxation Office, Submission at 8; NSW Department of Fair Trading, Submission at 7; Kerry Palmer, Principal Legal Officer (Legal Services Branch), NSW Environment Protection Authority, Consultation.
6. A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2398.
7. B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983) at 289.
8. A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2398, citing B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983).
9. A Curcio, “Painful publicity – an alternative punitive damage sanction” (1996) 45 DePaul Law Review 341 at 368-369.
10. B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983) at 306.
11. A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2403.
12. M Block “Optimal penalties, criminal law and the control of corporate behavior” (1991) 71 Boston University Law Review 395 at 411-12; G Jarrell and S Peltzman “The impact of product recalls on the wealth of sellers” (1985) 93 Journal of Political. Economy 512.
13. Block at 412.
14. NSW Department of Fair Trading, Submission at 7.
15. Cowan at 2403.
16. See B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983) at 292-293; A Curcio, “Painful publicity – an alternative punitive damage sanction” (1996) 45 DePaul Law Review 341 at 369-370.
17. Curcio at 369.
18. A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2402.
19. M Jefferson, “Corporate criminal liability: the problem of sanctions” (2001) 65 Journal of Criminal Law 235 at 257.
20. London Bread Act 1822 (3 Geo 4 c 106) s 10; Bread Act 1836 (6 & 7 Will 4 c 37) s 8.
21. Adulteration of Seeds Act 1869 (32 & 33 Vict c 112) s 3. See also a similar provision in Adulteration Act 1872 (35 & 36 Vict c 74) s 2.
22. Public Health (London) Act 1891 (54 & 55 Vict c 76) s 47(4). A similar provision relating to the adulteration of alcohol required the district police authority to affix a notice upon conviction when the licensee otherwise retained his or her licence: Licensing Act 1874 (35 & 36 Vict c 94) s 19.
23. Weights and Measures Act 1889 (52 & 53 Vict c 21) s 14.
24. Food and Drugs Act 1947 (NZ) s 28. The provision was not included when the new Food and Drug Act 1969 (NZ) was enacted.
25. United States Sentencing Commission, Guidelines manual (2002) §8D1.4.
26. Protection of the Environment Operations Act 1997 (NSW) s 250.
27. Occupational Health and Safety Act 2000 (NSW) s 115.
28. Fair Trading Act 1987 (NSW) s 67.
29. Environment Protection Act 1970 (Vic) s 67AC(2)(a) and (b); Environment Protection Act 1993 (SA) s 133(c).
30. Trade Practices Act 1974 (Cth) s 86D.
31. J C Coffee, “‘No soul to damn: no body to kick’: an unscandalized inquiry into the problem of corporate punishment” (1981) 79 Michigan Law Review 386 at 427.
32. J Gobert, “Controlling corporate criminality: penal sanctions and beyond” [1998] 2 Web Journal of Current Issues.
33. B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983) at 308.
34. See para 6.8-6.11.
35. J C Coffee, “‘No soul to damn: no body to kick’: an unscandalized inquiry into the problem of corporate punishment” (1981) 79 Michigan Law Review 386 at 425-426.
36. See Occupational Health and Safety Act 2000 (NSW) s 115; Protection of the Environment Operations Act 1997 (NSW) s 250; Environment Protection Act 1970 (Vic) s 67AC(2)(a) and (b); Environment Protection Act 1993 (SA) s 133(c); Trade Practices Act 1974 (Cth) s 86D.
37. B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983) at 293.
38. A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2407.
39. See para 1.16-1.18.
40. Cowan at 2407-2408.
41. M Levin, “Corporate probation conditions: judicial creativity or abuse of discretion?” (1984) 52 Fordham Law Review 637 at 657.
42. Occupational Health and Safety Act 2000 (NSW) s 115; Protection of the Environment Operations Act 1997 (NSW) s 250.
43. B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983).
44. Fisse and Braithwaite at 297-298.
45. For the suggestion of judicial review of corporate advertising during the publicity sanction period, see A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2418-2419.
46. B Fisse and J Braithwaite, The impact of publicity on corporate offenders (State of New York Press, New York, 1983) at 307-308.
47. A Cowan, “Scarlet letters for corporations? Punishment by publicity under the new sentencing guidelines” (1992) 65 Southern California Law Review 2387 at 2394.
48. Cowan at 2414.
49. Australian Taxation Office, Submission at 8.
