Violation Tracker UK Year One

Corporate responsibility and ESG issues are receiving more attention than ever in the United Kingdom. Numerous services now exist to help investors pick ethical companies to add to their portfolios.

 Yet what about the irresponsible companies—the ones that break the rules and which investors may wish to shun? That’s where Violation Tracker UK comes in.

The free database, which is one year old this month, is a unique resource for identifying the companies that have been sanctioned by government regulators for infringements in areas extending from environmental compliance and employment standards to consumer protection and accounting fraud. Along with investors, users of the database include activists, journalists, lawyers, academics and public officials. VT UK is modeled on the U.S. Violation Tracker, which was launched in 2015.

VT UK collects data from four dozen regulatory agencies, ranging from the Health and Safety Executive and the Financial Conduct Authority to lesser known bodies such as the Groceries Code Adjudicator and the Gangmasters and Labour Abuse Authority. The latest agency to be added is the Jersey Financial Services Commission.

Since its launch, VT UK has grown to 77,000 entries dating back as far as 2010. We are constantly on the lookout for new datasets. For example, HM Revenue and Customs recently released a list of about 200 companies fined for having inadequate protections against money laundering. Their names are now in VT UK.

Every three months, we add new entries to the database and tag those that are subsidiaries of a group of more than 700 large UK and foreign parent companies, including those in the FTSE 100 and 250. This allows us to show which firms have the highest aggregate penalty totals. Those at the top of the list include aerospace giants Airbus and Rolls-Royce as well as major banks such as NatWest, Barclays and Lloyds.

The linkages are modified when there is a change of ownership. For example, the entries previously associated with the aerospace company Meggitt PLC now have Parker-Hannifin as their parent, given that company’s recent acquisition of Meggitt.

Every entry in VT UK is tagged with one of six broad offense groups. Safety-related cases account for the most cases–40,000—reflecting the heavy caseload of HSE. The second largest group, employment-related cases, contains 24,000 entries.

Although it has fewer cases, we have to spend a lot more time on the employment category. The reason is the difference in the way the major agencies in the two groups report their data. HSE posts its enforcement information on standardized pages that we are able to scrape fairly easily. The Employment Tribunal, on the other hand, reports its cases in individual PDF decision documents, which are often quite lengthy. Our lead UK researcher, Anthony Kay Baggaley, must read each decision—about 300 per month–and extract the key facts. His works allows us to determine, for example, that the companies with the largest number of employment-related offenses are the Royal Mail Group and Tesco.

The offense groups with the most cases don’t account for the largest aggregate monetary penalties. That distinction goes to competition-related offenses, with £5.4 billion paid by companies in just 320 cases. This is the result of the relatively heavy fines imposed by the Competition and Markets Authority, including a recent £63 million action against the U.S. drug company Pfizer, as well as some substantial bribery cases brought by the Serious Fraud Office.

When the penalty totals are viewed by parent industry, the financial services sector is in first place by far, with a total of £5 billion. That’s because the big banks have been hit with large fines across multiple offense groups, especially competition and, of course, financial cases. These offenders include not only the major UK financial institutions but also foreign banks headquartered in Europe (UBS, Deutsche Bank, etc.) and the United States (especially JPMorgan Chase and Citigroup).

We will continue to update and expand VT UK, but it is also a stepping-stone to a multi-country version of Violation Tracker we plan to create over the next couple of years. Stay tuned for Violation Tracker Global.