Violation Tracker UK

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.

Violation Tracker UK has Arrived

The United Kingdom, which holds the presidency of this year’s United Nations climate conference, made the wise decision to bar fossil fuel companies from being corporate sponsors of the event. This is not to say, however, that the UK is generally tough on industries that harm the environment.

That’s one of the findings from the data collected in Violation Tracker UK, a database of business misconduct my colleagues and I at the Corporate Research Project of Good Jobs First have just launched. We assembled 63,000 cases dating back to 2010 from more than 40 regulatory agencies. Among those are the Environment Agency, Natural Resources Wales, the Scottish Environment Protection Agency, and the Northern Ireland Environment Agency.

Altogether, we identified nearly 6,000 cases in which a company was found to have committed an environmental offense. Yet in more than half of these, the culprits were not required to pay any sort of monetary penalty and instead were let off with a caution.

Among those environmental cases with a fine or settlement, the aggregate penalties were just £312 million. The penalties exceeded £1 million in just a dozen cases; in only 135 instances were they above £100,000. Many of the larger environmental penalties involved privatized water companies, which should be fined even more heavily, given the frequency with which they break the rules.

These numbers stand in stark contrast to the totals for competition-related offenses and financial offenses. There are fewer cases in those categories—a total of about 2,200—but the penalties have been substantially higher, totaling £5.2 billion for competition cases and £2.8 billion for financial ones. In those categories combined there have been 285 penalties of £1 million or more, and 716 above £100,000.

The UK’s use of monetary penalties also lags when it comes to safety-related offenses, including workplace safety as well as product, healthcare and transportation safety. This category accounts for just £413 million in penalties. The aggregate fines and settlements for environmental and safety offenses combined is only one-tenth that of competition and financial offenses. The other categories covered by Violation Tracker UK—employment-related offenses and consumer protection cases—fall in between.

Like the U.S. Violation Tracker on which it is modeled, Violation Tracker UK identifies which of the entities named in the individual cases are linked to larger parent companies. The UK parent universe numbers more than 650, both publicly traded and privately held. The parents are headquartered in more than 30 countries. After the UK, parents based in the United States account for the largest number of cases and the highest penalty total.

As in the United States, the list of companies with the highest penalty totals in Violation Tracker UK contains numerous big banks, both domestic and foreign. Three of those banks are the only corporations to appear among the ten most penalized companies on both trackers: JPMorgan Chase, Deutsche Bank and UBS. Other types of large, publicly traded corporations also feature prominently in the UK rankings. Companies in the FTSE 100 account for more than one-quarter of the Violation Tracker UK monetary penalty total.

Big business does not behave any better in Britain than it does in the United States.

Fronting for Rogue Corporations

Only days before the world gathers in Glasgow to discuss the climate crisis, Greenpeace has leaked a trove of documents suggesting that some countries are coming to that gathering with sinister motives. According to the environmental group, several leading coal, oil, beef and animal feed-producing nations are trying to water down the International Panel on Climate Change’s findings to protect their domestic industries.

Among the countries said to be involved are Saudi Arabia, Australia and Brazil. It seems clear these efforts reflect not only the inclinations of their political leaders but also the interests of major corporations headquartered in those nations.

Saudi Arabia is, of course, the home to the Saudi Aramco—one of the world’s largest oil and gas producers and thus one of the biggest contributors to greenhouse gas emissions. Australia is the home to mining companies such as BHP Group, the world’s largest producer of coal. Brazil is the headquarters of meat-producing giant JBS.

Along with their outsized role in CO2 emissions, these companies damage the environment in other ways and have run afoul of regulatory requirements. Take the case of Saudi Aramco. As documented in Violation Tracker, its U.S. subsidiary Motiva Enterprises has racked up more than $170 million in penalties over the past two decades for violations of the Clean Air Act and other environmental laws. In addition to cases brought by the EPA, Motiva has been the target of lawsuits and enforcement actions by attorneys general and environmental regulatory agencies in states such as Texas and Louisiana.

In its U.S. operations, BHP has been cited for violations both by the EPA and by the Bureau of Safety and Environmental Enforcement, the federal agency that oversees offshore oil and gas drilling. It has also paid fines to environmental agencies in Louisiana and Arkansas.

JBS, which has taken over several major beef and poultry producers in the United States, has been cited 59 times for environmental violations, paying a total of $5.6 million in penalties. Earlier this year, its Pilgrim’s Pride poultry subsidiary pleaded guilty and was been sentenced to pay approximately $107 million in criminal fines for its participation in a conspiracy to fix prices and rig bids for broiler chicken products.

JBS will also show up in Violation Tracker UK, which will be launched next week. Its Moy Park Limited subsidiary has been fined over £1.2 million since 2010, most of which came from workplace safety violations but also included £82,000 in nine environmental cases.

These examples suggest that the behind-the-scenes efforts of Saudi Arabia, Australia and Brazil are not just a matter of differences in climate policy. By resisting stronger controls on greenhouse gas emissions, these countries are serving the interests of corporations that repeatedly violate environmental regulations and other laws that serve the public good.

Note: Violation Tracker UK will go public on October 26. It will contain information on more than 60,000 cases brought by over 40 UK regulators such as the Environment Agency and the Health and Safety Executive. The database aggregates cases linked to more than 650 parent corporations based in the UK and over 30 other countries.

Trans-Atlantic Corporate Misconduct

It seems likely there is more corporate crime and misconduct in the United States than in any other country on earth. After all, Violation Tracker now documents 496,000 cases over the past two decades with total penalties of more than $724 billion. That’s a tough amount to beat, especially if you put aside kleptocracies such as Russia and look only at larger market economies with functional regulatory systems.

We will soon be able to make better comparisons between the U.S. and one of those economies—that of the United Kingdom. On October 26 the Corporate Research Project of Good Jobs First will release Violation Tracker UK. Like its U.S. namesake, VT UK will provide easy access to regulatory records covering a wide range of issues, including employment practices, environmental compliance, consumer protection, financial conduct and much more.

My colleagues and I are still finalizing the data, so I will not provide any actual penalty totals here. Yet there is one finding I can confidently share now: many of the same large corporations that feature prominently in the U.S. Violation Tracker will do so in the UK data as well. More than half of the 100 most penalized UK parents have also paid fines and settlements in the U.S.

The overlap between the penalty “leaders” in the two countries is concentrated in the financial services sector. I’ve noted numerous times that large UK banks such as NatWest (formerly Royal Bank of Scotland), HSBC and Barclays have behaved badly in the U.S. and have paid out billions of dollars in penalties for offenses such as interest-rate manipulation and violations of international economic sanctions.

It will come as no surprise that these same banks have been cited for some of the same sins at home. In fact, some of the U.S. cases resulted from investigations carried out in cooperation with UK regulators such as the Financial Conduct Authority and the Serious Fraud Office.

At the same time, giant U.S. banks have gotten into trouble in the United Kingdom. The VT UK list of most penalized corporations will include the likes of JPMorgan Chase, Citigroup and Goldman Sachs.

Banks headquartered in countries such as Switzerland and Germany also show up with large penalty totals in the UK as well as the U.S. Among these are UBS and Deutsche Bank.

Other portions of the financial services sector also engage in misconduct on both sides of the Atlantic. These include the accounting and auditing giants such as KPMG and Deloitte, which have gotten into trouble not only with the SEC and the Justice Department but also with Britain’s Financial Reporting Council.

Not all of the culprits that will appear in VT UK are multinational players. The database will include many homegrown offenders with little or no overseas presence. You will be able to check out the track records of offenders large and small when VT UK launches on October 26.