Court judgement highlights management failures to ensure regulatory compliance

The record £20 million fine levied by Aylesbury Magistrates Court on Thames Water today highlights the critical importance of companies ensuring compliance with environmental laws and regulations.

Commenting on the sentence, Martin Baxter, IEMA’s Chief Policy Advisor said this morning:

The size of the fine is an important reminder to shareholders and management that companies must have effective systems and capabilities in place to ensure regulatory compliance. The increasing scale of financial penalties being levied by the courts for poor regulatory performance demonstrate that companies must continue to invest in regulatory performance controls, or risk undermining shareholder value.”

The Sentencing Council’s environmental offices guidelines make clear to courts that: “The combination of financial orders must be sufficiently substantial to have a real economic impact which will bring home to both management and shareholders the need to improve regulatory compliance.”

In determining the scale of financial penalties, courts will give particular attention to turnover; profit before tax; directors’ remuneration, loan accounts and pension provision; and assets as disclosed by the balance sheet.