News that Transocean are awarding their executives substantial safety bonuses has the internet aflame with outrage. Certainly it seems hard to justify the bonuses given after the death of 11 workers and the damage to the local environment, economy and community but the action will also affect safety management.
Safety management is increasingly relying on statistics to identify performance levels. Transocean’s actions illustrate that some statistics bear little relation to reality or, at least, the real-world context of its operations.
AFP quotes Transocean as reporting to the US Securities and Exchange Commission that:
“Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record as measured by our total recordable incident rate and total potential severity rate”
“As measured by these standards, we recorded the best year in safety performance in our company’s history, which is a reflection on our commitment to achieving an incident-free environment, all the time, everywhere.”
The statistics are not disputed but the juxtaposition of statistics to the loss of life is indicative of the morals of the Transocean corporation. Should it feel embarrassed by capitalism? Probably not but there is a time and a place for performance rewards and so soon after such a major disaster is not the right time.
The AFP article says that
“The firm decided to reward its executives, according to a compensation policy “based on their ability to achieve annual operational objectives that further our long-term business objectives and to create sustainable long-term shareholder value in a cost-effective manner”.”
Transocean sees the Gulf Oil Spill as one incident in a long corporate history and continues to believe that BP was responsible for the incident.
For safety management, though, the spotlight will be on the validity of safety statistics. Look at the type of statistics quoted by Transocean and one can see how the statistics justify the bonuses. “Total recordable incident rate” and “total potential severity rate” are both rates not incidents and so the figures are comparative and over time. The United States Bureau of Labor has provided various tools to assist in determining these statistics, even providing an online calculator.
Each country has its own guidelines for determining safety performance and most of them are in quantitative formats. The strongest criticisms of the performance indicators and executive remunerations come from those of us who think more qualitatively but business is principally about numbers and not morality and the Transocean numbers equate to millions of dollars for its executives.
What the AFP does not report on is the context in the SEC Filing for the executive bonuses:
“Although in 2010 we made significant progress in achieving our strategic and operational objectives for the year, these developments were overshadowed by the April 20, 2010 fire and explosion onboard our semi-submersible drilling rig, the Deepwater Horizon, off the Louisiana coast that resulted in the deaths of 11 of our colleagues, including nine Transocean employees, and the uncontrolled flow of hydrocarbons from the well for an extended period (the “Macondo Incident”). As a result, many of our senior executive officers, including our Named Executive Officers (other than Mr. Long, who retired on February 28, 2010), dedicated a significant portion of their time in 2010 following the Macondo Incident to responding to the needs of the victims’ families, coordinating the involvement of additional resources required to stem the flow of hydrocarbons, including drilling rigs and personnel to drill relief wells and other operations as requested by the Unified Area Command, cooperating with the numerous federal, state, and local reviews and investigations into the incident, overseeing our internal investigation of the incident, and managing other demands stemming from these activities, in addition to performing their normal responsibilities.”
It always pays to read the original source documents.