Good corporate advice tainted by poisonous product

In Matt Peacock’s book, “Killer Company“, an entire chapter is devoted to the legacy of the James Hardie chairman, John B Reid.  In Peacock’s talk at Trades Hall in October 2009, he mentioned that Reid had once published a book called “Commonsense Corporate Governance”.  The apparent hypocrisy of an executive of a company that knowingly sells toxic material while advising others on how to manage their corporation responsibly generated chuckles of disbelief in the Trade Hall audience.

Reid book cover 001SafetyAtWorkBlog obtained a copy of John Reid’s book to see first-hand that someone could do such a thing.  A sad part of all this is that the advice in the book is sensible but Reid’s “legacy” now taints all he does and all he says.

One random example of the advice he provides concerns dealing with consultants:

“Where, as with solicitors and auditors, it is imperative for the company to retain them, company staff need to be reminded that the professional advisers are paid for on the basis of the time that they spend on the company’s business. This is not predetermined by the nature of the task. In large measure it is affected by the decisions made and by the homework done within the company. What does this mean?

First, the imposition of new and more demanding, and frequently less precise, legislation on all manner of subjects has made management and, as a result, directors, nervous about things that directors 50 years ago would have dealt with very quickly-and inexpensively. Further, the increasing number of specialists necessary within a company’s own payroll is a result of this legislative epidemic, and has produced a reinforcement of this culture of caution and, occasionally, of fear.”

Safety professionals may want to take particular note of this corporate imperative.

Peacock points to the strict confidentiality clauses that Hardie included in any settlements in the 1970s.  Peacock writes (p 156)

“Secrecy indeed was Hardie’s byword, one endorsed by the chairman, who would later advise aspiring directors to ‘remain silent where there is criticism’.”

Reid recommended this in a bulleted list of ways to handle the media.

John B Reid, whose personal wealth was estimated at $A181 million in 2004, is not unique in advising companies while also having a tarnished corporate reputation.  Some argue that the adjective “good businessman” is a tautology.

There is no doubt that Reid was an active philanthropist and corporate citizen.  He was awarded an Order of Australia for “service to industry” – no citation is available to explain the decision.  In 2006, he received the Goldman Sachs JBWere Philanthropy Leadership Award.

Greek tragedies were full of hubris and examples of the single flaw that made good men do bad things.  If the plays of Euripides, Aeschylus and Sophocles have yet to be analysed for their advice to corporate executives, they should be, for not only do they show human flaws but human corporate flaws.

John B Reid’s book on corporate governance is an easy read and has valuable lessons but it is now a book that makes the reader feel dirty.

Kevin Jones

Management – the importance of what comes before

A special guest for the Safe Work Australia events in Queensland was Matthew Gill, former Beaconsfield Gold mine manager.  According to a media statement from the Government

“Matthew Gill who was the public face of the Beaconsfield mine rescue will speak about how he immediately took control of the emergency and then implemented rescue operations for the three missing miners,” [Workplace Health and Safety Queensland Executive Director, Dr Simon Blackwood] said.  “Mr Gill maintained an unwavering commitment to the safety of the people conducting the rescue and to the trapped miners.

“He oversaw the rescue teams which battled 24 hours a day for 14 days to release the two miners trapped almost 1km underground. Mr Gill will relive the emotional story of finding Larry Knight’s body and having to talk to his family afterwards.

“Previously he has been involved with mine rescue at rock falls at Mt Lyell in Tasmania and in Papua New Guinea, but Beaconsfield was the first time that he had such ‘hands on’ involvement.”

Matthew Gill has a lot of skills to share on disaster management and media handling but a lot of that skill seems to come about after the rockfall in 2006 that killed Larry Knight.

Cover KNIGHT,_Larry_Paul_-_2009_TASCD_25Prior to that time, in 1995 to 1997, Matthew Gill was the Responsible Officer for the mine.  From 1997, Gill appointed other people to undertake the role that is required by legislation.  Sometimes there were three people in the role at the same time.  Professor Michael Quinlan was quoted in the Coroner’s report saying that

“……….the very notion of appointing a Responsible Officer would have little meaning unless that person so appointed exercised overall control of the workplace and could therefore make critical decisions in relation to OHS not simply recommend them, be part of them, or make decisions but not others than might affect safety. For example, as Responsible Officer Mr Ball was a participant in decisions on mine design and mining methods – decisions that have a critical effect on the safety of underground workings – but he was not the only or final decision maker.”

The Tasmanian coroner Rod Chandler,agreed that there should be only one Responsible Officer and that the legislation be amended to reflect this.

Media reports of the inquest into Larry Knight’s death reported that after rockfalls in October 2005 and various risk consultants’ reports Matthew Gill undertook some remedial work on the mine and in February 2006, Gill declared the mine safe to restart mining.  The decisions made on the basis of those consultants’ reports came under close scrutiny in the coronial inquest.

On 10 November 2008, AAP’s Paul Carter reported the following:

Lawyer Kamal Faroque [representing the Knight family and the Australian Workers’ Union] told Coroner Rod Chandler in Launceston that Allstate’s management failures contributed to Mr Knight’s death…. Mr Faroque said mine manager Matthew Gill was ultimately responsible for deficiencies in the mine’s ground supports.  “It is submitted that deficiencies in ground support contributed to the Anzac Day rockfall which killed Mr Knight,” he said.

He also said there was no reasonable basis for Allstate to conclude that it was safe for workers to return to the area after two earlier rockfalls.

“Mr Gill accepted responsibility for the decision to recommence stoping in the western zone following the October (2005) rockfalls,” Mr Faroque said.  Stoping is a mining method in which underground chambers are opened up deep beneath the surface.

Mr Faroque said the risk management process conducted following the October 2005 rockfalls was inadequate.  “It is submitted that these failures are a sound foundation for a finding that Allstate contributed to the death of Larry Knight,” Mr Faroque told the court.

There is no doubt that Matthew Gill was integral to the successful rescue of Brant Webb and Todd Russell but Gill had been employed at the mine for over a decade before the fatal rockfall and therefore was also involved with the decision-making leading up to the rockfall.  The decisions made by the company over many years should be analysed to see the combination of bad, poor, or short-term decisions that ultimately led to Larry Knight’s death and the entrapment of his colleagues.

The rescue of Webb and Russell is an exciting tale with a happy ending and at least one book and several long articles (even a school lesson plan) have been written about this.  The most lasting lessons for safety professionals, mine managers and business operators would be what contributed to the bad decisions leading to Larry Knight, Brant Webb and Todd Russell being in an unsafe working environment during a rockfall.

This is a more complex story that requires knowledge of geology, the stock markets, corporate accountability, OHS and mine safety regulations.  If this story had been Matthew Gill’s presentation during Safe Work Australia Week, it would have been worth travelling to Queensland to hear.

Kevin Jones

Revealing podcast on asbestos in Australia

On 15 October 2009, Matt Peacock, a journalist with the Australian Broadcasting Corporation and author of a new book on asbestos and the James Hardie company, “Killer Company: James Hardie Exposed” spoke publicly at Trades Hall in Victoria.

Killer Company cover 001Peacock has allowed an edited version of his presentation to be used as a SafetyAtWork podcast which can be downloaded.  In the podcast he discusses the conduct of the James Hardie boss of several decades, John B Reid; the pervasive nature of asbestos throughout the Australian community; the surveillance of opponents by the company; the immoral public relations campaigns and, generally, the conduct of a corporation that knowingly sold a product that was toxic and harmful.

One blogger reviewed the book and said

“Killer Company” clearly shows that JH directors were criminally negligent and showed no humanity or compassion for their victims and no remorse for their crimes.

Peacock produced several reports on asbestos recently.  Video and transcripts of his reports can be accessed HERE.

Peacock has also been interviewed extensively about his book.  A video interview is available HERE

Kevin Jones

New approaches on OHS fines and penalties

At the moment Australian OHS professionals, lawyers and businesses are preparing submissions to the Government on the harmonisation of OHS laws.  One of the areas that the Government is seeking advice on is penalties.  The Discussion Paper asks the following

Q17. Are the range and levels of penalties proposed above appropriate, taking account of the levels set for breaches of duties of care by the WRMC?

Q18. What should the maximum penalty be for a contravention of the model regulations?

Q19. The intention is that all contraventions of the model Act be criminal offences. Is this appropriate or should some non-duty of care offences be subject to civil sanctions e.g. failure to display a list of HSRs at the workplace, offences relating to right of entry?

The amount of  any fixed financial penalty is not a big issue in my opinion.  There is an assumption that the threat of a large financial penalty imposed on one company will encourage other companies to improve safety.  Is anyone seriously saying that all of the financial penalties imposed over the decades are in some way responsible for an improving level of safety in workplaces?  The motivation to improve safety comes from elsewhere.

The threat of large financial penalties send companies to seek ways of insuring against having to pay a fine.  Often it is cheaper to pay an insurance premium on the slim chance of being prosecuted and fined.  I acknowledge that this has been a corporate and risk management approach primarily but there are cases where such options are being offered to small business.

Large financial penalties, such as the then record fine to Esso over its Longford gas explosion, are easily paid with little OHS improvement resulting from the fine.  It can be argued that the negative corporate exposure from the resulting Royal Commission, a reulting class action and the media coverage resulting from its unforgivable treatment of Jim Ward were stronger motivators for improvement.

In most Australian States, there is not a crime of industrial manslaughter.  This issue has faded from the political agenda but it remains very much alive in England.  On 27 October 2009, the Sentencing Guidelines Council wrote the following:

“Companies and organisations that cause death through gross breaches of care should face punitive and significant fines, a consultation guideline published by the Sentencing Guidelines Council proposes today.

Fines for organisations found guilty of the new offence of corporate manslaughter may be measured in millions of pounds and should seldom be below £500,000.

The new sanction of Publicity Orders forcing companies and organisations to make a statement about their conviction and fine introduced under the Corporate Manslaughter and Corporate Homicide Act should be imposed in virtually all cases.

The consultation guideline proposes that the publicity should be designed to ensure that the conviction becomes known to shareholders and customers in the case of companies and to local people in the case of public bodies, such as local authorities, hospital trusts and police forces.  Organisations may be made to put a statement on their websites.”

The Council recommends a minimum financial penalty and a publicity order that has teeth. More on the publicity order is below.

Council member Lord Justice Anthony Hughes clearly states the purpose of financial penalties and it is not preventative.  He said in a media statement

“Fines cannot and do not attempt to value a human life – compensation will be payable separately in these cases.  The fine is designed to punish and these are serious offences so the fines imposed should be punitive and significant to reflect that.”

Penalties as a Percentage of Turnover

Hughes says that the Council rejected a Sentencing Advisory Panel proposal that I believe should be floated in the current debate on penalties in Australia, even though it is likely to be similarly rejected.

The Panel recommended the following

“In order to achieve an equal economic impact on offending organisations of different sizes, the proposed starting points and ranges for offences of corporate manslaughter are expressed as percentages of the offending organisation’s average annual turnover during the three years prior to sentencing.  The relevant turnover is that of the company convicted of the offence or, where the offending organisation is a holding company, the consolidated turnover of the group of companies of which it is the holding company.”

Here is the penalty table

Manslaughter table

Lawyers argue extensively about the use of manslaughter in relation to deaths in workplace but the public jumps across the legalese by repeatedly asking how the death of their loved one is not manslaughter when the actions of a director or company led directly to the death?  No level of legal explanation is going to counter this need for accountability, some would say revenge.

Similarly the penalty rate listed in the table above is easier for the public to understand conceptually compared to a judge’s or lawyer’s explanation of why a financial penalty for a workplace death was less than the maximum.

Sentencing options are complex and SafetyAtWorkBlog has no legal contributors but on 30 October 2009 within a public discussion period on national OHS laws and at the end of Safe Work Australia Week, it seem thats penalties imposed from a percentage of turnover may be an attractive concept to many safety advocates and one that needs to be considered in the Australian context.

Publicity Orders

On the issue of publicity orders, many Australian jurisdictions have had this option for a while.  Indeed, the issue of enforceable undertakings is getting a broader hearing after some of the recent actions by Comcare against John  Holland Group and others.

It is always important to look at the most recent actions and decisions in OHS law and regulation from outside one’s own jurisdiction so that innovations are not overlooked.  It seems that the Sentencing Advisory Panel has looked at lots of  jurisdictions in making the following requirements.

The Sentencing Advisory Panel listed specific requirements of a publicity order to be applied within a specified timeframe:

  • a quarter-page advertisement in a local or regional newspaper, in the case of an organisation operating in one area; or
  • an eighth-page advertisement in three specified national daily newspapers, in the case of an organisation operating nationally; and
  • an eighth-page notice in a relevant trade publication; and
  • a prominent notice in the organisation’s annual report (also in electronic format where applicable); and
  • where applicable, a notice on the homepage of the organisation’s website for a minimum period of three months.

The panel also closed a possible (out) for offending companies.

” The making of a publicity order does not justify a reduction in the level of fine imposed on an organisation for an offence of corporate manslaughter.”

The ads on home pages, local newspapers and trade publications (if there are any) seems very reasonable but the media option that may be most influential is the inclusion in the company’s annual report.  Acknowledging a workplace death and expressing regret in an annual report is admirable but “a prominent notice in the organisation’s annual report” goes straight to the shareholders who often have the ear of the corporation.  Just look at the influence being applied by them at the moment on executive salaries.

Now is the right time for Australia to consider alternative OHS penalty options.

Kevin Jones

Australian AGMs mention workplace deaths

Australia’s corporations are busy releasing their annual reports in October 2009.  The outgoing managing director and CEO of Boral Limited, Rod Pearse, provided his comments on the company’s safety performance to shareholders on 28 October 2009.

“Since demerger [January 2000], Boral’s safety outcomes have delivered steady year-on-year improvements and compare well with both ASX100 and industry benchmarks. Employee lost time injury frequency rate of 1.8 and percent hours lost of 0.06 have both improved by 80% since 2000 and are better than those of our competitors in like industries and in the top quartile of companies in the ASX100.”

Boral is, according to the executive statements, “a resource based manufacturing company with low cost manufacturing operations.” Continue reading “Australian AGMs mention workplace deaths”

Not all employers are the same

Recently SafetyAtWorkBlog reported the umbrage that the Australian Institute of Company Directors (AICD) felt about executive accountability, particularly in relation to OHS legislation.  On 25 October 2009 the Australian Chamber of Commerce and Industry (ACCI) provided an example that should stop generalisations about employer associations , at least for a little while.

Below are extracts of the significant statements made by ACCI and attributed to its CEO,  Peter Anderson:

“Safe Work Australia Week [is] an opportunity for employers and employees to step back and review their approach to ensuring safety within their workplace.

It is essential that at regular intervals time is taken to step back and take a fresh look at the bigger picture of workplace safety. Safe Work Australia Week presents an ideal opportunity to do so.

Company Boards and Senior Executive teams should regularly review their organisation’s strategy, culture, systems and commitment to workplace safety and make adjustments where needed. Safe workplaces are driven from the top.

However, managers, supervisors and all employees also need to take individual accountability for workplace safety. Workplaces with the best safety records have a culture of clear and shared accountability for safety from the first year apprentice to the Chief Executive.   This is built on the empowerment and obligation of all employees to openly discuss workplace safety, report hazards and incidents, and collaboratively find the most appropriate ways of managing risks.

It is important that in the midst of the current debate about harmonised OHS legislation, the focus on day-to-day workplace safety does not slip.   Legislation is not going to drive further improvements in OHS outcomes in Australia – people’s actions will.   Governments and industry must look for ways to further provide small business in particular with the tools, information, advice and encouragement to effectively manage the challenges and complexities faced in ensuring workplace safety.”

The risk with any national week of special day is that the focus is on a specific moment rather than seeing the issue being raised as one that is relevant for an entire year.  This is very much the problem with Safe Work Australia Week but it is not alone.

Significantly, ACCI makes a clear statement about executives being involved with the management of safety in their workplaces – the attitude and approach of “proactivity” the OHS model legislation is aiming at.

Equally significantly, ACCI discusses the individual accountability of everyone in a company for OHS.  It specifies the elements in support of accountability

  • open discussion or (OHS regulators would say) consultation;
  • hazard and incident reporting; and
  • collaboration.

ACCI is on familiar turf when it says legislation should not be the motivation for change on OHS but employers and other commercial organisations must realise that self-regulation has never been more of an unpopular concept than in the wake of the global financial crisis.  No one can trust business to do the right thing by shareholders, investors or employees.  They want government to make business accountable.

The capitalist ideology says that the wealth created by business is shared with the masses through social and financial structures.  ACCI is trying to rebuild the capitalist structure into a nice, friendly, warm and comforting capitalism because if it cannot, the government will impose social obligations on them.  If the ACCI and other commercial bodies can do this, it will be impressive but the question can be asked why capitalism became so ruthless in the first place and did various employer associations advise companies to act cautiously and keep capitalism in line with the social obligations everyone has?

Workplace safety is an easy indication of the heartlessness of capitalists – increase profits by rushing production and encouraging shortcuts in safety; or not taking the time to train workers well enough that they can work without being harmed.  But if capitalists are willing to try again and NOT follow the same pathways that have been shown to lead to economic destruction, then they should have our support.

Kevin Jones

Nice comparison on Directors’ complaints

In the Australian Financial Review in October 2009  there was an opinion piece (not available online) from the CEO of the Australian Institute of Company Directors (AICD), John Colvin, expressing concerns about the accountability of directors under legislation including the proposed OHS laws in Australia.

According to a report by Adam Schwab in the Crikey newsletter of 23 October 2009 (also not freely available online), Colvin wrote in the AFR:

“There are more than 660 state and territory laws which impose personal liability on individual directors for corporate misconduct. That is, a director is liable because he is a director, even when he may not have had any personal involvement in the breach…”

Schwab writes

“The AICD noted, the NSW courts have taken a hard-line enforcing the deemed liability laws.  According to AICD data, between 2004 and 2008, 144 company directors were found guilty of OHS offences, of which 115 of those prosecutions occurred in NSW.”

Schwab then provides a comparison of risk that I wish I’d thought of:

“That means the proportion of directors convicted over these so-called onerous laws is 0.0068%.  To compare, there is roughly a 0.04% chance of someone being struck by lightning.  Therefore, based on the AICD’s own data, company directors are six times more likely to be hit by lightning than to be prosecuted.  It also shouldn’t be forgotten, directors’ liabilities are almost always covered by indemnity insurance and most prosecutions result in a mere financial penalty.

While the NSW OHS laws result in occasional harsh results, to extrapolate one set of allegedly ill-advised laws across the country is much like a cry of wolf.”

This perspective will be an important one to remember when considering the submissions being lodged with Safe Work Australia on the OHS model laws by 9 November 2009.   The corporate submissions particularly but also those from the OHS law firms that spruiker the exposure of company directors ruthlessly whenever OHS and accountability is discussed.

Some of us remember the “glory days” when industrial manslaughter was widely considered in some Australian States. (There is a noticeable absence of controversy of the industrial manslaughter law that is operating in the Australian Capital Territory)

Also important is the point that Schwab makes about indemnity insurance for Directors and Officers, a matter that has been discussed elsewhere in SafetyAtWorkBlog.

The amount of “get-out-jail-free” options available for directors should encourage more attention to alternative, non-financial penalties for breaches of OHS law.  Over the last 24 hours the United States has been talking about replacing executive cash remunerations with stocks so that director’s incomes are reliant on the share price of the corporation which, in turn, relates to the quality of leadership from the director.

As long as Australia’s principle OHS penalties involve money, directors can buy their way out of trouble.  If Australia’s Prime Minister, Kevin Rudd, can face an entire country and apologise for the bad behaviour of others, and the bad policies of other governments in relation to the interaction with indigenous peoples, why should company directors not have a similar obligation when their poor management of a workplace kills someone?  If corporate executives are that keen on leadership, let’s see them apply some of the leadership that Rudd showed, and accept responsibility when they should.

Kevin Jones

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