The Pernicious Derision of a Health & Safety Culture by Those Who Brought Us The ‘Free Market’.

Image

I was a catastrophe underwriter for  over 20 years. I therefore find the starting point of this Telegraph article on health and Safety typical of the journalistic and (sometimes understandable) broad public view on the issue. It is representative of a willful blindness that has created the  corporate culture we have today; a blindness that actively encouraged through weak risk mgmt, incentive misalignment, outsourcing and Free Market Globalisation, the kind of  catastrophic life-ending and economic and social  damage inducing events such as  Aberfan, Piper Alpha, Bhopal and the Gulf of Mexico oil spill (to name a few though plenty more here) .

Wobbly ladders are really not the underlying point being made  here. In fact, it is quite laughable that £133/hr be used here as the representative cost here particularly when compared to the cost of an average lawyer. They will charge more for drafting a “my client” response to a safety rule infringement that a company’s own half decent internal controls would have  picked up. And let’s not compare that with the cost of a 100 page legal opinion from a  law firm regarding a legally marginal activity. Some lawyers have essentially become no more than glorified corporate bodyguards.

The critical point is that we’re moving into an era where the States willingness to ‘turn a blind eye’ to their assumption of Business Risks and the taxpayers ability to assume it it are increasingly conflicted. Poor employee protection and inadequate provisioning for pensions or accidents at work are a social cost. These costs of private wealth creation or entrepreneurial risk taking are a wealth transfer society is questioning harder. Companies doing things roughly right should have little to fear.  Yet executives set risk management processes and internal controls cognizant they are within the law or rules if not its spirit. This for many is the language of the “red-tape-benefit-sponging world that holds back wealth creation” . For others, it is simply language manipulation. When the risk/reward proposition benefits the risk seller  (see banks apology to the FSA) at the expense of those unconsciously assuming them, executives can no longer avoid the cost. Health & Safety is a subset of this bigger issue.
It is wholly  understandable businesses should be burdened by compliance costs. Equally, governments  must ensure there is a legislative framework that encourages growth and entrepreneurialism without ‘turning a blind eye’ to safety inadequacies and wealth transfers that cost lives as the mining tragedy in Wales suggests last year. This is an issue both main political parties must address as part of the ‘responsible capitalism’ agenda.

However, as a pragmatist, accidents do happen. There is also significant red tape. Government departments or agencies can be inflexible, rule-driven, under-staffed and distant. This creates challenges.  As a  voter and taxpayer, I expect governments of all colours to ensure those responsible for weak internal controls so obvious in industrial and financial accidents (let’s not forget the financial crisis) are accountable financially, policed by the equivalent of a vice around their (usually) male genitalia. Whilst talk of “dead wood” and “incompetence” fills the soundbites of the coalition’s ongoing review of the public sector, there is plenty of dead wood in executive suites up and down the country. Unfortunately for the vast majority of those in the public sector, they don’t necessarily have the education, connections or manners of those in executive suites that enable luck to be passed off as skill.

As an underwriter I met  many executives of Mining and Energy companies who would claim they had “zero tolerance” for loss of life and safety infringements. I have no doubt they believed what they said. Daniel Kahneman has taught us much about over-confidence. However, few pay the price for foreseeable accidents where causation can be attributed to budgetary considerations, weak project oversight or lack of executive accountability. We now know that financial – not safety-  metrics dominated executive key performance indicators for compensation (see Harvard Business Review’s : The Incentive Bubble) . This is one reason shareholders will focus on risk-adjusted returns in an era of lower credit.

Truth is, the Real Economy will only grow faster and more fairly when those asked to pull hardest know those asking them to pull harder will pay a price if the rope breaks.

 

2 comments
    • Hi Tim. Government agencies seem to do little for free. Process appears similar to the police charging you a fee for each call-out.
      But it highlights an interesting point highlighted by the Harvard Business Review piece earlier this month on the Incentive Bubble and John Kay’s report to Coalition on Corporate Governance. Focus on financial performance at the expense of environmental and safety performance measurements comes at a cost. The call for banks to move to more risk-adjusted performance measurements should probably not stop at financial borders.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: