Preventing Corporate Accidents

Robert Whittingham, R B Whittingham

• Publisher: Routledge
• Year: 2012
• Print ISBN: 9780750680622
• eBook ISBN: 9781136372179
• Edition: 1
• Topic: Technology & Engineering
• Subtopic: Industrial Engineering
• Index: Technology & Engineering

The passing of the Corporate Manslaughter and Corporate Homicide Bill in the UK and increasing public and investor pressure for good Corporate Governance and Corporate Social Responsibility, means organizations now, more than ever, need to ensure they do all they can to prevent major accidents. However, past experience shows that just implementing safety management systems is not enough and this book makes the case for a more holistic and ethical approach to improving corporate systems as a whole. Preventing Corporate Accidents shows how major accidents can result from human error and defects in corporate systems. The book describes accident prevention strategies, from safety culture, safety management systems, foresight and planning to safety regulations, corporate ethics, corporate social responsibility and the learning organization. Barry Whittingham illustrates with international case studies from various industries how and why these defences have failed in the past, and more importantly, how to strengthen corporate systems to prevent future major accidents.The case studies include:

• The loss of the space shuttle Columbia
• Infant heart surgery at Bristol Royal Infirmary
• The Davis-Besse nuclear power plant incident
• The fire and explosion at the Conoco-Phillips Humber oil refinery
• Herald of Free Enterprise and Southall rail accident manslaughter prosecutions

This book is essential reading for all those with a professional interest in health and safety management, the control of major risk and accident prevention, in particular for directors, senior managers and health & safety professionals in high-hazard industries and public operations, such as nuclear, chemicals, construction, oil and gas, energy, manufacturing and transportation. Barry Whittingham has worked as a senior manager, design engineer and consultant for the chemical, nuclear, offshore, oil and gas, railway and aviation sectors. He developed a career as a safety consultant specializing in the human factors aspects of accident causation. Barry is a Fellow of the Safety and Reliability Society.

ICompanies at Risk

Introduction to Part I

DOI: 10.4324/9780080570297-3

This book has been conveniently divided into two parts. Part II identifies the essential features of a number of critical corporate systems which, if not fit for purpose, may lead to a serious accident involving harm to people or the environment. The accident case studies included in the appendices at the end of the book bear powerful witness to the tragic consequences of such corporate failures. The lessons to be drawn from these case studies help to ensure that this text is grounded in reality and not overreliant on theory. Part II can be classed as the more ‘strategic’ section of the book since, drawing on the experience of the author and many other quoted sources, it describes the strategies which a corporation must employ to prevent a ‘corporate accident’, as defined in Chapter 1.

Part I of the book is more foundational in that it prepares the ground for Part II by exploring some issues pertinent to the strategies for preventing corporate accidents. The role of human error in accident causation is an important and continuous theme in the book, but is examined here at corporate level rather than at the more usual level of workplace activities. Consequently, the first chapter examines the nature of ‘management error’ (as a subset of ‘human error’) and explores how it can lead to serious accidents, the root cause of which may often be found in defective corporate systems. Part I also examines the concept of the corporation in its historical evolution from the partnership or small ‘hands-on’ family business to the larger businesses owned by individual stockholders, who generally took little active part in the enterprise. This business model was the main basis of trade from the beginning of the twentieth century, but gradually evolved owing to economies of scale and through mergers and acquisitions into the huge international corporations which have come to dominate the world of commerce today. In this model, ownership is usually institutional or corporate rather than individual and this has led to an even greater separation between ownership and control. The effect of this separation, together with the principle of limited liability, has led to a situation where any philanthropic instinct or sense of moral duty which owners might have displayed in the past has become largely subservient to the claims of profit and share price.

The basic structure of the corporation is explored, including the curious and elusive legal fiction of ‘corporate personhood’. This is a device which enables the corporation to be treated as an artificial person under the law so that it becomes something other than an inanimate entity - a corporate body. This legal device allows the corporation to interact more effectively with other corporations, with government and with society at large. Also examined here are the underlying economic theories which have led to modern corporatism and to a large degree have determined its impact upon society both for good and for bad.

Part I starts from the premise that the main reason for the existence of a corporation, apart from meeting the need of society for goods and services, is to generate a profit and increase the value of the company's stock for its owners. It is well known that the profit motive can easily come into conflict with the legitimate expectations of society regarding corporate behaviour and the requirement to limit the potential harm that the company can cause to people and the environment. One of the ways in which this conflict is triggered is through the mechanism of ‘cost externalization’. This is a corporate ‘reflex’ which tries to maximize profits at the expense of uninvolved third parties. It was identified by the economist Milton Friedman, the Nobel Prize winner and guru of neo-classical economic theory in the 1980s. This mechanism is fundamental to the theme of this book and is described in more detail in Chapter 2. Government controls and regulation are the counter-mechanism by which the worst excesses of corporatism are contained. However, the book maintains that legal compliance defines only minimum standards of corporate behaviour. This is because modern economic theory dictates that excessive government control limits entrepreneurial initiative and technological development. Over zealous regulation of business therefore needs to be avoided if corporatism is to deliver its full potential to the society it serves.

The development of the modern corporation has produced huge benefits for society, but the process is always in danger of being overshadowed by a potential for societal harm. This has not gone unnoticed by the public, who now not only display a greater level of awareness about corporate failure but also have a greater aversion to unnecessary risk exposure. In the age of the internet and 24/7 media coverage, the glare of publicity which now illuminates corporate failure has resulted in a general raising of the expectations of society regarding corporate standards. Whenever there is a serious corporate accident involving major loss of life it stimulates an increased public desire for greater safety and justice for those who have been harmed by the accident. The result is often that government, responding to public concern, is prompted to take immediate action. Any serious mismatch between public expectation and corporate performance eventually leads to additional curbs being placed upon industry which may not always be proportionate to the actual risks being generated. In some cases, however, government action is justified and this has been demonstrated in recent decades by some prominent corporate manslaughter cases brought against large companies in the UK who failed in their duty to protect the public. When these prosecutions collapsed (for legal reasons which are outlined in a later chapter and in Appendix 1) there were strident demands for errant companies to answer properly for their failures in a court of law. The result was the Corporate Manslaughter and Corporate Homicide Act 2007, in force from 2008, which aims to ensure that companies are successfully prosecuted and subject to appropriate penalties when they have been grossly negligent and society's interests have been harmed.

Apart from charges of corporate manslaughter, companies can be prosecuted under a wide range of other legislation varying from the Companies Act in the case of financial malfeasance to the Health and Safety at Work etc Act 1974, for industrial fatalities and injuries. Just as companies are increasingly held liable for the external consequences of the risks they generate, so the companies themselves are at risk from the sanctions that society will impose if a mistake is made; hence the title of Part I of this book, ‘Companies at risk’. These risks include not only heavy fines but also, more importantly, loss of corporate reputation, which can seriously damage customer confidence and sometimes threaten the very existence of the company. Senior company personnel face similar but more personal risks such as loss of freedom and career when they become implicated in a corporate failure to protect people and the environment.

Whilst government regulation, particularly in the realm of health, safety and the environment, will always be necessary (and, indeed, compliance with regulation is a corporate strategy defined later in the book), it is suggested here that compliance alone is no guarantee of responsible corporate behaviour. This book suggests that if the modern corporation is to limit its own exposure to risk it needs not only to take account of its strict legal responsibilities, but also to subscribe to ethical policies which constitute a safety margin between normal and illegal operation. The final chapter of Part I introduces the complex, and in today's world increasingly relevant, subject of corporate ethics and how failures in ethical practice can easily stray into illegality. The ethical approach which stems from this chapter permeates the whole book. It is taken up in more detail in Part II, where it is shown how the modern company must, if it is to retain the trust and support of its stakeholders and customers, be prepared to take its rightful place alongside them as a responsible ‘citizen’ of society. This not only is necessary to minimize the detrimental effects arising from its operations (a rather negative motivation), but also will help to guarantee future business success; it has been well demonstrated that safe and responsible companies are also successful companies.

1 Management Error

DOI: 10.4324/9780080570297-4

As we move towards the 21st century there is an ever-increasing awareness and expectation of the duties and responsibilities of large corporations in matters of health and safety. It is a sad fact that despite advances in modern technology from time to time major disasters occur. Often, perhaps more often than not, these are the result not of one isolated human error or technical failure, but a combination of several operating together. The corporation itself is in the best position to foresee and take steps to avoid such disasters, so why should it not be brought to book in the event of a culpable failure, so the argument runs. In one sense it can be through the strict requirements of the health and safety legislation. But a conviction does not carry the same stigma as a conviction for manslaughter and since one of the purposes of punishment is the emphatic denunciation by the community of the prohibited conduct as a crime, there is a compelling case for a company to be found guilty of manslaughter and punished accordingly when it is guilty of gross negligence that results in death.

Mr Justice Scott Baker, Regina v Great Western Trains Company Ltd ¹

Introduction

The title of this book refers to a particular type of industrial accident which the author has termed ‘corporate accident’ and which, at the very start, needs to be defined. Although it is possible that this term has already been used outside the remit of this book, to the author's knowledge ‘corporate accident’ does not have any standardized or accepted meaning and he is able to begin with a clean sheet! Obviously, the meaning of ‘corporate accident’ will become clearer as the book proceeds, but for introductory purposes, here is a very simple definition:

A corporate accident is one whose ultimate root cause can be traced back to a failure of corporate systems.

In writing the book, as during most of his career in accident prevention, the author has been particularly concerned with major industrial or other accidents having severe consequence such as serious loss of life and/or asset damage. Such accidents have, in the past, tended to involve larger organizations whose operations pose a major hazard risk or some other kind of potential threat to their workforce and/or the public or environment if things go wrong. The book includes a number of case studies of corporate accidents, detailed descriptions of which are included in appendices and which are referred to extensively in the text. All these case studies happen to involve larger organizations and cover a wide range of industries as well as being international in their scope. The case studies include the US and Japanese nuclear industry, public transportation systems in the UK as well as accidents in the oil and gas, aerospace and medical sectors. They have been chosen because their root cause has been definitively established by others to be a failure of corporate systems reaching to the highest level of the organization.

Sometimes, corporate accidents are so serious that they have led to a prosecution on perhaps the most serious charge that can be brought against a company, namely a charge of corporate manslaughter. When such prosecutions occur it is usually in relation to multiple-fatality accidents, particularly when members of the public have been killed, raising the level of society's concern about safety in that particular sphere. It is natural, even if slightly sad, that the public aversion to multiple-fatality accidents is disproportionately greater than to single-fatality accidents which, in general, are much less newsworthy. The subject of societal versus individual risk and the perception of risk by the public is discussed in more detail in Chapter 5. The author does not wish to downplay in this book the seriousness of the many thousands of tragic accidents which occur every year resulting in single fatalities, serious injuries or occupational diseases. Some statistics about such accidents are included in Chapter 5 to illustrate the gravity of this problem.

In the case of the more serious accidents, which are the main subject of this book, prosecutions for corporate manslaughter have in the past been quite rare. Certainly in the UK, where charges have been successfully brought and companies found guilty this has, in every single instance, involved small companies where a senior person in the company, such as a director, has been closely associated or identified with the activities leading to the accident. The very few prosecutions for corporate manslaughter brought against large companies have always failed because of the so-called ‘identification’ principle required under common law in the UK. This principle did not allow the corporate body to be charged with a common-law offence unless a person of sufficient seniority could be identified and who could also be prosecuted for manslaughter. The reasons for this are explored in Chapter 2 of the book, which commences with an explanation of the legal basis of the corporate entity. The subject of corporate liability under the law is dealt with in the same chapter, together with a comparison of a company's vulnerability to manslaughter charges in various countries. It also explores the degree to which new corporate manslaughter legislation has brought about greater justice for those affected by a serious accident.

When commencing this book the author assumed that just as the study of workplace error is important to accident prevention (since it has been shown that about 80 per cent of accidents are due to human error), in a similar way, ‘management error’ at the administrative level will be important to the prevention of accidents resulting from corporate failure. This initial assumption was largely borne out, but with some surprises. It was discovered that most managers, in an analogous way to workers at the shop-floor level, are often innocent victims of the systems which are imposed upon them and which they are obliged to follow. The main difference between ‘shop-floor errors’ and ‘management errors’ is the type of systems which govern the way work is carried out. This may be simplified to the distinction between ‘ergonomic’ systems in the case of shop-floor errors and ‘corporate’ systems in the case of management errors. This book therefore adopts a systemic approach to human error, as did the previous book.² In this case it deals primarily with corporate system failure and how to prevent it. A basic knowledge of ‘human factors’ principles, particularly concerning the ways in which systemic human error occurs, is essential for an understanding of this book. For those not familiar with these concepts, some basic principles are set out in the next section.

At the level of workplace tasks, safe and effective working is highly dependent upon the ergonomics of the systems of work, using the term ‘ergonomics’ in its widest sense. This would include working instructions and procedures which define closely and often rigidly how the work is to be carried out, the training and experience of the worker, the complexity of the task in relation to this and the quality of the human–machine interface (i.e. the equipment provided to carry out the work).

At the administrative or management level, conventional wisdom holds that there is a much greater degree of flexibility in the way work is carried out and the work of others is controlled. It is true that many decisions and practices at this level depend upon the professional judgement and experience of individual managers. At the same time the work of managers is often guided, or sometimes strictly limited, by corporate systems which can constrain the degree of flexibility that is possible. In some cases, the requirements of corporate systems can override professional judgement and experience. If these corporate systems fail to take account of health, safety and environmental considerations then disastrous consequences can ens...

Table of contents

• Cover Page
• Half Title Page
• Dedication
• Title Page
• Copyright Page
• Contents
• Preface
• Part I Companies at Risk
• Part II Strategies to Prevent Corporate Accidents
• Appendix 1 Case studies in corporate manslaughter
• Appendix 2 Case studies in corporate accidents
• Appendix 3 Safety management tables
• Index