Could they care less?

The case for jailing dangerous directors
- Why fines don’t work
- Could BP care less?
- Shell doesn’t feel fine
- A question of guilt
What the unions say

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Could dangerous employers care less?

The case for jailing dangerous directors
[Hazards 90, May 2005]

If directors faced the prospect of a jail term or even the loss of their boardroom seats for poor safety performance, then safety might be a more pressing corporate concern. As it is, they don’t even lose their bonuses.

The average fine for a health and safety offence was £9,858 in 2003/04 (Hazards 79). But even the rare larger fines – only 16 so far have broken the £400,000 mark - hardly dent the profits of larger firms.

Why fines don’t work

United Biscuits was fined £150,000 in April 2005 following the death of driver Steve Tupman, 46. The company’s trading statement for 2004 shows it had total sales of £1.36 billion for the year. Its business profits for 2003 were £166.2 million.

British Sugar was fined £400,000 in February 2005 for safety offences relating to the death of Lorraine Waspe. Its parent company, Associated British Foods, made an operating profit of £478 million in 2004. Co-defendant VM Plant Ltd was fined £250,000 but has gone into liquidation so it is unlikely the fine will be paid.

BAE Systems was fined £250,000 in November 2004 after is safety failings led to the death of contract welder Billy Farrell. BAE made a £453 million profit in 2003.

Balfour Beatty Rail Infrastructure Services Ltd (BBRIS) was fined £150,000 in October 2004 on charges relating to the death of casual labourer Michael Mungovan, who an inquest had early judged was a victim of “unlawful killing”. Parent company Balfour Beatty Group Ltd made pre-tax profits of £130 million in 2003.

Construction company Wates was fined £150,000 in March 2004 for safety offences related to the death of sub-contractor employee Indergit Singh. The company made a pre-tax profit of £7.4 million in 2002.

Sunlight Services Group Ltd was fined £325,000 in July 2004 for offences related to the death of employee Paul Clegg. The company made a pre-tax profit in 2003 of £29.6 million.

RMD Kwikform Ltd was fined £100,000 in May 2004 for safety offences related to the death of Mark Warrallo. The company made an operating profit of £7.9 million in 2002. In November 2002 the company received a £240,000 fine for safety offences.

Could BP care less?

Oil giants BP and Shell provide two shocking examples of how even record fines can be a drop in the ocean to profit-rich British companies.

British oil multinational BP says it takes its corporate responsibility seriously. A BP report published in April 2005, ‘Making the right choices,’ says it sacked 252 for unethical behaviour in 2004.

But while some paid with their jobs, the boardroom had a bumper year. BP’s annual report for 2004 says London-based chief executive Lord Browne picked up £5,649,000 in pay and bonuses for the year, reflecting the company’s global success. Several other directors broke the £1m mark.

The company reported in April this year that its first quarter profits were $4.72bbn (£2.64bn). All of which means the company and its board need not be overly concerned by a sequence of record safety penalties, because even the largest fines could be paid off with an hour’s profit. And all could be settled from the CEO’s bonus package for last year.

For example, an August 2003 HSE report highlighted the company’s lamentable safety performance at its Grangemouth plant, following an HSE prosecution and £1 million fine in January 2002 – one of Britain’s biggest ever safety penalties (Hazards 81), but loose change when quarterly profits are in the billions.

In January 2005 if was fined $1.42 million for safety offences in Alaska.

An April 2004 US report, 'Irresponsible care: How the chemical industry fails to protect the public from chemical accidents,' put BP at the top of the chemical industry’s accident list (Hazards 86).

And the tragedies continues. A Texas City BP refinery explosion on 23 March 2005 killed 15 workers and injured 100 others, several critically. Earlier the same month, official safety watchdog OSHA proposed a fine of $109,500 (£58,000) against the refinery, currently being appealed by BP, for an incident last September in which two workers were killed by superheated steam.

Last August, the agency proposed a fine of $63,000 (£33,300) for 14 serious violations; BP eventually settled for a payment of $13,000 (£6,880) and an agreement to make changes at the plant.

BP leads the US refining industry in deaths over the last decade, with 22 fatalities since 1995 — more than a quarter of those killed in refineries nationwide, the Houston Chronicle revealed on 15 May 2005.

Shell doesn’t feel fine

The oil firm Shell was fined £900,000 in April 2005 following the deaths of two workers on a North Sea platform. Sean McCue and Keith Moncrieff died in a massive gas escape on the Brent Bravo platform in September 2003.

Shell had admitted breaching three health and safety regulations and received what is thought to be the biggest fine on a company following a North Sea accident. However, offshore union Amicus has said the fine, on 27 April 2005, will have little impact on a multinational such as Shell and says the role of the Health and Safety Executive (HSE) prior to the tragedy must be the subject of a probe.

Graham Tran, Amicus' regional officer for offshore workers, said: A £900,000 fine represents no deterrent to a company due to announce a quarterly profit in the region of GBP2.7 billion tomorrow.”

Shell’s first quarter results, released a day after the fine on 28 April 2005, showed it made an hourly profit of £1.6 million in the first quarter of this year. The penalty is the equivalent of only two minutes’ worth of the oil giant’s global revenue.

Amicus says one of the charges relates to failure of the company to maintain equipment – a problem the union had reported on three Shell offshore platforms, including Brent Bravo, in March 2003. According to Amicus, an HSE report published three weeks before the deaths said there was no immediate problem. The union called in April 2005 for an inquiry into HSE’s role.

Graham Tran said: “We believe a fatal accident inquiry should now take place so lessons can be learned and questions asked of HSE's equipment inspection protocols.”

More on BP’s safety record

BP sustainability report

More on the Texas explosion from Confined Space

Shell story The ScotsmanGrampian TVGlasgow Daily Record BBC News Online on the fine and on Shell’s profitsAmicus news release

A question of guilt

The government’s publication of a draft manslaughter bill comes after eight years of delays. The decision to target companies but not their directors has caused some consternation.

Commenting on the 23 March announcement by Home Secretary Charles Clarke, TUC general secretary Brendan Barber said: “The TUC recognises that the draft Bill covers a number of complex areas and we are pleased that the government has agreed that the legislation should apply to Crown bodies, but are disappointed that the draft bill does not threaten individual directors with the ultimate sanction of a jail sentence.”

Unions Amicus, TGWU and UCATT and campaign group the Centre for Corporate Accountability all called for new directors’ duties – no-one will face jail under the proposals, but companies could face an unlimited fine.

The bill has also been criticised for setting the bar too high, restricting corporate manslaughter to circumstances where someone has been killed because a company’s senior management “grossly fails to take reasonable care for the safety of employees or others.” A jury must also consider whether or not senior managers “sought to cause the organisation to profit from that failure”.

A TUC briefing says it will be calling on the government to include directors’ duties in the corporate manslaughter law or related measures, and says a range of innovative sentencing approaches should be considered to cut the death toll at work from its current unacceptable level of five a week. These include corporate probation and more innovative financial penalties.

Safety officers’ professional body IOSH said the draft bill “doesn’t go far enough,” adding “the test applied for establishing gross management failure should not be dependent on proving the organisation sought to profit from the failure to comply with health and safety requirements.”

Draft corporate killing bill – TUC briefing, available on the TUC website


A lack of official conviction?

Hazards charts union responses to the government’s corporate killing bill.

“The draft bill does not require directors to take positive steps on health and safety. This could mean that the courts will not be able to apply the new offence of corporate manslaughter in instances where individual company directors have neglected to maintain safe workplaces. The draft Bill is a chance to ensure that health and safety is taken more seriously in the boardroom… and that justice is done when tragedies do occur.”
Tony Woodley, TGWU general secretary

“Amicus research demonstrates that stronger laws incorporating director liabilities are the greatest determinant of improving employer health and safety standards so we will be seeking to ensure that the legislation allows for individual prosecution… Amicus will be pushing for introduction of the legislation as early as possible in the new parliament.”
Derek Simpson, Amicus general secretary

“One area that my union will be making representations on is the matter of custodial sentences for company directors… It is the prospect of a jail sentence that will change the behaviour of company directors not a fine.”
Alan Ritchie, UCATT general secretary

“Safety professionals know that the first line of defence in ensuring workplace health and safety is compliance with workplace safety legislation, policed through regular inspection and enforcement. This draft bill is a welcome addition to that armoury by making rogue employers who flout the law accountable for their actions.”
Mike Clancy, Prospect assistant general secretary

“This is a tough bill and it has a tough job to do. We want to stop employers evading justice and give the families of those who are killed or injured at work the justice they deserve.”
Dave Prentis, UNISON general secretary

“If employers are taking the right precautions, they will have nothing to worry about. It's the slack bosses, the corner-cutters and the cowboys who should be sweating right now - the buck will soon stop with them.”
Debbie Coulter, GMB deputy general secretary