New Aspects of European Integration: Corporate Social Responsibility, Social Dialogue and the Workin

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New Aspects of European Integration Corporate
Social Responsibility, Social Dialogue and the
Working Environment in the Baltic States An
Interdisciplinary Approach

• Seminar 4 Corporate Social Responsibility

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Why a movement to Corporate Social
Responsibility?

• Globalisation
• Greater transparency of corporate (mis)conduct
• Wider notion of accountability

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Corporate Social Responsibility (CSR)

• CSR promotes the idea that companies besides
  their economic concerns decide to take on board
  environmental and social ones.
• The occupational safety and health concerns for
  the workforce often play an important role
  amongst these.
• Hans-Horst Konkowlewsky, Director General of the
  European Agency for Safety and Health at Work

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Corporate Social Responsibility in Europe

• Beyond legal compliance towards best practice
• Frameworks for corporate social responsibility
• European Commission, Green Paper Promoting a
  Framework for Corporate Social Responsibility
  (2001)

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European Commission Communication - Corporate
Social ResponsibilityA business contribution to
Sustainable Development (July 2002)

• In its communication Adapting to change in
  work and society a new Community strategy on
  health and safety at work 20022006, the
  Commission has expressed its intention to
  encourage instruments which promote innovative
  approaches, to encourage the various parties to
  go a step further and to associate all the
  interested parties in achieving the overall
  objectives of this strategy

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Two case studies of safety failures in the
offshore oil industry
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Corporate Safety Failure The Piper Alpha
Disaster Causes and consequences

• Case Study 1

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Big Oil and Corporate Responsibility

• Geology has not restricted the distribution of
  hydrocarbons to areas governed as open
  pluralistic democracies. The cutting edge of the
  issue of corporate responsibility comes from the
  fact that circumstances dont always make it easy
  for companies to operate as they would wish.
  (Lord John Browne, BP)

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The Ethical Tool Kit

• At ChevronTexaco, we know that success demands
  the highest standards of responsible corporate
  citizenship in our operations worldwide. Our
  approach to this responsibility is rooted in our
  core values, known as the ChevronTexaco Way "to
  conduct business in a socially responsible and
  ethical manner support universal human rights
  protect the environment, and the communities
  where we work..

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Key points

• Interconnection between safety and industrial
  relations
• regulatory issues
• industry response

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The disaster

• July 6th 1988 Occidental Petroleums Piper Alpha
  platform exploded - 167 killed
• Not the first disaster -Sea Gem 1965 - 13 killed
  - led to the passing of the Mineral Workings
  (MWA) Act 1971
• A highly prescriptive act but never properly
  enforced - institutionalised tolerance of
  non-compliance (Carson)

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Regulatory Capture

• process whereby a regulatory agency comes to
  wholly identify the public good with the
  interests of the industry it is supposed to
  regulate
• relationship between the Department of Energy and
  the offshore oil industry - conflict between
  production (tax revenues) and safety

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The contrasting onshore safety regime

• The Robens Report (1972) Safety and Health at
  Work
• Safety regulation moves away from prescriptive
  rules towards a goal-setting regime
• implies the systematic assessment of risk in an
  overall sense and a shift from externally-policed
  regulation towards industry self-regulation

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The Robens approach

• advice and persuasion were seen as the best means
  of securing safety improvements Accidents cased
  by carelessness and apathy
• Emphasis on voluntary compliance rather than
  administrative or criminal sanctions
• 'too much law - 'encourages too much reliance on
  state regulation, and too little on personal
  responsibility and voluntary self-generating
  effort'

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Health and Safety at Work Act

• The Health and Safety at Work Act 1974 - a
  unifying body of enabling legislation - basic
  duties of employer to provide a safe working
  environment, and of the employee to observe
  health and safety provisions
• Even though the employer held the ultimate
  responsibility, health and safety was deemed to
  be the concern of all those who created risk
  namely 'everyone at work

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Health and Safety at Work Act

• A single unifying agency to govern safety and
  health at work separate from sponsoring
  ministries (HSC/E)
• The HASAWA 1974 was tied to the Labour Government
  agenda of corporatist industrial relations -
  consensualist and tripartite
• trade unions given exclusive powers to appoint
  safety representatives and safety committees

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Powers of safety representatives

• investigate hazards and dangerous occurrences
  and the causes of accidents at work
• investigate complaints
• make representations to the employers
• carry out certain inspections
• request that the employer set up a safety
  committee

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Offshore Industrial Relations

• HASWA 1977 regulations do not apply, especially
  on electing safety representatives - few safety
  committees and consultation
• Industrial relations climate hostile to trade
  unionism - attempt to create union-free
  environment and consultative committees
• Intimidation and victimisation of employees,
  especially contractor workforce

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Offshore Safety Regime

• Operation of an agency agreement between the
  Department of Energy and the HSC prevented the
  effective supervision of offshore safety and the
  development of regulation remained with the
  Department of Energy.
• This led to the maintenance of a sympathetic
  regulatory regime for the industry

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The Disaster

• An uncontained gas leakage leads to initial
  explosion and fire, which lead to further major
  explosions
• All major emergency systems failed
• Rescue by helicopter impossible
• safety management response on linked platforms
  was deficient

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The Cullen Report

• Public Inquiry under Lord Cullen QC
• Occidental Petroleum criticised for failure to
  operate a safe system of work despite previous
  incidents - lessons not learned
• Regulatory controls by D of En criticised -
  inspection of Piper Alpha in the weeks before the
  disaster was described as superficial to the
  point of being of little use as a test of safety

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The Cullen Report - D of En

• Department of Energy - overconservatism,
  insularity and a lack of ability to look at the
  regime and themselves in a critical way. Little
  had been learned from the more modern onshore
  approach to hazard characteristic of the HSWA or
  from the more forward-looking regime in Norway

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The Cullen Report - Occidental Petroleum

• Failed to operate an effective permit-to-work
  system
• Disregarded written procedures
• Provided inadequate and misleading safety
  induction materials
• Ignored previous concerns over the permit-to-work
  system
• Failed to learn the lessons from previous
  incidents (included a fatality and a
  near-disaster evacuation)

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• Lord Cullen -
• It appears to me that there were significant
  flaws in the quality of Occidentals management
  of safety which affected the circumstances of the
  event of the disaster . . . They (senior
  management) adopted a superficial response when
  issues of safety were raised by others . . .
  Platform personnel and management were not
  prepared for a major emergency as they should
  have been

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Regulatory Reconstruction

• D of En powers removed and given to HSE in a new
  Offshore Safety Division
• New concept of safety management proposed -
  Formal Safety Assessment (FSA) - the
  identification and assessment of hazards over the
  whole life cycle of a project through all its
  stages of development to final decommissioning
  and abandonment - the Safety Case regime

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Problems with new Regime

• The Safety Case required the complement of a
  system of goal-setting regulations setting
  intermediate goals which would give the regime
  a solidity it might otherwise lack, for example
  in construction, fire and explosion protection,
  evacuation, escape and rescue

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Problems with new Regime

• Oil company hostility and resistance to new
  regulation, especially any prescriptive
  requirements
• Initial hostility to new regulatory authority
  under the HSE
• Failure to address the outstanding issue of
  industrial relations offshore
• Increasing tacit accommodation between
  regulator and target industry

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Positive elements of new regime

• Introduced modern safety thinking into the oil
  industry
• Safety representative system in place
• New sensitivity to issues of corporate reputation
  (safety and environmental issues)
• Greater degree of regulatory scrutiny
• No similar disaster to Piper Alpha, so far,
  although a number of close calls

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Negative elements of the new regime

• No significant increase in safety performance
  measured by accident data
• Danger of a gradual erosion scenario
• Issue of workforce empowerment still to be fully
  addressed
• Step Change Programme an inadequate response

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Case Study 2

• The routine nature of death at work
• An offshore worker
• Gordon Mackie Moffat

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HSE, Safety and the Oil Industry

• Charles Woolfson

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Gordon Mackie Moffat Deceased 9th October 2000

• Santa Fe Magellan rig operating 120 miles east of
  Aberdeen in the Elgin/Franklyn Field
• On contract to TotalFinaElf Exploration UK
• An assistant derrickman and a member of C Crew
  (one of four crews)
• Task of securing hydraulic hoses to the casing of
  part of the drilling apparatus
• Man-riding - suspended in mid-air in a sling
  attached to a winch line, approximately 40-50
  feet above the blowout preventer (BOP) deck

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Supervisory failures

• absence of a proper tool box talk before the
  commencement of the fatal man-riding operation
• absence of a proper risk assessment of that
  man-riding operation
• absence of a proper risk assessment of the
  variation that occurred part the way through
• failure to stop the work on the drill floor while
  the man-riding operation was taking place
• failure to allocate a supervisor on the drill
  floor
• failure to allocate a man to the mouse hole
• no assessment of suitability of available
  personnel
• no allocation of roles according to that
  assessment
• no mutual awareness of each crew members role
• no allocation of supervisory function

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Management Failure

• Sheriff McLernan
• The deficiencies in the prescribed system viz.
  the absence of significant elements from WWI, the
  lack of clarity, and the lack of effective radio
  communication procedures were not in my view the
  primary cause of the accident. The primary cause
  was the almost total lack of proper supervision
  by the persons delegated to supervise.
• Alexander Kemp (on behalf of the relatives of the
  deceased)
• The picture that emerges is of an accident that
  was waiting to happen. There really were no
  effective controls in place. The system of
  management of safety, if it ever worked, had
  broken down. That caused a wholly avoidable fatal
  accident.

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Management in the Offshore drilling industry

• Magellan not atypical installation-
• Profit and results-driven ethos of industry
• History of authoritarian management
• Legacy of victimisation and NRB
• Lack on unionisation
• In theory, Time out for Safety
• Reality, inadvisable and might carry
  reprecussions
• Suppression of workers voice

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Attitudes and Culture

• Sheriff McLernan-
• unless there is elimination of the attitudes
  which were primarily responsible for the
  occurrence of this accident - there is a real
  risk of further serious accident.

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Business interrelations dependency and ambiguity.

• Major oil companies constitute the client
  organisations.
• In turn, they subcontract many of the specialist
  services to a variety of sub-contractors.
• These sub-contractors drill for oil and provide
  many specialist functions on an out-sourced basis
  for offshore installations.
• The oil companies retain direct responsibility,
  mainly for the core group of their own employees.
  
• Such arrangements provide the oil companies with
  both numerical and functional flexibility,
  allowing them to adjust their operations to
  changing production and demand requirements.
• An offshore installation is, therefore, often a
  multi-employer site in which the safety
  performance of individual sub-contractor firms
  is, in theory, monitored in its own right by the
  client company.

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Legal duty of care

• The main employer is responsible in law for the
  safety and health of everyone on the platform
• employers obligations overlap with those of the
  sub-contractor who is also responsible for its
  own employees' welfare.
• Under the Health and Safety at Work Act of 1974,
  the main employer must take responsibility for
  its own workers and for those of the
  sub-contractors who may be affected by its
  operations.
• Ambiguity arises when it comes to determining who
  should take major responsibility for ensuring
  that there is an adequate level of knowledge and
  training to allow the sub-contractor's employees
  to perform their work safely.
• This entails not just what the sub-contractor
  employees do, or do not do, but what those around
  them do, whether they are employees of the same
  sub-contractor, of another sub-contractor, or
  direct employees of the client oil company.

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Structural determination of managerial failure

• The wider complex context of the nature of
  business organisation in the offshore oil
  industry
• Typical contractual and financial arrangements
• Multiple complex of business interrelations
  between client and subcontractors acts to
  minimise economic risks at each stage of the
  business structure

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The organisational web risk transfer mechanisms

• Organisational legal proliferation - acts as a
  parallel structure of occupational risk transfer
  mechanisms intrinsic to business relations
• Even where there is an identifiable employer, the
  company itself operates through a variety of
  other subsidiaries which are legally independent
  entities for some purposes, but not necessarily
  for others.
• This chameleon-like legal identity creates
  endless uncertainties over boundaries as to
  where, for example, the ultimate responsibility
  lies in safety and health at work.

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Santa Fe A Russian doll

• Mr Moffats legal employer - Santa Fe
  International Services Inc, Panamanian company.
• The rig on which Mr Moffat worked operated
  through Santa Fe subsidiary, Santa Fe Drilling
  Company (North Sea) Limited, registered in
  Lowestoft - held the Safety Case for the
  installation.
• Santa Fe Drilling Company (North Sea) Limited
  also had the responsibility as the duty holder
  in law for the operational safety aspects of the
  Magellan rig.
• Further Santa Fe subsidiaries were actors Santa
  Fe International Services Inc. and Santa Fe
  Technical Services (North Sea) Ltd.
• Santa Fe Technical Services (North Sea) employed
  the Rig Manager and health and safety advisors
  based in Aberdeen.

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HSE The Regulatory Response

• Offshore Safety Division (OSD) now part of
  Hazardous Installations Directorate - set up in
  the aftermath of Piper Alpha to oversee the
  implementation of a new Safety Case regime.
• Safety case requires the management responsible
  for each offshore installation act as duty
  holder, to carry out a comprehensive and
  documented appraisal of risk factors.
• HSE also issues periodic advice to duty holders.
• OSD had issued a Safety Notice in May 1997
  stating that man-riding operations that are not
  routine should be subject to the duty holders
  permit-to-work system.
• Subsequently OSD issued an industry-wide Safety
  Alert (2000/1) Man Riding Winch Units,
  highlighting problems as a result of the
  incident, need for a suitable and sufficient
  assessment of risk, reviewing equipment and
  procedures and the means by which all winch
  motions can effectively and rapidly be brought to
  a halt.

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HSE and the judicial authorities

• The regulatory authority has a duty to ensure
  that the law, in respect of the Health and
  Safety at Work Act (1974) is applied, and that
  sanctions are sought, where it is merited
• HSE has the power to make recommendations to the
  Procurator Fiscal in Scotland for criminal
  charges to be brought

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Possible charges under existing UK law

• Santa Fe ignored previous HSE advice - a repeat
  offender.
• Competent charges against three sets of actors
• The employer registered in Panama, Santa Fe
  International Services Inc, under Section 2(1) of
  the Health and Safety at Work Act and Regulation
  3(1)(a) of the Management of Health and Safety at
  Work Regulations
• the duty holder, Santa Fe Drilling company (North
  Sea) Ltd under Section 3(1) of the Health and
  Safety at Work Act and Regulation 3(1)(b) of the
  Management of Health and Safety at Work
  Regulations
• The individual executive deemed responsible for
  the safety failure, Roger de Freitas, the
  managing director of Santa Fe Drilling company
  (North Sea) Ltd, under Section 37 of the Health
  and Safety at Work Act.
• If successfully prosecuted on indictment, these
  charges could carry unlimited fines, or a prison
  sentence.

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The plea negotiation

• Shortly after the incident Mr de Freitas departed
  UK jurisdiction
• Charges did not proceed to trial under criminal
  justice system
• The Fiscals office engaged in what is referred
  to as plea negotiation with Santa Fe -
  agreement entered into about what charges will be
  pled to.
• The Fiscal agreed with Santa Fe what facts and
  circumstances he would present to the Court and
  what mitigation they would put forward in their
  defence.
• Santa Fe Drilling Company (North Sea) Ltd entered
  a guilty plea to lesser charges which did not
  include a Section 37 offence.

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The prosecution failure

• The Section 37 indictment - in line with the
  publicly stated enforcement policy of the HSE and
  HSC (Health and Safety Commission) and in line
  with the stated expectations of the Government
  and current expectations of the public (with
  respect to corporate accountability).
• Not in the public interest that employers in the
  UK, who are based abroad for financial reasons,
  cannot be brought before the Court.

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Corporate avoidance and Corporate Homicide

• Prima facie grounds for a prosecution of Santa
  Fe under a corporate homicide law
• One month after court, Santa Fe awarded
  Compliance Document in Houston ceremony
• one of the first offshore drilling contractors
  to receive the full International Safety
  Management (ISM) certification for its
  shore-based facilities and self-propelled
  offshore rigs.

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The penalty for the death of Gordon Mackie Moffat

• Fine at Aberdeen Sheriff Court 60,000
• Santa Fe declared net income for 2001, the year
  of their court appearance - 377.8 million

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Case study of Corporate Social Responsibility
Failure in the Baltic region

• Ferro-concrete plant in Ukmerges, a small town of
  30,000 in eastern Lithuania
• New production line producing expandable
  polystyrene (EPS) insulation panels for buildings
• granular raw material for EPS emits pentane - a
  gas so flammable that, when mixed with air, even
  heat from a single light bulb can ignite

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Building Supplies Manufacturer Ukmerges,
Lithuania July 2003

• no gas-monitoring equipment
• ventilation was inadequate
• a fire which resulted when a welder used a
  blowtorch the previous day unreported to the
  authorities
• substantial amounts of pentane which is heavier
  than air, had accumulated in the foundations of
  the building.

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Profits before Safety?

• Company was the cheapest supplier of foam
  polystyrene panels in the country.
• The production line had been recently renovated
  and modernised
• production output was 9 times higher than before
  renovation.
• Consequently, pentane levels in the occupational
  environment also increased

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Corporate Failure

• Company failed to execute any additional
  occupational risk hazard assessments
• failed to indicate any explosion risk in the
  workers instructions
• warning instructions were in Russian, not
  Lithuanian
• regulations relative to workers protection
  against hazardous chemical substances at work
  were not adhered to
• requirements for protecting employees working in
  a potentially explosive environment were not
  adhered to.

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Strategies of corporate avoidance

• Promotion of self-regulation
• Regulatory capture the agency of public
  scrutiny identifies the public good as the
  interests of the industry
• Corporate denial
• Absence of judicial accountability
• Promotion of global de-regulation

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Voluntary forms of Corporate Social Accountability

• External certification
• Codes of practice
• Social labelling
• Social Reporting
• Listing in registers of good practice

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An alternative strategy -Criminalising corporate
(mis)conduct

• Penalties and sanctions for corporate wrongdoing
  through the criminal justice system
• Obstacles
• What gets viewed as criminal
• Business-friendly regulatory regimes
• The problem of the controlling mind
• Piercing the corporate veil

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Corporate Killing Law?

• Criminal manslaughter for reckless killing
• Manslaughter killing by gross carelessness
• Management failure operating with standards
  that fall well below what could be reasonably
  expected in terms of the prevailing standards in
  the industry

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The business case for effective corporate
killing law

• graduated deterrence and corporate rehabilitation
• proportionate fines
• corporate probation
• compulsory disclosure
• insurance regulation
• compliance and rehabilitation programme

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Empowerment

• Stakeholders
• Employees
• Wider Community
• Conflict is normal
• Too much consensus is a cause for concern

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The business case for safety and health Good
health and safety good business?

• An unproven theorem ..
• Need for compliance incentives..
• Marginal costs of substitution (recruitment,
  training and discipline costs of new workforce)
  do not outweigh the benefits for the individual
  enterprise (low costs of replacement of injured
  or ill workers)
• Enterprises able to externalise costs of worker
  ill-health and injury to national social
  insurance systems (no realistic charges for
  rehabilitation services by national health
  systems)

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• Enterprises able to externalise costs of worker
  ill-health and injury to individual workers and
  their families (no developed system of personal
  injury litigation)
• Insurance premiums not related to company record
  on safety and health, and implementation of
  advanced occupational health and safety
  management programmes
• Financial sanctions for safety and health
  regulation violations are insufficiently large to
  impact of enterprise profitability
• Low reputational costs for business - no naming
  and shaming of offenders, transparency through
  social and environmental auditing (CSR), ongoing
  scrutiny by civil society actors (eg trade
  unions, health and safety campaign organisations,
  environmental NGOs)
• No concept of criminalisation of corporate body
  and/or possible custodial sentencing of
  individual company officers under corporate
  killing legislation

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Conclusions

• Need to recognise tensions between profits and
  safety
• Business will not always do the right thing
• Need for credible compliance incentives
• Empowerment of stakeholders must be real
• Accidents - rarely individual isolated
  unforeseeable events.
• They are more often the result of long term
  underlying patterns of (mis)behaviour.
• Management must carry primary ethical, legal and
  practical responsibility for safety and health of
  employees.