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


1
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

2
Why a movement to Corporate Social
Responsibility?
  • Globalisation
  • Greater transparency of corporate (mis)conduct
  • Wider notion of accountability

3
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

4
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)

5
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

6
Two case studies of safety failures in the
offshore oil industry
7
Corporate Safety Failure The Piper Alpha
Disaster Causes and consequences
  • Case Study 1

8
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)

9
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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15
Key points
  • Interconnection between safety and industrial
    relations
  • regulatory issues
  • industry response

16
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)

17
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

18
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

19
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'

20
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

21
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

22
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

23
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

24
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

25
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

26
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

27
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

28
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)

29
  • 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

30
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

31
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

32
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

33
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

34
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

35
Case Study 2
  • The routine nature of death at work
  • An offshore worker
  • Gordon Mackie Moffat

36
HSE, Safety and the Oil Industry
  • Charles Woolfson

37
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

40
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.

41
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

42
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.

43
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.

44
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.

45
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

46
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.

47
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.

48
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.

49
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

50
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.

51
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.

52
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.

53
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.

54
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

55
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

56
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

62
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.

63
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

64
Voluntary forms of Corporate Social Accountability
  • External certification
  • Codes of practice
  • Social labelling
  • Social Reporting
  • Listing in registers of good practice

65
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

66
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

67
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

68
Empowerment
  • Stakeholders
  • Employees
  • Wider Community
  • Conflict is normal
  • Too much consensus is a cause for concern

69
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)

70
  • 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

71
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.
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