Directors Duties - the argument for legal change

Talk for CCA Conference, 19 Nov 2007

David Bergman

Centre for Corporate Accountability

www.corporateaccountability.org

History• 2000: Government Commitment to to produce

Voluntary Guidance and to legislate• 2001: Publication of voluntary • 2003: HSC decide against legal duties and to

continue with voluntary guidance• 2004: Select Committee calls for legislation on

director duties: Government asks HSE to do more research

• 2005: HSC supports legislation but asks for options paper

• 2006: HSC delay decision on legislation• 2007: Publication of new voluntary guidance

Action Point 11: RevitalisingThe Health and Safety Commission will develop a code of practice on Directors' responsibilities for health and safety, in conjunction with stakeholders. …

The Health and Safety Commission will also advise Ministers on how the law would need to be changed to make these responsibilities statutory so that Directors and responsible persons of similar status are clear about what is expected of them in their management of health and safety. It is the intention of Ministers, when Parliamentary time allows, to introduce legislation on these responsibilities."

Director Action can result in significant health and safety benefits

• Not in fact contentious• HSE’s publications since at least 1981 have stated

this;• Significant academic support

“Continuous and genuine management support is the key to a safe and healthy working conditions” (1999 review)

• HSE looked at 41 organisations whose directors had taken positive action. If you look at the injury reductions that the HSE state are the result of director action - average of 25% decrease in injury.

Failure of Voluntary Guidance• GSB Survey 1:

– 58% in 2001: 79% in 2005– BUT:

• verification survey showed 14% of worker reps disagreed. = 64%

• Only relates to very large organisations, those employing on average more than 4,300

– so nothing on large/medium sized organisations

Failure of Voluntary Guidance• GSB Survey 2:

– Part of review of Enforcement Policy Statement– On time survey, not at different times– Looked at different sized organisations:

• 67% of very large organisation• 52% of large organisations• 39% of medium sized organisations• 29% of small-sized organisations• 17% of micro-sized organisation

What does it all mean?

Law and enforcement as motivator of directors

HSE Commissioned Research - James“existing evidence suggests that legal regulations and their enforcement constitute a key, and perhaps the most important, driver of director actions in respect of health and safety at work and that this motivational force is intimately connected to a number of others, such as corporate reputation, competitive damage and a sense of moral responsibility to protect workers from injury and ill health. It also suggests that the creation of individual personal liabilities on the part of directors can particularly serve to motivate them to improve health and safety. …

Law and enforcement as motivator of directors

Further HSE research, 2006 “61% of duty holders agree or strongly agree that individuals believing they could possibly be imprisoned is essential or important for enforcement to have a deterrent effect – just ahead of fear of personal reputation damage at 60% whilst 52% cite individual legal consequence as essential or important”

Other Arguments used by HSE against legal change

• costs of legal change outweigh benefits• safety breaches are not individual failures• disproportionate risk adverse and bureaucratic

response• directors will introduce systematic delegation on

H&S• existing and new sanctions will motivate directors• Corporate Manslaughter and Corporate Homicide

Act• Companies Act

Directors Duties - the argument for legal change

Talk for CCA Conference, 19 Nov 2007

David Bergman

Centre for Corporate Accountability

www.corporateaccountability.org