How boards set the tone and hold management to account on health and safety
Ralph says the Pike River Royal Commission placed a considerable amount of responsibility for the tragedy at the door of the company’s board of directors.
The Commission found that the board didn’t have the skills or experience it needed to assess assurances from management that all was well at the mine.
So what’s required from directors and boards when it comes to health and safety?
Chivers says the board’s role on health and safety is the same one it plays across all areas of corporate governance. That is to hold management to account and to make sure that good decisions are being made.
Skills and experience
For that to happen, boards must have a high standard of skill and expertise, he says. But generic business experience isn’t enough. There needs to be directors around the table with expertise in key areas of business operations.
No one on the Pike River board had experience in underground coal mining, Chivers says. That meant the board didn’t have all the capability it needed to ensure management was doing its job properly.
If necessary directors need to upskill themselves, or get outside advice so they can make informed decisions.
High standard of care
Directors are also expected to display a high standard of care in their work. It’s not enough to turn up, open the board pack at the table, sign off a few things, eat the cucumber sandwiches and go home, Chivers says.
Directors need to ask searching and insightful questions informed by the board’s collective experience and wisdom. They can’t take things on face value. Their job is to pull apart the issues so that good decisions can be made.
"It's not enough to turn up, open the board pack at the table, sign off a few things, eat the cucumber sandwiches and go home"
Directors should listen to prudent advice, but they should test this advice in the context of what they know about the company.
They have an individual, as well as a collective responsibility, Chivers says. They should listen to what other directors have to say, but ultimately they must make up their own minds and take responsibility for their own decisions.
Risk management and culture
Directors are also responsible for ensuring that risk management is effective in an organisation, Chivers says. This means more than ensuring a risk management framework has been developed. They need to make sure this framework is effective and is working as it should.
An effective business culture, and an effective health and safety culture, starts with the board, he says. They set the tone. If you’ve got good things pouring in from the top, the benefits will flow right down through the company. But if you’ve got poison pouring in, the opposite will happen.
New guideline for directors
In response to the Royal Commission’s recommendations, a guideline for good governance practices on health and safety has been published by the Institute of Directors and the Ministry of Business, Innovation and Employment.
The guideline provides directors with advice on how they can influence health and safety performance in their organisations. As well as outlining director responsibilities, the guideline includes diagnostic questions and actions for directors.
It is an essential resource for directors, Chivers says.
The guideline is available from: www.iod.org.nz/Publications/Healthandsafety.aspx