The Impact of Corporate Governance on UK Health and Safety

Neil HartleyHealth & Safety Issues/Trends4 Comments

Corporate Governance

Do British companies take health and safety seriously enough at board level? Do companies believe it requires board level leadership and strategic direction or do they think it’s an operational issue? Are companies serious about effecting cultural change or do they pay lip service and tick boxes when it comes to health and safety?

These are all important questions, so let’s look for some answers.

What is Corporate Governance and How Does It Impact Health and Safety?

Corporate governance is the set of principles and rules that control and direct a company. The board of directors of a company is responsible for governance.

In the UK, the Financial Report Council publishes the UK Corporate Governance Code. It’s specifically aimed at London Stock Exchange listed companies and shows how corporate governance works in practice. In particular, instead of companies being compelled to follow the code, they are required to “comply or explain”. In other words, they can choose not to comply but they must give their reasons.

Although 90 percent of FTSE 350 companies comply with almost all the code, the “comply or explain” principle leaves a lot of room for manoeuvre in how companies approach the issue of corporate governance.

What about the issue of health and safety and corporate governance? In guidance that is published alongside the UK Corporate Governance Code, companies are encouraged to look beyond financial risk.  This includes considering health and safety as well as things like reputational risk and risks to the environment. In addition, the Health and Safety Executive publishes guidance for companies on leadership in relation to health and safety. This applies to all companies, regardless of their size.

It is important to remember, however, that codes and guidance on the issue of corporate governance overall, and health and safety governance, in particular, are not compulsory.

The Current State of Corporate Governance

There is an ongoing debate in Government, business, and with other stakeholders around the issue of corporate governance. Some believe corporate governance is a box-ticking exercise in many organisations while most believe there is a need for reform.

The Government recognised this push for corporate governance reform and published a Green Paper in November 2016. Nothing has come of that to-date, but it shows where improvements could be made.

For example, in its response to the Green Paper, the Institution of Occupational Safety and Health (IOSH) recommended a number of things including board member training on issues like health and safety. It also said bonuses should be linked to corporate responsibilities, citing health and safety again.

Benefiting from Good Practice

Updating the codes and guidance on health and safety leadership and corporate governance is important. That said, codes and guidance on their own won’t improve the safety of employees, customers, or members of the public. Neither will they reduce the financial and reputational risks that companies face when it comes to health and safety.

Real benefits of corporate governance and health and safety governance come when companies create an ingrained culture. This must start at the very top and filter through the organisation. For example, boards should not simply delegate health and safety issues to one director or to a senior manager. Acting as a mere health and safety rubber stamp is not enough. Instead, directors should have individual and collective responsibilities for health and safety and they should be accountable.

One example of this is the company British Sugar. After suffering three deaths in 2003, it changed its approach to corporate governance and health and safety. Specifically, every director became responsible for health and safety. The board started getting reports on health and safety and incentivised targets were introduced. It created a culture of greater cooperation and the company embarked on a programme of behavioural change.

The results were impressive. For a start, the directors of British Sugar developed a better understanding of the health and safety risks the company faced. Also, the number of minor injuries fell by two-thirds. We’ll come back to this last point in a future post.

Of course, companies don’t have to wait until there is a major incident before refining corporate governance. One example is Sainsbury’s. It radically changed its approach following an audit. The changes included creating a new health and safety plan, implementing health and safety targets, and giving all directors health and safety training.

This helped embed a culture of health and safety in the company. It also led to a 28 percent reduction in health and safety incidents and a 17 percent reduction in absence due to sickness.

Improving Your Business

The two examples above show the improvements that can be made when companies get real about corporate governance and health and safety. This includes:

  • Making workplaces and work practices safer
  • Improving health and safety awareness from the board down
  • Embedding a culture of health and safety in the organisation from the board down
  • Improving and/or protecting the reputation of the company both with customers and with employees
  • Improving productivity
  • Reducing risk
  • Reducing minor injuries and more…

To be successful, you can’t look at health and safety from a financial risk point of view alone. You can’t pay lip service to health and safety either. Instead, there must be real leadership, the pursuit of cooperation, and a commitment to measuring success and, where necessary, making improvements.

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4 Comments on “The Impact of Corporate Governance on UK Health and Safety”

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