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February 24, 2017

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IOSH: pay and bonuses should be linked to OSH performance

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Leaders would have even greater incentive to improve safety and health if their performance was more transparent and executive pay and bonuses were linked to it, suggests the Institution of Occupational Safety and Health (IOSH).

This is one of nine summary recommendations made by IOSH in its response to the UK Government’s Corporate Governance Reform Green Paper proposals, which follow public concern about serious failures, such as those at Sports Direct.

IOSH believes strong leadership, good governance and meaningful corporate reporting are fundamental for helping to ensure safe, healthy and sustainable working environments across all sectors.

IOSH agrees with the Prime Minister’s views, expressed in her foreword to the green paper published last November, where she said: “…big business must earn and keep the trust and confidence of their customers, employees and the wider public”. The suggestions IOSH makes contribute constructively to those aims.

Ensuring that executive pay is properly aligned to long term performance, giving greater voice to employees and consumers in the boardroom, and raising the bar for governance standards in the largest privately held companies are all among areas for reform that this green paper sets out.

Richard Jones, Head of Policy and Public Affairs at IOSH, said: “IOSH believes strong leadership, good governance and meaningful corporate reporting are fundamental for helping to ensure safe, healthy and sustainable working environments across all sectors.

“Reforming corporate governance and supporting companies to make better decisions includes getting occupational safety and health right for every business.

“Among the ideas our experienced members have recommended to the government are provisions for increasing stakeholder engagement around OSH issues, improving reporting and governance requirements for large privately held companies and developing a new bespoke ‘Corporate Governance Code’ by authoritative independent experts especially for these private companies.”

IOSH also proposes that a non-executive director should be designated responsible for ensuring that a company’s employees have a voice on OSH. We advocate again the introduction of explicit directors’ duties for OSH and greater provision of OSH training for directors, remuneration committee members and institutional or retail investors.

The Institution also recommends lowering the turnover threshold for anti-slavery disclosures, and extending these requirements to public sector organisations, together with improved transparency and use of standardised OSH reporting metrics.

IOSH made the following nine recommendations to help reform corporate governance and deliver wider benefits:

  • Linking executive pay and bonuses to OSH performance and making bonus-targets more visible and better designed to encourage positive leadership behaviours
  • Directors (and their equivalents), remuneration committees and institutional / retail investors receiving adequate OSH training
  • Strengthening the UK Corporate Governance Code on stakeholder engagement about occupational safety and health issues
  • Designating a non-executive director to ensure the employee-voice is heard on OSH, supported by an advisory panel and stronger reporting requirements on stakeholder engagement on OSH
  • Strengthening reporting and governance requirements for large privately-held companies
  • Developing a new bespoke ‘Corporate Governance Code’ for large privately-held companies, produced by authoritative, independent experts
  • Introducing explicit positive directors’ duties on OSH, together with adequate OSH awareness training for all directors and equivalents
  • Lowering the turnover threshold for anti-slavery disclosures, so that more companies are required to provide them and extending the requirement to public sector organisations
  • Requiring those employing 250 or more employees to publicly report on OSH performance and the use of standardised OSH performance metrics

Each one of these, in addition to IOSH responses to the consultation questions, is explained in more detail on IOSH’s website here.

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Peter
Peter
4 years ago

Lost Time Injury Rates could be very low (including as a result of cover up underreporting) whilst the low frequency, high consequence events might be waiting to occur, e.g. BP Grangemouth 2000, Texas City 2005, Deepwater Horizon 2010.

The last two of these had just celebrated global best performance, despite numerous precursor events.

So how best to link pay and bonuses to OSH performance?

Stephen Moore
Stephen Moore
4 years ago
Reply to  Peter

I have similar comment to Peter’s. I’m based in the USA, and over the past 3 years OSHA has been actively discouraging setting lagging indicator targets and related bonuses. I would be opposed to “letting in” injury rates for target-setting. Philosophically, in my opinion, having such targets is flawed (in addition to driving under-reporting). It is only fair to hold leaders to account for results they can directly influence – i.e. incident prevention, risk reduction and cultural growth. H&S practitioners can add much value by working with C-Suite and Boards to develop objective leading indicators. Leading Indicators are a “holy… Read more »

Ray Rapp
Ray Rapp
4 years ago

It’s not very often I agree with IOSH but on this subject I do. If senior management are responsible for success why are they not held accountable for failure? If you take the Deepwater Horizon disaster for example, serious failures were identified throughout the organisation, including failing to learn lessons from a similar incident a few months before the Macondo Well blowout. This resulted in serious financial loss through fines, litigation and lost revenue. Why then should the Board and other managers not lose their bonuses? I might draw the line a AFRs/IFRs where they do not always reflect the… Read more »