Can Legalistic mechanisms be effectively used to promote organizational safety

Can legalistic mechanisms such as ‘corporate liability’ be effectively used to promote organizational safety? Use two specific cases to illustrate your argument.

In the era of globalisation and “battle” of business for expansion to foreign markets, large organisations in a form of legal entities (i.e. corporations) is seem to be taking the dominant role over the world’s economy. The growing size of corporations, their complexity and control of immense resources provides ground for misconduct that often results in adverse effects to both individuals and the community. Great numbers of incidents that resulted in a large scale harms caused to society in the past decades has brought the responsibility of corporate misbehaviour and the way they treat risks to many debates both in professional and lay public.

The idea of attempting to manage organisational risks is recognized as a relatively new concept (Institute of Lifelong Learning, 2006: 5-6) and the complexity of social interactions of individuals that constitute organisations adjacent to fast development of advanced technologies in contemporary society may prove for identification of hazardous circumstances that affect safety within organisations, extremely challenging. As observed by the Institute of Lifelong Learning (2006: 5-6) there are some acknowledged professional and academic courses in Britain, but since the management of organisational risks is not a mature activity, it does not possess the same level of legitimacy that some other institutionalised concepts do.

It appears that legal reforms in Europe and some other countries intend to make it easier to impose legal sanctions on corporations for serious wrongdoings. One might suggest that such reforms are logical consequence of some mayor harms produced by corporations that were later unsuccessfully prosecuted under existing laws and deemed insufficient to protect the public interests. In the United Kingdom (UK) some large scale accidents such as the train crash at Paddington, the fire at King’s Cross underground station, the capsizing of the ferry Herald of Free Enterprise are few that were catalysts for reforms making it easier to impose strict liability on corporations for physical injuries or deaths. The adoption of Corporate Manslaughter and Corporate Homicide Act 2007 might be perceived as an important indicator of these reforms.

This paper will examine a much controversial aspects of the extent to which risk management regimes should be more or less “blame orientated” (Hood et al., 1996: 46) and, … whether, in the event of an avoidable accident, the company as well as (or perhaps rather than) identified individuals might or should be held morally or legally responsible for an act or omission (Institute of Lifelong Learning 2006, 4-22).

The essay question opens a much discussed notion of corporate liability which this paper will discuss in the context of organisational aspects of health and safety as an integral part of managing risks in organisations. The essay will also discuss legislative aspects that are regulating corporate responsibility. However, the intention of the author is not to summarize the arguments on legislation basis in detail. It needs to be recognized that legislation that regulates corporate responsibility varies worldwide. Therefore, the paper will discuss some of the broader aspects that might affect health and safety compliance in organisations.

Finally this essay will throughout the discourse provide an argument that strict financial and legal liability posed on corporate bodies can significantly contribute to a better organisational safety. This will be achieved by using two specific cases for discussion in order to support the argument. The case studies used in the discussion are the fire at King’s Cross underground station in London, UK in 1987 and the fire of the cable car in Kaprun, Austria in 2000.

Definitions of terms

For further discussion the key terms from the essay question needs to be defined. Bergman, (2000: 20) in his critical perspectives on corporate responsibility in UK uses the term ‘company’ and ‘corporate’ in the context of ‘…companies set up with a view to profit that have been registered under the Companies Act 1985.’ In the same explanation, he further also considers a set of those companies that befalls under variety of other legal provisions, including a number of organisations in public sector. Despite some important distinctions can be made, this essay considers the term of corporation, company and organisation in the same context, with potential to produce a certain kind of harm.

According to online dictionary a corporation is ‘…a large company or group of companies authorized to act as a single entity and recognized as such in law’; and liability is ‘…the state of being legally responsible for something’ (Ask Oxford, 2010). In order to merge the terms, this paper will use the definition on corporate liability of another internet source, namely Wise Geek (2010), which defines corporate liability ‘…as an assessment of the activities that a corporation may be held legally liable for in a court of law’.

The general point to be made here is that in principle a corporation can be held legally liable as a single entity for corporate activities (acts or omissions) that is breaching the law through the group or an individual it employs. Such breaches of law might have severe adverse effects on society, resulting in harm to health and safety of either the people or environment, where health is regarded more in the context of wellbeing of people.

For further discussion the definition of the term safety is taken from a dictionary. Shorter Oxford (1973; quoted in Institute of Lifelong Learning, 2006: 4-11) regards safety as: ‘The state of being safe; exemption from hurt or injury; freedom from danger… the quality of being unlikely to cause hurt or injury; freedom from dangerousness; safeness’. In order to merge the terms ‘health and safety’ in the context of organisational structures and their legal responsibilities, the example is taken from an explanation provided by the Institute of Lifelong Learning (2006: 4-7), which argues that the term is not only about enforcement of legislation related to protection of employees. The argument goes ‘…It is much more of a generic concept, which has developed the status of an ‘ethos’, …which is demonstrated by the use of the term `Safety Culture’ for the attitude of an organisation towards risk-taking’.

One might already observe that targeting the essay question in the context of effectiveness of corporate liability towards organisational safety in an affirmative manner might be considerably narrow. It becomes visible that managing safety in organisational framework requires further examination in a broader context of Risk, Crisis and Disaster management, if complementary progress on safety through imposed strict liability measures on corporations desires to be achieved. However, before the discussion on specific case studies, the term ‘safety culture’ requires additional attention, since it was illustrated that it might play an important role in attitudes towards risk taking in an organisational context.

Explanations of the term safety culture flourish. A very concise one was given by the CBI (1990) as ‘the way we do things around here.’ Pidgeon et al. (1991: 249) define safety culture as ‘…those sets of norms, rules, roles, beliefs, attitudes and social and technical practices within an organisation which are concerned with minimising the exposure of individuals to conditions considered to be dangerous.’ As such defines individual’s attitude and beliefs about organisations, their perceptions of risks and the importance, practicality and effectiveness of controls regarding organisational safety.

The case studies

The case studies used in this paper are both disastrous events caused by the sudden occurrence of fire which resulted in fatal outcome to many involved. The first, fire at King’s Cross underground station in London in 1987 claimed the lives of 31 people and injured many more. The fire followed a number of less serious hazardous fire incidents on the London Underground. The official report concluded the immediate cause of the fire as a failure to clean and lubricate the running tracks of the escalator where the fire took place after the match fell (Department of Transport, 1988; quoted in Bergman, 2000: 24).

Kletz (2001: 116) argued that approximately 20 fires per year between 1958 and 1967 were ‘…called ‘smoulderings’ to make them seem less serious.’ Similarly, the November 1988 Public Inquiry report observes the London Underground management’s reaction to earlier escalator fires from 1956 to 1988 as ‘imperfect’, describing the management’s approach as reactive rather than proactive (Department of Transport, 1988; quoted in Bergman, 2000: 24). In particular, the report summed up in the evidence of the then Director General of the Royal Society for the Prevention of Accidents, that many recommendations after previous fires:

‘…had not been adequately considered by senior managers and there was no way to ensure that they were circulated, considered and acted upon. London’s Underground failure to carry through the proposals resulting from earlier fires – such as the provision of automatic sprinklers, the need to ensure all fire equipment was correctly positioned and serviceable, identification of alternative means of escape and the need to train staff to react properly and positively in emergencies – was a failure which I believe contributed to the disaster at King’s Cross’.

(Department of Transport, 1988; in Bergman, 2000: 25)

Despite the fact that the report recognized collective failure for disaster from the level of most senior managers downwards over many years to minimise the risk of fire outbreaks, the sound blame was placed mainly to senior management of the company. The official report into the disaster claims the responsibility of management systems as playing a significant role in development of precipitating causes that triggered the disaster (Fennell, 1989; in Institute of Lifelong Learning, 2006: 3-5). However, was the applicability of existing legal instruments effective enough to reach the corporate decision makers and to what extent? Apparently, at the time of the accident there were sufficient instruments in place to find the London Underground legally liable for a criminal act of manslaughter or for a lesser offence under the Health and Safety at Work Act 1974 (Bergman, 2000: 29). Regardless sustainable grounds provided for legal punishment, the London Underground and its senior managers gained immunity from any form of criminal accountability (Bergman 2000: 29).

It is beyond the scope of this paper to examine further in details all the failures that led to disaster and the debates that followed in the aftermath. Though, the failures summed above can already pinpoint that organisational safety culture was poorly maintained. The November 1988 Public Inquiry report specifically stated that the London Underground’s understanding of statutory responsibilities for health and safety at work was ‘mistaken’ and that many of the shortcomings which led to the disaster had been identified in earlier investigations and in reports by the fire brigade, the police and the Railway Fire Prevention and Fire Standards Committee (Department of Transport, 1988; in Bergman, 2000: 24-25). This exemplifies that the London Underground management was made aware of non-compliance with safety standards. Even though a history of small fire outbreaks was excessive, the London Underground failed to consider reported hazards seriously and to introduce safe guards to minimise the risk of a fire with a potential for large scale loss of life.

Such a conclusion stands much in favour of those who argue that ‘…effective risk management depends on the design of incentive structures that place strict financial and legal liability onto those who are in the best position to take action to minimize the risk’ (Hood & Jones, 1996: 46). The claim is that:

‘…if liability is not precisely targeted on specific and appropriate decision-makers, a poorly designed institutional incentive structure will allow avoidable accidents to occur. Without close targeting of liability, there will be too little incentive for care to be taken by those decision-makers in organizations who are capable of creating hazards, and (the argument goes) “risk externalization will be encouraged. Policies should, therefore, aim to support expanded corporate legal liability, more precisely targeted insurance premium practices, and regulatory policies that have the effect of criminalizing particular management practices and of laying sanctions directly on key decision- makers within corporations, rather than trusting corporations as undifferentiated legal persons.’

(cf. Fisse & Braithwaite, 1988; in Hood & Jones, 1996: 46)

Was the looseness of regulatory and legal instruments in hands of the safety investigators that did not make it possible to enforce the London Underground to remove the identified hazards and that led to the disaster, this paper was not able to fully determine. However, it is of believe that strict liability imposed on those who represent a ‘guiding mind and will’ of the company for non-compliance with safety regulations, would be effective to prevent an avoidable accident to occur. An absence of criminal charges against the senior company managers might to some extent support a positive answer on the essay question with Bergman’s argument in criticising the authorities of their failure to prosecute directors. He suggested that ‘it is often argued that only when proper action is taken against directors-with a real threat of imprisonment-will other companies take notice’ (Bergman, 2000: 90). Though, some wider perspectives of corporate liability in relation to organisational safety need to be further discussed before any conclusions drawn. This brings the discussion to the next case study, where all the regulations were complied and yet the disaster occurred.

The second example that this essay considers is the fire of a funicular train in a tunnel that happened near Kaprun, Austria in November 2000. The fire on a Gletscherbahnen Kaprun’s funicular railway, carrying 167 people up to the Kitzsteinhorn glacier claimed lives of 152 passengers on board, the driver of the second train in the tunnel and two people near the top portal of the tunnel. In total 155 people lost their lives, injured not tallied (the total number of people involved in the incident varies throughout different articles. Figures presented in this paper are matching the majority of them). The 12 survivors who managed to escape out of the train through smashed windows were those who fled downhill away from the smoke. Others who fled uphill were overcome by smoke and fume. Those survived witnessed that smoke was emanating from the rear’s driver cabin before the train entered the 3.5 kilometres long and 3.6 meters wide tunnel with an average incline of 45 degrees. The immediate cause of the fire was a leaky tube of hydraulic oil that came into contact with a glowing heater at the rear cabin, nearby wooden panels and isolation materials. After the heater caught fire, the hydraulic line exploded and the oil was sprayed into the flames. This was stated as the reason why flames spread so quickly. The official results of the investigations confirmed belief of the experts that fire was caused by an electric heating ventilator, which was illegally installed into the driver’s cabin (Transit Cooperative Research Program, 2006: 26-28; Beard & Carvel, 2005: 6; Faure & Hartlief, 2006: 31).

Although the train driver reported the blaze to his base station, the train continued and stopped 600 meters into the tunnel. Following, as the Transit Cooperative Research Program (2006) suggests that:

‘…the fire continued and the steep tunnel acted like a giant chimney, sucking air in from the bottom and sending toxic smoke billowing upwards. Despite an alarm signal and contact with the base station instructing the driver to open the doors, the train stayed at the location with its door sealed. Later investigation revealed that this was the immediate cause of death of most of the passengers.’

(Transit Cooperative Research Program, 2006: 27)

Some observed that the accident has parallels with the King’s Cross fire. As Transit Cooperative Research Program (2006: 28) suggests that the King’s Cross escalator shaft at the centre of the fire had a 30 degree incline that, like the Kaprun fire created a chimney effect. The Kaprun blaze moved faster because of the steeper incline. Though, unlike the King’s Cross disaster, where several small fires were excessively observed before the accident, in the Kaprun case a regular inspection of an independent civil technicians performed two months before the first day of skiing season and also the day of the accident, has found no safety breaches or non-compliances with safety regulations. However, does that make the existing safe guards to prevent the accident sufficient and, nonetheless, the Gletscherbahnen Kaprun any less culpable for the disaster?

As Tyler (2000) put forward ‘…there was no sprinkler system to put out the flames in the tunnel, fireproof emergency refuges or an evacuation tunnel through which the passengers might have escaped.’ The BBC News (2004) stated that ‘…the blaze was worsened by the fact that the tunnel was not lit, had only one narrow service stairway and the doors of the train could not be opened by the trapped passengers from the inside.’ Another author (Beier, Unknown: 3) in his paper claims that there were no emergency exits, lights or a method to pull the burning train out of the tunnel. Similarly the Transit Cooperative Research Program (2006: 28) stated that the train did not have enough fire extinguishers and that an evacuation drill never took place.

The listed above illustrates that significant safety measures were ignored downwards many years of operating the Gletscherbahnen Kaprun’s funicular train. In recognition of that, sixteen people – including company officials, technicians and government inspectors were arrested and charged with criminal negligence. The centre of the prosecution was to claim liability for those responsible for installing and servicing a non-regulation heater in the driver’s cabin, which sparked the blaze by leaking oil. However, on February 19, 2004, Austrian court acquitted all sixteen with explanation of the judge in Salzburg that ‘…there was insufficient evidence to find the 16 – train operators, suppliers and inspectors – responsible for the blaze’ (BBC News, 2004). The appellate court in Linz in 2005 confirmed the verdict of the Salzburg court with the decision that no criminal acts were demonstrated despite the obvious failure to take care. The defendants had complied with the regulations (Beier, Unknown, 3). Many affected announced that they would continue with civil proceedings. Though, these cases are still pending.

The main problem was that designers of the electric heater complied with the existing regulations. However, the regulations failed to distinguish required standards for different types of trains. The design of the heater installed was inappropriate for a train in a tunnel and obviously different hazards were not foreseen. As Beier (Unknown, 4) argues: ‘A horrible risk caused entirely by the design and construction of the technical system had slipped through the entire legal and regulatory system because everyone focused on the compliance with the regulation not whether the system was safe.’ As he suggested in the paper, ‘no one thought about a fire nor did regulators ask anyone to think about it’ (Beier, Unknown: 3).

One of the conclusions drawn by Beier (Unknown: 4) on Kaprun’s accident is that even major companies will do only the exact minimum to comply with regulations and that compliance with regulations does not guarantee a safe outcome. It is important that, he as many argues that simple product can create extremely complex risk systems and assuming that risks in technologically advanced -complex systems can be effectively managed by regulations they might prove as inefficient as in the case of Kaprun disaster. However, short before the accident in Kaprun took place, there were several occurrences of disastrous events that befell the road and rail tunnel users in the Alps and elsewhere (BBC News, 2000). Therefore, it should not be neglected that the Gletscherbahnen Kaprun managers together with the authorities inherently failed in the management of organizational risks by, as Toft and Reynolds (1994; quoted in Institute of Lifelong Learning 2006: 5-10) suggest, not taking advantage of the lessons learned by others.

Conclusion

The case studies revealed serious recklessness of the companies in their regard to safety, which unfortunately in both cases resulted in disastrous events with great losses of lives, many injured and large numbers of grievous families that lost their loved. Despite the fact that great harm was caused to society, neither companies nor their managers were prosecuted or found guilty in front of court for any kind of criminal behaviour. Though, it needs to be recognised that the concept of criminal corporate liability is only one perspective in a broader context of responsibility claimed in case of corporate wrongdoing.

In the case of King’s Cross fire it is suggested that strict liability imposed on senior managers could stipulate the company’s proactive respond in dealing with identified hazards that later led to disaster. In the case of Kaprun fire the possibilities for cross-organisational isomorphism to cover the gap of being unaware of the consequences that could happen and actually did happen, were obviously missed. In both cases this paper suggest that the companies regarded safety with gross negligence, with the main aim to do only exact minimum to comply with safety standards and regulations. Bergman argues that:

‘…unlike the minds of individuals, which cannot be re-modelled, the components of a company can be analysed and reformed. New policies can be adopted, new job positions created and new management systems set up. The organisational defects of a company – its’psyche’ – can be taken into pieces and put together. Unsafe companies can be turned into safe ones.’

(Bergman, 2000: 99)

Both companies operated in an inherently unsafe manner before the accidents occurred and responded with significant safety improvements only after the disasters. One might argue that such safety improvements were not out of sight in terms of available resources on both sides already before the accidents. With strict financial and legal liability incentives, avoidable accidents might be prevented. Bergman (2000: 90) argues that ‘…there is a great need to increase the accountability of directors and senior company officers; the backbone of any system of deterrence in preventing corporate harm, must be action against those in control of the company.’

There are many that are sceptical of such an argument and consider it as possibly ineffective or even counterproductive. Such opponents can point to some other policy areas where criminalization leads to the adoption of artificial legal devices to limit liability, rather than to real changes in behaviour (The Royal Society, 1992: 157-158). Fitzgerald (1986; quoted in Hood & Jones, 1996: 62) claims that ‘…person should not be punished for occurrences over which they could not exercise no control…if such targeting is to be implemented, then it must be accurate.’

Indeed, safety concerns should not be placed in the hands of management only. It should be overall responsibility of all aspects within organisational structures. However, it should be vested at the highest level of each organization (Bergmann 2000: 126). Wells (quoted in Hood & Jones, 1996: 60) suggest, ‘…if safety managers want to make themselves weatherproof, their barometers need to be tuned as much to the pressure of social constructions of accidents as to the legal categories into which they potentially be placed.’ The managers should exercise whatever is reasonably possible to prevent avoidable accidents to occur. Therefore, incentive structures that place legal liability on those corporate bodies that are in the best position to take action to minimize risks can be an effective mechanism to promote organisational safety. Regular safety audits or inspections could present an important instrument not only to penalize non-compliances of safety regulations, but to expose hazardous circumstances that could develop into any mayor accidents. Gray and Scholz suggest that:

‘Inspections imposing penalties result in improved safety because they focus managerial attention on risks that may otherwise have been overlooked. It is not the miniscule penalty that makes OSHA inspections effective in reducing injuries, but rather the concern of managers to prevent the costs associated with accidents once they are aware of the risks.’

(Scholz, 1997: 256)