It may be only a matter of time before industrial manslaughter offences are introduced right around Australia, with a number of states and territories already introducing industrial manslaughter laws and a number of others looking to enact similar legislation, according to Clyde & Co.

There are a number of factors and events behind this trend, according to Alena Titterton, a partner in the firm’s regulatory & investigations, health, safety and security practice, who observed that there have been a range of royal commissions, public inquiries and inquests touching upon the health and safety, leadership and corporate governance landscape over the past 12 months.

These include the Dreamworld inquest or the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and closer to home for the OHS profession, the Boland Model WHS Laws Review or the Federal Senate Standing Committee on Education and Employment Inquiry into the Framework surrounding the prevention, investigation and prosecution of industrial deaths in Australia.

“We aren’t yet reaching the end of the cycle of that kind of inquiry either,” she said.

“If we look ahead over the next 12 months, there are quite a number of similar types of exercises in the nascent stages such as the Aged Care Royal Commission, the Royal Commission into Violence, Abuse, Neglect and Exploitation of People with Disability, the Royal Commission into Victoria’s Mental Health System and the National Inquiry into Sexual Harassment in Australian Workplaces to name but a few.”

“What each of these inquiries emphasise is the need to effectively managing conduct risk and have effective leadership at all levels of an organisation to set the right cultural tone for behaviours to be aligned with organisational values and objectives,” said Titterton.

“That, in turn, creates a change in organisations and board rooms in terms of a broad focus on culture in the approach to corporate governance.”

Titterton, said one of the other impacts in a broader corporate regulatory sense has been the additional scrutiny of regulators posed by such inquiries.

“In particular, Commissioner Hayne in the Banking Royal Commission took the view that part of the regulatory function for bodies such as APRA needed to involve supervising culture,” she said.

“In that regard, there were specific recommendations for regulators to assess entity culture, identify what is wrong with entity culture, educate the entity on cultural issues, agree what the entity will do to change its culture and supervise the implementation of those steps.”

Titterton observed that the regulatory frameworks in the WHS / OHS space in Australia are more mature on the question of considering safety culture, particularly given the officer due diligence obligation which is all about ensuring senior leaders set the right tone and personally take specific actions for a proactive approach to safety management.

“However, it may be these broader frameworks leap ahead of OHS in terms of the approach to enforcement on these issues,” she said.

“It will be interesting to see if the safety focused inquiries follow suit in suggesting that regulators take an active role in supervising safety culture beyond current approaches to investigating officer due diligence compliance.

“The particulars of charges in most OHS organisational prosecutions are tailored towards more tangible hazards and risks rather than cultural aspects of failures in safety risk management,” said Titterton, who noted that the model WHS laws provide a framework that also focus on enforcement.

Titterton also observed that executives and Boards are learning that there is a domino effect when one industry player is put under a microscope: “that is, the whole industry can find itself in the same boat when something goes wrong in one organisation,” she said.

For example, Dreamworld prompted regulators to conduct amusement device inspections across each of the Gold Coast theme parks: not just at Dreamworld, while a similar dynamic played out in the lead up to the Banking Royal Commission.

Since 2016, she said there has been much more reflection from Boards and senior executive teams in moving beyond simply obtaining refresher briefings on OHS due diligence.

“They are now engaged in active self-reflection when they see their competitors and industry colleagues struggling post crisis,” she said.

“While it is easy to criticise, they are asking themselves: would we fare any better? And they are actually testing that. We are seeing a real thirst from the C-suite in developing and testing resilience and crisis response.”

Titterton also said there is a real interest at the executive and board level in understanding community standards.

“I see an increasing appreciation that community standards have absolutely increased across the board, including in terms of ramifications in serious health and safety incidents,” she said.

“We saw two individuals sentenced to terms of imprisonment under health and safety laws in Victoria and Queensland in the three months between December 2018 and February 2019.

“This is remarkable given the closest we had seen to gaol time for OHS offences involved fully suspended sentences prior to those matters.”

The recent rise of industrial manslaughter offences around Australia is another example of increasing community standards, and Titterton said these types of developments are making Boards sit up and take notice.

Safety leaders have understood for a long time the power and benefit in collaborating across industry when it comes to sharing OHS lessons for industry-wide best practice on specific topics, she added.

“That level of sophistication in collaboration has not yet been applied across industry when it comes to managing conduct and culture risk,” said Titterton.

“One of the broad themes emerging from the Banking Royal Commission Report is the need for organisations (and regulators) to adopt a risk-based approach to culture and conduct and when embarking on cultural change programs, it is critical to review the effectiveness of those programs.”

She explained that the OHS profession has a real opportunity to demonstrate the value of the knowledge and skill-sets to support organisational capability development for corporate governance and culture more broadly.

WHS legal and theoretical frameworks support the C-Suite in how to give effect to personal accountability at senior leadership levels, while there are 6 elements of due diligence required to establish a corporate governance approach to safety that can be widened to consider culture and conduct more broadly.

“To head the lessons from the Banking Royal Commission, OHS leaders should be arranging for safety culture maturity assessments to be conducted as part of assessing the effectiveness of the approach to leadership and due diligence in their organisations,” she said.

“I would strongly recommend that OHS leaders take an active role in supporting their organisations take specific steps to improve culture and governance because the tide is turning absolutely in favour of higher community expectations both in terms of safe working conditions and impacts of their undertakings on members of the public.

Some suggestions for steps to take include:

1. Challenge assumptions and promote leadership at all levels: “For me, one of the best quotes from the Banking Royal Commission Report is this: ‘Entities must challenge assumptions about how they can and should encourage certain behaviours and discourage others. In the end, good management, at all levels, is the best and most effective way to obtain the best results.’

“That goes equally for incentivising proactive approaches to OHS management. You have to keep challenging your thinking and invest in ensuring your organisation’s cultural values and objectives for OHS are reflected at all leadership levels from senior leaders through middle management and to supervisory levels at the coalface,” said Titterton.

“We often find there is a dilution of the leadership message the further down it goes. That’s also why visible leadership from senior leaders is so important at the coalface.”

2. Senior leadership must seek out information for verification and assurance: Ensure your executive/Boards invest in organisational cultural maturity assessment reviews as part of their approach to WHS due diligence.

“In my experience conducting such assessments, they have the potential to reap multiple dividends for organisational corporate governance beyond health and safety,” said Titterton.

3. Collaborate across industry on leadership and culture: Conduct peer benchmarking on officer OHS due diligence across entities, and engage in peer networks for OHS leadership.

4. Get ahead of the curve on performance indicators. The reign of the Lost Time Injury Frequency Rate (LTIFR) as the preferred OHS measure for the boardroom may be at an end, suggested Titterton.

“We are working collaboratively with industry, academics and safety professionals to develop a due diligence Index for more meaningful Board reporting that is aligned to understanding organisational cultural capital,” she said.

5. Revisit remuneration and incentives: The broader corporate governance and conduct risk conversation coming out of the Banking Royal Commission is looking at how the wrong incentives can drive the wrong culture and behaviours, she added.

“Interestingly, the report recommends that the design and implementation of remunerations systems for staff be reviewed at least annually to pick up not just what workers do but how they do it,” she said.

“That may be worth reflecting on in a review of OHS incentive schemes.”

Source: Safety Institute of Australia, 14 May 2019