Does safety governance matter? Just ask Boeing.


By Prasanthi Vasanthakumar, ICD

If there’s one thing we can learn from Boeing’s 737 MAX crisis, it’s that safety is not a given. The revamped jetliner crashed twice in five months, killing 346 people and raising the possibility of board culpability. Following the second crash, shareholders and families of the crash victims demanded answers from the board. What did it know about the aircraft’s safety and could it have done more to avoid these tragedies? As the board floundered in response, its safety governance (or lack thereof) came under scrutiny.
 
Boeing’s mistakes
In terms of safey, it appeared that Boeing’s board was asleep at the wheel. The board was criticized for having no safety oversight in its bylaws or any aviation safety experts at the table to ask the probing but necessary technical questions. In the aftermath of the second crash, the board’s structure also came under fire: namely, for being too large, and having celebrity members and multiple cross-relationships that clouded objectivity. Coasting on a previously strong track record, it’s possible the board simply took safety for granted.
 
The case of Blue Bell Creameries
Like Boeing, safety didn’t appear to be on the radar for the board at Blue Bell Creameries. The U.S. manufacturer of ice cream and frozen yogurt found itself in hot water when three customers died from ice cream tainted with listeria. During litigation, board directors were accused of failing in their oversight responsibilities by ignoring food safety risks. The court case made it clear that directors should identify an organization’s risks – in this case food safety – and engage with them at the board level.
 
How to govern safely
Mary-Ann Bell, Corporate Director at Nav Canada, Cogeco and Energir, and Carol Stephenson, Corporate Director at Maple Leaf Foods, General Motors and Intact Financial, both agree that safety starts at the top. And that means boards should actively engage with safety. With extensive experience in safety governance, Bell and Stephenson share insights on how boards can avoid making the same mistakes as Boeing and Blue Bell.
 
Set a good example
Creating a culture where employees feel comfortable reporting safety risks is critical. For example, General Motors has a program called ‘Speak up for Safety,’ which encourages employees to report safety issues. “The whole idea is to congratulate people for speaking up for safety instead of covering things up,” says Stephenson. “And it starts right at the top. Our Chair and CEO has a safety story at the beginning of every board meeting, which keeps safety front and centre. It tells our employees that safety matters at the top, and that trickles down.”
 
Bell also outlines the importance of making it easy for employees to report issues without fear of repercussion, and giving them the confidence that management is taking action. “At Nav Canada, safety is our product and so, we have a dedicated safety committee to oversee operations risks. The board chair always ensures this committee’s report comes first at meetings to underscore our focus on safety.”
 
Analyze the data
When incidents and near-misses are reported and investigated, boards should be able to review the outcomes in a meaningful fashion. “Analytical tools can help report, benchmark and identify causes and correlation when it comes to safety incidents,” says Bell. She believes that boards should consider using new tools such as AI to capture and conduct an in-depth analysis of data quickly to find unnoticed correlations.
 
Why prevention is the best cure
A comprehensive approach to all things safety is the best way to prevent incidents from happening at all. At Maple Leaf Foods, Stephenson describes a 360-view of safety that spans everything from food to employee safety: Are employees safely using tools? What foods have been recalled and why? If an issue didn’t result in a recall, is it an early warning sign of something to come? And how long does it take to resolve problems? “We’re looking at all aspects of safety, from the products that we produce to the employees that are producing it,” she says.


Photos courtesy istockphoto.com. 

As part of this prevention ideology, Stephenson encourages boards to take plant tours. “If you tour a plant, you get to see beyond the walls of the boardroom,” she says. “At an automobile assembly plant, you’ll get an idea of how many accidents or near-misses have occurred. In a food processing plant, you can see what kind of protective clothing employees wear. A tour can give you a strong sense of how important safety is at the plant.”
 
To solidify a board’s prevention plan, Bell encourages industry collaboration to identify best practices and reduce risks as a whole. She also underscores the importance of understanding the safety legislation that applies to an industry as a bare minimum.
 
Motivate management
Including safety in the executive compensation plan reinforces a board’s commitment to safety.

“When safety is part of executive compensation, it sends a strong message that it isn’t just a nice-to-have,” says Stephenson. “If you don’t have great safety results, then it’s just as bad as poor financial performance.”
 
Bell notes the importance of outlining short- and long-term incentive plans related to safety, as well as the challenge of setting proper objectives and key performance indicators. “You have to collectively understand what numbers are reasonable, and which safety elements are non-negotiable,” she says.
 
Learn from your mistakes
When a crisis does happen, the company should use it as a way to keep safety top of mind.
 
A decade later, Maple Leaf Foods’s 2008 listeria crisis is still a learning example across the organization. Every year, on the anniversary of the crisis, all employees receive an impactful video on why it’s important not to forget the incident.
 
“A lot of companies try to pretend their disasters never happened,” says Stephenson. “But Maple Leaf Foods came out of that crisis much stronger and demonstrated real leadership. And now they’re using it to build a strong culture around safety.”
 
Safety matters
Whether it’s planes, trains and automobiles or food processing and foodservice, a culture of safety is imperative for most, if not all, Canadian businesses. Boards should oversee all safety aspects, from food safety to overall employee well-being. And when no safety concerns arise, and everything seems too good to be true, directors should pay even closer attention. To their detriment, Boeing and Blue Bell took management at its word, leading to the loss of hundreds of lives and irreparable reputational damage. When it comes to protecting your employees and customers, it truly is better to be safe than sorry.
 
Mary-Ann Bell is Chair of the Safety Committee at Nav Canada.
 
Carol Stephenson is Chair of Executive Compensation Committee for General Motors Company, and former Chair of the Safety and Sustainability Committee at Maple Leaf Foods.
 
Further reading
Developing an effective safety governance framework, Campbell Institute (n.d.)
Safety governance inside the boardroom: the role of senior executives and board directors in safety leadership, EHS Today (2016)
Leading health and safety at work, Institute of Directors (2013)
Health and safety guide: good governance for directors, Institute of Directors New Zealand (2016)
The influence of safety leadership at board level, Safety and Health Practitioner (2015)
 

ICD Resources
More resources on safety governance
The right questions to avoid another Lac-Mégantic,” Director Journal, 2014

Video: Health Safety & Environment Issues (ICD Calgary Chapter event, Jan. 2012)


 

ICD Education
ICD course on risk governance

 

Enterprise Risk Oversight for Directors – Developed in collaboration with CPA Canada and based on CPA Canada’s A Framework for Board Oversight of Enterprise Risk©, this course is designed to help directors better understand and oversee risk, including imbedded vulnerabilities and compounding effects from multiple risks. Course dates will soon be published on www.icd.ca.
 

Course dates will soon be published on www.icd.ca.