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AICD Directors Briefing
Welcome to the Australian Institute of Company Directors (AICD)
Victoria Division Directors Briefing
OH&S Issues For The Board
Presenters:
Kirsty Roser, Managing Principal, Workforce Strategies, Marsh Pty Ltd
Barry Sherriff, Partner, Employee Relations, Freehills
Greg Tweedly MAICD, Chief Executive Officer, Victorian WorkCover Authority
www.marsh.com.au
OH&S: Issues for Directors and the BoardLimiting exposure through effective risk management
13 October, 2009
Melbourne
3Marsh
Agenda
Background issues
How does an organisation demonstrate due diligence and what are the
benefits?
What makes an effective safety management system?
How do you know when its working?
How do you protect your organisation?
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Health & SafetyDrivers
Employeeexpectations
Communityexpectations
Personal liability
Legislation &enforcement
Insurancecosts
Public relations
Accreditation
Health and Safety Pressures Are Increasing
Supply chain Investorexpectations
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Duty of Care (in relation to health and safety) can be defined as:
“Taking all reasonable care to avoid acts or omissions likely to harm
any person or cause damage in the workplace.”
An employer has a ‘duty of care’ and fulfills this by showing due
diligence.
Duty of Care
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What is Due Diligence?
Taking every reasonable precaution in the circumstances to protect the
health, safety and welfare of all your employees.
Can be used as a defence for prosecutions under the legislation.
Requires everyone in the workplace to understand and comply with the
duties set out in the legislation.
Reasonable pre-caution.
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How to Demonstrate Due Diligence
System in place for complying with the law.
Review health and safety issues at Board meetings.
Act promptly when made aware of a problem.
Follow up to ensure instructions have been carried out.
Provide written instructions to subordinates.
Allocate time and resources to support the health and safety program.
Monitor and audit the health and safety program.
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Benefits of Due Diligence
Safer workplaces
Reduced costs
Legislative compliance
Increased productivity
Increased business / competitive advantage
Improved morale
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Safety Management Systems
Safety needs to be integrated in to your general business practices.
What makes a system effective?
– Senior management involvement
– Reflective of the organisation’s practices
– Implemented – do what you say you are going to do
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A Systematic Approach
Safety Management Systems – a model for establishment,implementation and maintenance
(reproduced from ILO-OSH 2001 -Guidelines on occupational safety and
health management systems)
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Key Elements of an effective system
Risk management
Consultation
Incident reporting
Monitoring and review
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Risk Management
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Consultation
Consultation is a two way conversation between employers and
employees that involves:
– Sharing information (information must be made available in a
timely way and in a form that can be understood by employees)
– Giving employees a reasonable opportunity to express their views
(employees should be encouraged to play a part in the problem
solving process), and
– Taking those views into account (employees should help to shape
decisions, not hear about them after they are made).
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Incident Reporting
Timely
Detailed
Investigated
Escalated
Followed through
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Monitoring and reviewHow do you know if its working?
Audit Results
Management Reporting
– Significant legal non-compliances (including non conformances and
corrective actions)
– Notifiable incidents
– Legislative changes
– Performance Indicators
Costs
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Is this what you see?
Monitoring and reviewHow do you know if its working?
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This is what you should also see:
– % of planned audits completed
– % of corrective actions closed out within prescribed time frames
– % of incidents reported within prescribed timeframes
– % of incidents investigated within 48 hours
– % of planned health and safety system committee meetings held
– % of managers trained in risk assessment
– % of employees inducted prior to commencing their job
Monitoring and reviewHow do you know if its working?
18Marsh
How do you protect your organisation?
Systems in place and implemented
Clear responsibilities and accountabilities
Robust review of performance and results
Cultural leadership from the top down – high visibility and participation of
senior management is critical
Insurance cover??
www.marsh.com.au
Australian Institute of Company Directors
OH&S: Issues for Directors and the Board
Harmonisation: What will it mean for corporategovernance?13 October 2009
Barry Sherriff
What we will look at today
• current OHS obligations and liabilities relevant tocorporate governance
• positive duty for officers
• other relevant changes
• what to do to comply – and should you be actingdifferently
Key to the model OHS ACT
• Removes employment as the key to duties of care andobligations
• Duties owed to a wider (clearer) class of persons
• A positive duty of care for officers and extension to theCrown
• Broader obligations for consultation and representation inthe workplace
• Much higher penalties, but numerous alternatives to fines
Current officers’ liability provisions
• differ across the jurisdictions
• who is an officer?
– Vic: s9 Corporations Act
• how can an officer be liable?
– Vic: officer guilty if offence by corporation isattributable to failure of officer to exercise reasonablecare
– Reverse onus of proof in NSW, Qld, SA and Tas
– ACT: Specific measures required
• what will be the consequences?
– Vic: Max fine now >$200k
Officers liability - now
• no current positive duty of care
• guilty only if company is guilty
• ‘attributed’ liability
• often reverse onus on the officer
• officer liability provisions nowhere near the duties owedby others (e.g. Vic s144; Qld, s167; ACT s219) – easilymissed
• inconsistent application by courts
• do current provisions
– encourage action by officers?
– let officers know how to comply or avoid liability?
Recommended officers’ duty of care
WRMC decisions on recommendations of National Review intoModel OHS Laws
• Modified s9 definition of an officer• include Crown but not Ministers
• volunteers and councillors have duties of officers but not to be prosecuted
• Officers will have a positive duty of care to exercise due diligence to ensurecompliance by the corporation
– can be guilty of an offence without an incident
– onus of proof on the prosecution
• ‘due diligence’ will not be defined, decisions by the courts will provide themeaning of the term
• The recommended definition - based on case law – may be used as a guide
Due diligence: What should officers do?
(Proposed definition)
Up-to-date knowledge of OHS
laws and compliance requirementsAn understanding of the nature
of the operations of the entityand generally the hazards and risks
associated with those operations
Ensuring appropriate resources andprocesses to enable the identification
and elimination or controlof specific OHS hazards and risks
Verification that risks and hazardsare being appropriately controlled
A process for receiving, considering andensuring a timely response to
information regarding incidents,identified hazards and risks.
Officers protection – the current position
Officers can protect themselves by:
• exercising and showing due/reasonable diligence in fulfilling theirroles (demonstrate obligations identified and responsibilitiesallocated)
• having a proper basis for believing that OHS is being properlyattended to by appropriate people
– governance, accountability, reporting, auditing, follow up etc
• having the understanding of OHS and information to be able to do this
• not ignoring obvious hazards
Same standard under model Act – but a positive duty
How does this fit with what officersordinarily do?
Isn’t this just proper and effectivegovernance?
Will OHS now be any different to otherlegal obligations of officers?
Executive and Senior Management
• Provides the direction and policy
• Authorises resources – human and financial
• Ensures framework and support systemsare in place
• Monitors performance and review throughreports (lead indicators, not just lag)
• Demonstrates leadership
• Lead by example
Management
• Identify and monitor legal obligations and compliance
• Arrange acquisition/allocation of resources
• Analysis and recommendations
• Policy and procedure development and implementation
• Involvement in strategy and action planning
• Engage in consultation
• Deal with authorities
• Ensure information, training and supervision
• Audit/incident follow up
• Demonstrate leadership
Practical impact in current economic climate
OHS compromised
• reduction in resources
– unable to do it properly
– stress and psychological injuries
• distraction from OHS to other issues
• suspension of expenditure on OHS and other initiatives(e.g. training)
• cultural ‘deterioration’ and friction between workers andmanagement
• corner cutting by suppliers of labour and inputs
Corporate governance
Leadership and governanceLeadership and governance
Policies and procedure and actionPolicies and procedure and action
• Culture
• Accountability
• Resource allocation
• Due diligence
Governance and leadership
• To govern is to drive accountability and compliance
• To lead is to make people want to join you to do it
• Either way you need personal involvement at the topsupported by useful information
• Leadership can have the greatest impact, whilegovernance provides the support (and demonstratescompliance)
Particular issues to consider
Preparing for any future changes may also allow you to assess your current levelof compliance
– Understand impact of the new primary duty of care
– Consider requirements of officers’ positive duty and review currentcorporate governance arrangements
– Understand how consultation, issue resolution, HSR provisions may impactyour business to ensure ongoing corporate compliance, for which you mustexercise due diligence
– Require a review or develop or development of policies and contractprovisions for effective and efficient compliance
– Review or develop procedures for incident response, including ensuringprivileges are available and exercised
Starting now is prudent
• Model OHS laws are no longer just a possibility
• While the detail is to be refined the key principles and keychanges have been clearly stated and agreed
• Development and effective implementation (‘take up’) takes18 months to 2 years for significant change
• Detailed requirements in regulations will also happen at thesame time – get the strategic, structural and consultationissues resolved ahead of this
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Leading from the top
• The executive being first aware can lead and support thechanges – train them first in what is needed to be done
• The executive will be directly involved in strategic andstructural issues – critical to due diligence and their dutyof care as officers
• Then the middle management and subject matter expertscan be trained in the detailed requirements and what theywill mean
• Development, consultation and implementation, trainingand review can then take place
www.freehills.com
OHS Management inBoards
13 October 2009
Context
• OHS is now an issue of community concern
• Direct and indirect costs of injuries are difficult toquantify
• There is an increasing link between marketperformance and safety records
• Good OHS can provide competitive advantage
Boards have a legal obligation totake a leadership role in health
and safety
Duties of Officers in Victoria
• Officers can be responsible when a contravention by acorporation is attributable to the officer failing to takereasonable care
• In determining whether an officer has committed anoffence, regard must be had to —
(a) what the officer knew about the matter
(b) the extent of the officer's ability to make, or participate in themaking of, decisions that affectthe body corporate in relation to the matter
(c) whether it is also attributable to any other person; and
(d) any other relevant matter.
Good occupational health andsafety is good business
Roles and responsibilities
• Leadership
• Knowledge
• Responsibility
• Decision-making
• Consultation
• Oversee efficacy of OHS systems and programs
Organisational culture is driven from the
top.
Visible levels of involvement in leading
OHS strategy by the board makes a
difference to the level of importance it is
given throughout the organisation.
Thank you
AICD Directors Briefing
Question & Answer Session
AICD Directors Briefing
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