Many OHS professionals state that leadership is a crucial element to establishing a safety culture and then support this with examples of positive leadership. But some people fail at leadership and failure is often more instructional than success. Recently the CEO of Orica, Ian Smith, had to resign after his abusive manner resulted in the resignations of two employees. This is bad enough but when the Board hired Smith around three years earlier, the Board saw his manner as attractive. If leadership is crucial to a safety culture, what does this say about Orica’s decisions?
The Chanticleer column of the Australian Financial Review (AFR) wrote on March 24 2015 (paywalled):
“The board’s determination to have Smith shake Orica to its foundations was so great it allowed him to destroy staff engagement and walk all over the company’s culture of mutual respect. What is so bewildering about this deliberately aggressive and occasionally bullying change management strategy is that it was endorsed by a range of respected non-executive directors…..”
The same article says that
“The board failed to realise the significance of what Smith had done. Perhaps, three years of being told everything was OK made them immune to the severity of what he did to McRae and the former manager for corporate communications, Miche Paterson.” (links added)
The language used in much of the reporting of this abuse by a corporate CEO is notable as it illustrates a perception of bullying and unsafe behavior that may be part of the impediment to progressing occupational health and safety (OHS) initiatives on mental health.
The Due Diligence column of the AFR on 30 March 2014 reported that
“Ian Smith, a hard-nosed miner famous for his aggressive management style, was brought in as Orica CEO in February 2012 as a change agent.” (emphasis added)
And that:
“Orica chairman Russell Caplan had been working with Smith on his temper and took regular “temperature checks” on his CEO.” (links added)
WTF? The Board appointed an executive renown for his temper and aggressive manner. Why would a Board do such a thing? In OHS terms, the Board’s decision introduced a known hazard into the workplace and applied an administrative control measure to try to achieve a reasonably practicable outcome. That outcome has been shown to be inconsistent with accepted executive behavioural standards, has caused the resignations of two employees, and is likely to have breached Orica’s own Code of Conduct, a Code that was issued by Ian Smith himself!
The Code lists a value involving Collaboration that says:
“We work together as one business across many geographies and embrace the diversity of our team. We respect and value the participation of everyone. We build trusted partnerships with our stakeholders and we will only succeed if they feel as though they have succeeded with us.” (page 2, emphasis added)
The current perception in the business media is that although the Board made a mistake in appointing Smith it has somehow redeemed itself by quickly fixing the mistake. This lets the Board downplay its substantial error in judgement.
Incident Investigation
If we consider Smith’s behaviour to his colleagues as a workplace incident, an investigation would find the damaging event was Smith’s action but that a major contributory factor would be the Board’s decisions and the actions of its Chair, which contributed to a culture that indicated Smith’s actions were an acceptable managerial approach. The Investigator’s recommendations would surely include that the membership of the Board be reviewed with particular attention to the Chair.
A Board may try to justify the continuance of a bad-tempered CEO if the financial results were improving (although I don’t think this is any justification) but, according to the AFR’s Chanticleer, the Board’s decision to put up with Smith’s behaviour
“…did not appear to deliver superior financial returns through the sharemarket. In the three years Smith ran the company, its shares slumped 27 per cent.”
Is there an excuse for bullying?
A 21 March 2015 article in the Weekend Australian (“Smith exit puts corporate bully boys on notice”, paywalled) was particularly worrying. The article acknowledges Smith’s behaviour but then almost excuses it by asking:
“….was it reflective of a broader, blokey corporate culture, or was it an isolated incident from a man raised in one of Australia’s toughest mining towns, Broken Hill, and known to have trouble containing himself from aggressive outbursts to those beneath him in the corporate pecking order?”
How would this argument play out if Smith’s abused colleagues put in a complaint under OHS laws, perhaps, for bullying? A regulator would not accept the culture of a workplace as justification for abuse and harm. If it did, Cafe Vamp and its employees would never have been prosecuted and fined.
The “blokey” culture
The writer of the Weekend Australian article also described Smith’s abuse as “overly aggressive”, as if some degree of aggression towards employees is acceptable. The article continues with interviews discussing the blokey culture as if the mining and resources sector is somehow a special case. If the writer had interviewed an OHS professional or labour lawyer, the article would have shown that such behaviour is not just unpalatable but is illegal. Orica and all other Australian businesses have a legislative obligation to
“…ensure, so far as is reasonably practicable, the health and safety of:
(a) workers engaged, or caused to be engaged by the person; and
(b) workers whose activities in carrying out work are influenced or directed by the person, while the workers are at work in the business or undertaking.” (page 15)
The Model WHS Act specifically states that:
“health means physical and psychological health.”
OHS and Work Health and Safety (WS) laws emphasise the importance of applying due diligence to safety management. In a submission on the draft Model WHS Laws, Michael Tooma and Richard Johnstone wrote that:
“This proactive obligation [due diligence] is an important reform because health and safety leadership is critical to health and safety outcomes. An international study into best practices in corporate health and safety amongst major corporations by the Conference Board concluded that achieving excellence is about empowering everyone – management, supervisors, employees and contractors alike – to make health and safety truly work. This ultimately comes down to the commitment and leadership of the top echelon of the organisation. “
The conduct of Ian Smith and the Orica Board seems far from diligent.
Gender
In some of the reporting of Smith’s sacking there is also an implication of gender relations. The abuse was by Smith towards two female workers, McRae and Paterson; a situation repeatedly mentioned in the press. But there was a fourth person in the room at the time of the incident who is rarely mentioned. A 19 March 2015 report in The Australian (“One insult too many for board”) stated that the meeting in January 2015 included Smith, McRae, Paterson and the Chief Financial Officer, Craig Elkington. Elkington has not spoken publicly about the incident.
Much of the reporting on this incident is only in the business pages of the newspapers but the issues raised resonate far beyond the share price. The conduct of Smith, Caplan and the Board as a whole should be analysed through the, legitimate, prism of occupational health and safety.
The ramifications of Smith’s behaviour may not be over. It would only take a workers’ compensation claim for stress by one or both of the executives who resigned in January for the situation to be re-examined.
