Strengthen rail-safety risk management: study

(Canadian OH&S News) — One year after the train derailment in Lac-Mégantic, Que., which claimed the lives of 47 people, a study has found that just under half of energy companies surveyed identified rail transportation as a possible material risk factor for their companies.

The Rail Safety and Executive Compensation in the TSX60 briefing note, released in early July by the Vancouver-based Shareholder Association for Research & Education (SHARE), examined 15 companies on the TSX60 — the stock market index of 60 large companies listed on the Toronto Stock Exchange. SHARE reviewed the companies to identify those that explicitly included occupational health and safety issues (OHS) in the performance evaluation of named executive officers.

“Poor management of OHS has impacts not only on the well-being of workers and their families, but for a company’s bottom line as well, including increased workers’ compensation premiums, decreased productivity, absenteeism, higher healthcare costs, potential lawsuits, negative publicity and a loss of investor and consumer trust,” the briefing note said.

While the study found that all of the surveyed companies had active committees responsible for oh&s oversight at the board-of-directors level, only 46 per cent identified rail transportation as a possible material risk factor. Identification of safety risks as material for the company helps to ensure that resources are dedicated to effectively managing those risks, the briefing note added.

“One year after the Lac-Mégantic tragedy, we would have expected to see universal acknowledgement amongst the companies shipping potentially volatile products by rail that there are risks that need to be managed for the health of those communities and the company itself,” Kevin Thomas, director of shareholder engagement with SHARE, wrote in an e-mail to COHSN.

The study also found that while 12 of the 15 (80 per cent) TSX60 companies included some type of safety metric among the factors that their compensation committees used in evaluating their CEOs’ annual performance, only six companies (40 per cent) identified the specific metrics that had been used to evaluate safety performance.

“No company identifies the actual targets executives are expected to meet to earn their bonuses,” the study noted. “Some companies, such as CN Rail, have identified safety targets for their general operations which is positive but these are not explicitly linked to executive performance evaluations.”

Lastly, only seven of the companies (47 per cent) included some information on how these factors were weighted in the overall evaluation of executive bonuses. “Even among those that do disclose how factors are weighted, safety metrics are often bundled with other performance metrics that are then given a single overall weight,” the briefing note said. “There is room for much stronger disclosure in this area.”

The study called the Lac-Mégantic disaster “a terrible tragedy for the community in which it took place and a strong example of why effective management of health and safety practices must be a primary responsibility for any company’s managers. For shareholders to know what risks are being prioritized and how strong the incentives are for management to address them, more extensive disclosure of compensation practices is in order.”