corporate board health and safety governance committees ...€¦ · corporate board health and...

CORPORATE BOARD HEALTH AND SAFETY GOVERNANCE COMMITTEES:

DO THEY MAKE ANY DIFFERENCE?

by

John Harvey Murphy A thesis submitted in conformity with the requirements

for the degree of Doctor of Philosophy

Institute of Health Policy, Management and Evaluation

Dalla Lana School of Public Health

University of Toronto

© Copyright by John Harvey Murphy, 2016

ii

Corporate Board Health and Safety Governance Committees: Do

They Make Any Difference?

John Harvey Murphy

Doctor of Philosophy

Institute of Health Policy, Management and Evaluation

Dalla Lana School of Public Health

University of Toronto

2016

Abstract

A three phase mixed methods study (records research, survey, case analysis) was undertaken to

develop understanding of board of director health and safety governance committees (“BHSCs”)

amongst large market capitalization Canadian public companies, and ascertain their impact on

company health and safety performance outcomes. This goal was deconstructed into a series of

12 research questions.

The study determined that as of 2010, 58 companies with market capitalizations of $1.5 billion

or higher (out of 146) had BHSCs. Forty percent had BHSCs dating back to 2001, and 60%

formed BHSCs between 2002 and 2010. Factors accounting for the emergence of BHSCs

included legislative changes, liability concerns, risk reduction objectives, corporate social

responsibility pressures, emulation of peers, and industry sector guidelines and standards.

Approximately 2/3rds of the companies with BHSCs were in mining or oil and gas.

Most companies with BHSCs published descriptive information on their structures and

processes in annual sustainability reports, and / or in filings with securities regulators. Using

those sources it was possible to characterize patterns over the 2001-2010 period in the evolution

of BHSC mandates, terms of reference, member composition and characteristics, levels of

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activity, and governance practices. Information was also available for many companies on

occupational health and safety program evolution and injury rates for all or portions of the

period 2002-2014.

A conceptual framework consistent with available empirical research and theory was created to

describe mechanisms whereby BHSCs could be instrumental in the achievement of

improvements in company injury rates. Evidence for the existence and operation of those

mechanisms was obtained via review of company data, survey responses, and case analyses of

three specific companies. The study found evidence of BHSC instrumentality in company

health and safety performance improvements, and that the conceptual framework presents a

plausible model of this phenomenon.

iv

Acknowledgments

I wish to acknowledge and express thanks to several people whose assistance and contributions

were invaluable in completing the work of this thesis:

Aryah Frydman and Julia Findlay, who worked as my research assistants in the early

stages of the work, and assisted in the retrieval and inputting of information, drawn from

a variety of different corporate annual reports and disclosures over the period 2001-2010,

relating to the characteristics of board health and safety committees.

Sivan Almosnino, who over the past two years provided assistance and advice with

statistical analysis of information for the study on the emergence and characteristics of

board health and safety committees among the selected Canadian corporations, and for

the survey of board health and safety committee chairpersons.

Daniel Seto, who assisted in the graphic design of materials used for the survey, and

aspects of physical production of the final thesis document.

Adalsteinn Brown, and Louise Lemieux-Charles, who were my thesis committee

advisors, for their guidance and assistance in the refinement of the final work, and

particularly my thesis supervisor, Rhonda Cockerill, for her guidance, support, mild

cajoling, patience, and troubleshooting over the course of my time as a student and PhD

candidate at the Institute of Health Policy, Management and Evaluation.

Finally, I wish to thank Andrea Sass-Kortsak, for her significant career contribution to the

University of Toronto, and her interest in and support for my professional and academic career

over the past three decades.

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Table of Contents

Abstract ........................................................................................................................................... ii

Acknowledgments.......................................................................................................................... iv

Table of Contents .............................................................................................................................v

Chapter 1 Societal Context, Corporate Governance Context, and Conceptual Framework ............1

1 Societal Context to the Study ......................................................................................................1

2 Corporate Governance Context .................................................................................................11

3 Formulating a Conceptual Framework to Study BHSCs ..........................................................27

Chapter 2 The Research Questions and State of Knowledge ........................................................33

1 Study Purpose and Research Questions ....................................................................................33

2 The State of Knowledge on the Research Questions ................................................................34

3 Conclusions Respecting the Research Questions ......................................................................41

Appendix – Description of the Literature Search ..........................................................................43

Chapter 3 Overview of the Study and Organization of the Research Reports ...............................48

1 Study Overview .........................................................................................................................48

2 Organization of the Research Reports.......................................................................................53

Chapter 4 The Emergence and Characteristics of Board Health and Safety Committees

Amongst Canada’s Largest Corporations .................................................................................55

1 Introduction ...............................................................................................................................55

2 Methods .....................................................................................................................................55

3 Findings .....................................................................................................................................62

3.1 The 2010 Population of Canadian Large Cap Companies .................................................62

3.2 Canadian Large Cap Companies with BHSCs...................................................................66

3.3 Industry and Economic Characteristics of Companies with BHSCs .................................68

3.4 Health and Safety Information in Annual Disclosures ......................................................74

3.5 Governance Characteristics ...............................................................................................75

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3.5.1 Published Mandates ...............................................................................................75

3.5.2 Charter of Operations / Operating Terms of Reference .........................................81

3.6 BHSC Composition and Member Characteristics .............................................................88

3.6.1 Gender ....................................................................................................................88

3.6.2 Age .........................................................................................................................88

3.6.3 Academic Attainment ............................................................................................89

3.6.4 Years of Board Experience ....................................................................................90

3.6.5 Independent Status .................................................................................................90

3.6.6 Compensation and Shareholdings ..........................................................................91

3.6.7 Attendance at Meetings..........................................................................................94

3.6.8 Board Leadership Roles .........................................................................................95

3.6.9 External Executive or Board Involvement .............................................................95

4 Contribution to Answering the Research Questions .................................................................96

5 Potential Implications for Other Research Questions .............................................................104

Chapter 5 Accident Rate Trends of Major Canadian Corporations Having Board Health and

Safety Committees, 2002-2014 ...............................................................................................107

1 Introduction .............................................................................................................................107

2 Methods ...................................................................................................................................107

2.1 Collection of Injury Rate Data for Companies with BHSCs ...........................................107

2.2 Injury Rate Disclosure Practices of the Companies with BHSCs....................................108

2.3 Identification and Compilation of Peer Comparison Data ...............................................109

2.4 Data for Companies Not Having BHSCs.........................................................................111

3 Findings ...................................................................................................................................111

4 Discussion ...............................................................................................................................115

4.1 Historical Workplace Injury Rate Trends in Canada .......................................................115

4.2 Companies with BHSCs versus All Canadian Reporting Companies .............................116

vii

4.3 Mining Companies with BHSCs versus Ontario Mining Sector .....................................118

4.4 Oil & Gas Companies with BHSCs versus Alberta Petroleum Production Sub-Sector ..119

5 Contribution to Answering the Research Questions ...............................................................123

Chapter 6 Survey of Governance Practices and Impacts of Board Health and Safety

Committees of Large Canadian Corporations .........................................................................126

1 Introduction .............................................................................................................................126

2 Methods ...................................................................................................................................127

2.1 Creation of the Survey Instrument ...................................................................................127

2.2 Data Categories ................................................................................................................129

2.3 Identification of Survey Recipients .................................................................................132

2.4 Survey Ethical Approval ..................................................................................................135

2.5 Survey Package ................................................................................................................135

2.6 Survey Delivery, Request for Return, and Clarification Requests ..................................135

3 Survey Response Information .................................................................................................136

3.1 Overall Response Rates ...................................................................................................136

3.2 Industry Sector Response Patterns ...................................................................................136

3.3 Respondent Company Characteristics .............................................................................137

3.4 Injury Rates of Respondent vs. Non-Respondent Companies .........................................142

4 Findings in Relation to the Research Questions .....................................................................146

5 Implications of the Findings for the Conceptual Framework .................................................159

Appendix – Survey Questionnaire ...............................................................................................161

Chapter 7 The Instrumentality of Board Health and Safety Committees in Company Health

and Safety Performance Improvements: Comparative Case Analysis of Three Canadian

Gold Mining Companies .........................................................................................................172

1 Introduction .............................................................................................................................172

2 Selection of Subjects ...............................................................................................................173

3 Methodological Considerations in the Analysis of Subjects...................................................175

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4 Data Sources and Description of Analysis ..............................................................................179

5 Case Analysis: Barrick Gold ...................................................................................................186

5.1 Company Profile (December 2015) .................................................................................186

5.2 BHSC Member Characteristics (Knowledge, Influence) .................................................187

5.2.1 Academic Attainment and Industry Experience ..................................................188

5.2.2 Career Accomplishments .....................................................................................188

5.2.3 Board Tenure .......................................................................................................188

5.2.4 Commentary on the Evidence ..............................................................................188

5.3 BHSC Mandate ................................................................................................................189

5.3.1 Mandate Enables BHSC to Acquire Intelligence for Decision Making ..............190

5.3.2 Mandate Permits BHSC to Intervene if Necessary ..............................................190

5.3.3 Mandate Confers Authority to Hold Executives Accountable ............................190


5.4 Level of BHSC Activity...................................................................................................191

5.5 BHSC Governance Practices ...........................................................................................191

5.5.1 Information Supplied by Company, and Quality Assurance ...............................191

5.5.2 Involvement in Health and Safety Objective-Setting and Strategy Formulation 192

5.5.3 Communications to the Board and Executive ......................................................192

5.5.4 Ensuring Executive Accountability .....................................................................192

5.5.5 External Reporting and Disclosure ......................................................................193

5.5.6 BHSC Performance Self-Evaluation....................................................................193


5.6 Company Health and Safety Program Evolution .............................................................193


5.7 Company Health and Safety Performance Changes ........................................................206

5.8 Conclusions: Barrick ........................................................................................................210

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6 Case Analysis: Goldcorp .........................................................................................................211



6.2.1 Academic Attainment and Industry Experience ..................................................213


6.2.3 Board Tenure .......................................................................................................214


6.3 BHSC Mandate ................................................................................................................215




6.5.1 Information Supplied by Company, and Quality Assurance ...............................220

6.5.2 Involvement in OHS Objective Setting and Strategy ..........................................220

6.5.3 Communications to the Board and Executive ......................................................220

6.5.4 Ensuring Executive Accountability .....................................................................221

6.5.5 External Reporting and Disclosure ......................................................................221

6.5.6 BHSC Performance Self-Evaluation....................................................................221





6.8 Additional Information Obtained by Interviews ..............................................................233

6.8.1 Chair - BHSC .......................................................................................................233

6.8.2 Vice-President, Safety..........................................................................................238

6.9 Conclusions: Goldcorp.....................................................................................................240

7 Case Analysis: New Gold .......................................................................................................242

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7.2.1 Academic Achievement and Industry Experience ...............................................243


7.2.3 Board Tenure .......................................................................................................244


7.3 BHSC Mandate ................................................................................................................245







7.8 Conclusions: New Gold ...................................................................................................252

7.9 Overall Conclusions from the Three Case Analyses .......................................................252

Chapter 8 Synthesis: Answers to the 12 Research Questions, and Utility of the Conceptual

Framework in Explaining BHSC Instrumentality ...................................................................256

1 Introduction .............................................................................................................................256

2 Findings of the Descriptive Research .....................................................................................256

3 Contribution to the Existing Body of Knowledge ..................................................................265

3.1 Board Committees ...........................................................................................................265

3.2 Corporate Occupational Health and Safety Governance .................................................266

4 Comments on Incidental Findings ..........................................................................................266

4.1 The Relationship of Health and Safety Program Initiatives to Performance

Improvements ..................................................................................................................266

4.2 Instrumentality of the Corporate Senior Safety Manager ................................................269

5 Policy Implications for Occupational Health and Safety Regulatory Agencies .....................269

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Bibliography ................................................................................................................................272

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Chapter 1 Societal Context, Corporate Governance Context, and

Conceptual Framework

1 Societal Context to the Study

Occupational Injuries and Illnesses in Canada

Workplace accidents and illnesses represent a significant healthcare cost in Canada. In fiscal

2014, the Ontario Workplace Safety and Insurance Board incurred approximately $6.4 billion in

benefits and associated costs for workplace injuries and illnesses1. To put this in perspective, in

the same year, the Ontario Ministry of Health and Long-Term Care spent approximately $49

billion on the provincial health care system (which in turn represented about 40% of all

provincial government spending)2. On a national scale, approximately 250,000 claims were

accepted for workplace injuries and illnesses by Canadian workers’ compensation agencies in

20113, and the annual sum of direct and indirect costs for workplace injuries and illnesses was

estimated to be approximately $19 billion in 2008, the latest year for which estimates have been

reported (Gilks and Logan, 2010). Clearly, occupational injuries and illnesses represent a major

public health issue in Canada.

Public Policy and Legislation for Workplace Injury and Illness Prevention

In Canada, government intervention to minimize the contribution of work activities and working

conditions to injury and illness dates back to the early 20th century, but the nation’s

contemporary public policy and legislative framework was created in the late 1970s. The current

1 Ontario Workplace Safety and Insurance Board. “Fourth Quarter 2014 Report to Stakeholders”.

2 Treasury Board Secretariat. “Public Accounts of Ontario 2014-2015”.

3 Association of Canadian Workers Compensation Boards. “Number of Accepted Time-Loss Injuries, by

Jurisdiction, 1982-2011”.

2

framework largely reflects what might be labelled a “hazard control approach” to workplace

health and safety – that is, one that emphasizes technical requirements and restrictions relating to

worker exposures to chemical, physical and biological hazards associated with equipment,

facilities, the work environment, materials, performance of tasks, and the methods for organizing

and managing the work to achieve these ends4. This has resulted in the production of tens of

thousands of pages of federal, provincial and territorial statutes and regulations in Canada,

stipulating hundreds of thousands of requirements and prohibitions5. Ultimately, these laws are

intended to compel organizations to operate in ways that minimize the risks of employees

suffering occupational injuries or illnesses as a result of their work activities and workplace

environments.

In addition to prescribing a myriad range of hazard identification, evaluation and control

activities, a common feature of Canadian federal, provincial and territorial occupational health

and safety (“OHS”) legislation is the assignment of specific roles, duties and functions to the

workplace parties – that is the employer, the employee or worker, the supervisor, the contractor,

the workplace health and safety committee, the workplace health and safety representative, and

other less central characters such as suppliers, engineers and architects. This scheme of roles,

duties and functions is commonly referred to by regulatory authorities, authors, practitioners and

unions as “the internal responsibility system”. The latter phrase originated as a title to Table 51

in the Report of the Ontario Royal Commission on the Health and Safety of Workers in Mines,

released in 1976. Across the jurisdictions, the roles, duties and functions prescribed by

4 The Canadian legal framework for occupational health and safety does not, for example, require or provide

incentives for the workplace parties to promote healthy behaviours, or for product and equipment manufacturers to

render their wares intrinsically safe.

5 In Canada, each province and territory has jurisdiction over workplace health and safety within its borders. The

Government of Canada has exclusive jurisdiction over its own workforce, and over the workplaces of a variety of

industries that were historically of national importance, such as interprovincial and international railways, shipping,

trucking and airlines, seaway operations, banks, and telecommunications companies.

3

legislation are very similar, due to the manner by which the statutory framework evolved in

Canada between the mid-1970s and late 1980s6.

The “internal responsibility system” prescribed the roles, duties and structures for management

of workplace health and safety issues by many of the workplace parties, and the “hazard control

approach” prescribed the “how” of managing many hazards and OHS issues. Rounding out the

legislative architecture was an enforcement framework describing the roles and powers of

governmental regulatory agencies to inspect workplaces, investigate situations, lay charges and

initiate prosecutions - and a penalty framework intended to denounce and deter.

6 A brief explanation of the evolution may be helpful in providing understanding context for information that

follows. The Royal Commission (commonly referred to as the “Ham Commission”, after its chair, Dr. James M.

Ham, at the time head of the Department of Electrical Engineering, University of Toronto) was established by the

Government of Ontario in 1974 largely in response to the recognition of an epidemic of lung cancer in the Elliott

Lake uranium mines. The Commission studied health and safety management practices of industries in Ontario and

abroad, and canvassed the opinions of stakeholders with respect to the need for an occupational health and safety

legislative framework, and if so, how it should be designed and applied to different industries in Ontario. The

Commission report contained over 100 recommendations, for which a fair capsular summary would be as follows: a

occupational health and safety act and regulations are needed; those laws should apply broadly to all workplaces; the

statute should prescribe roles, duties and functions of the workplace parties in a manner such that: (a) the employer

bears ultimate responsibility and liability for protection of workers; (b) supervisors are the agents of the employer,

and have significant responsibilities for day-to-day implementation of employer duties; (c) the employer (as

represented by management personnel) is obliged to consult with workers and unions on various aspect of how

health and safety is managed at the workplace; (d) workers have various duties for protection of themselves and co-

workers, within the scope of their capacity; and (e) management and workers are compelled to collaborate on a

range of health and safety management practices and issues via workplace health and safety committees, which

much be established in most workplaces having 20 or more employees. The Ham Commission recommendations

were largely adopted by the Government of Ontario, and reflected in the workplace health and safety management

structures and processes prescribed by the Ontario Occupational Health and Safety Act of 1978. Following the

establishment of this statute by the Government of Ontario, the scheme of the legislation was largely emulated by

the federal government for federally-regulated workplaces, and by the other provinces and territories, resulting in

those jurisdictions rolling out their own foundational occupational health and safety statutes in the decade thereafter.

4

The Introduction of Occupational Health and Safety to Canadian Corporate Governance

While the Canadian occupational health and safety statutes formulated in the late 1970s and

1980s prescribed specific roles and duties for supervisors, workers and local workplace health

and safety committees, they did not prescribe roles or duties for the senior leadership of

companies – i.e. corporate officers and directors – and in fact, those parties simply were not

mentioned, despite the fact of their inclusion in the Table 51 roles matrix shown in the Ham

Commission report. From the perspective of many organized labour groups, the omission of

officers and directors from the “internal responsibility system” was a serious flaw that had a

predictable effect: senior executives and directors paid little or no attention to the state and

management of health and safety in their organizations; and unions regularly called for

amendments to the Occupational Health and Safety Act to create new duties and liabilities for

corporate officers and directors. In 1990, the Government of Ontario responded by including

within a package of statutory amendments called Bill 208 – An Act to Amend the Occupational

Health and Safety Act, a new section in that Act that placed a proactive duty on officers and

directors to ensure that their organization complied with requirements of the OHS Act and

regulations7, with potential for significant penalties for non-compliance. Bill 208 was passed,

incorporating into the Ontario Occupational Health and Safety Act a new Section 32, that

imposed specific duties of compliance assurance on company officers and directors, and

formally incorporating those parties into the “internal responsibility system”.

There is an intuitive rationale for the Section 32 amendment, that being that by imposing a

personal duty for compliance and liability for non-compliance upon the controlling minds of the

corporation, those minds would act for self-protection, which, in the workplace health and safety

context, would translate to a comprehensive program of activities to protect the health and safety

of workers, and maintain a high state of OHS legal compliance. This intuitive logic is supported

by large body of knowledge. In organizational theory, and in company law in the English

common law jurisdictions, the board of directors of a company is the paramount governance

structure of the business (Rodrigues, 2013). Its key mandates are to direct and exercise control

over the actions of the chief executive officer, offer strategic counsel to the senior leadership

7 Legislative Assembly of Ontario.

5

team, and provide linkages to important external networks in the firm’s operating environment

(Bainbridge, 2002). One might assume, therefore, that good governance of company health and

safety issues at the board of director level would be an effective self-regulatory mechanism for

the organization, leading to high levels of health and safety compliance and performance in the

company’s workplaces and operations. In the idealized model, the board would receive perfect

and timely information with respect to management of health and safety issues, risks, compliance

obligations and outcomes (such as rates of accidents and injuries, and government enforcement

actions), ensure adequate allocation of company resources, prod the chief executive officer to

remedy shortfalls, provide the benefit of their wisdom to aid in problem solving, and use a

combination of carrots and sticks to drive the operation of this virtuous cycle. Accordingly, the

Bill 208 expansion of officer and director liabilities and duties could logically motivate the

controlling minds of the corporation to establish structures and processes to reduce their personal

liability, ideally by reducing employee exposure to hazards and risks to health and safety.

So What Happened After Bill 208?

Twenty-six years have passed since the imposition of officer and director liability for non-

compliance with the Ontario Occupational Health and Safety Act. Have there been any salient

developments following the Bill 208 amendment, and has it had any beneficial effects from the

perspective of worker protection and prevention of occupational injuries and illnesses? Perhaps

the starting point for answering this question is to point out what has not happened. Firstly,

while other Canadian jurisdictions emulated the original 1978 Ontario OHS legislation, only one

introduced comparable officer and director compliance assurance duties in their respective OHS

legislation following Bill 2088. Secondly, there have not been any prosecutions of individuals in

their capacities as members of a corporate board directors for contravention of Section 32 of the

8 In 2000, the Government of Canada amended the Canada Labour Code Part II, which is the occupational health

and safety statute applicable to most Public Service of Canada workplaces, and federal works and undertakings as

defined by the statute. The amendment introduced a new section, being subsection 149(2), which makes it an

offence for certain persons who are members of the Public Service of Canada, and are an “officer, director, agent or

a mandatory of (a federal Crown) corporation; or a “senior official in a department of portion of the public service”,

when, if acting as agents of their employer, those persons “directed, authorized, assented to, acquiesced in or

participated in the commission of the offence.”

6

Ontario Occupational Health and Safety Act. There have also been no prosecutions of Public

Service of Canada or federal Crown corporation senior officials or directors for contravention of

Subsection 149(2) of the Canada Labour Code Part II. Thirdly, there have been no published

studies or governmental program evaluations that have studied any aspects of the actual or

potential impacts of Section 32 on employer organizations operating in Ontario, such as possible

effects on officer or director awareness of OHS legislation or hazards relevant to their

companies, effects on company OHS management practices at the workplace or enterprise level,

or board governance of OHS.

So what has happened as a result of the introduction of officer and director OHS liability in Bill

208? Anecdotally, legal advisors to large Ontario corporations are said to have responded at the

time of the legislative amendment by advising their clients to implement structures and processes

to permit corporate boards of directors to monitor OHS compliance and performance of the

corporation, and to take action where necessary to address compliance and performance

shortfalls9. With respect to the structural aspect, reportedly a common piece of advice was to

establish a board committee10 mandated to perform governance11 functions in relation to the

corporation’s OHS obligations and programs12. The idea of establishing a mandate-specific

9 Personal communication with Currie, M.B. E-mail to author, September 23, 2013. Ms. Currie was a lawyer

practicing in Canada with the Ontario Ministry of Labour from 1987 to 1988, then at McCarthy Tetrault LLP from

1989 to 2002, and then at Bennett Jones LLP from 2002 to 2013. She was recognized by LExpert as one of

Canada’s leading OHS lawyers. She confirmed in an e-mail to the principal researcher that the 1990 amendments

did in her experience result in corporate legal advisors regularly being asked by corporate boards for due diligence

advice, and in those legal advisors providing such advice to clients as a standard practice.

10 Ibid.

11 Herein, the word “governance” means “…the system by which organisations are directed and controlled by their

boards of directors. It is distinct from ‘management’ – which can be thought of as the regular day-today decisions

and actions required to run the business. ‘Governance’ refers to the higher level processes by which managers are

held to account and through which the broadest strategic decisions are taken.” (Acona Ltd., 2006).

12 In English common law jurisdictions around the world incorporated for-profit companies are owned by

shareholders (or more precisely, the shareholders have a claim on profits and equity), who in turn appoint one or

more individuals to a board of directors, which governs the company, typically by retaining and approving the work

of executive managers. The governance functions of boards of directors are dictated by a variety of regulatory

7

board committee for OHS governance was very much “in tune” at the time with prevailing

thinking about strategies for boards to manage corporate compliance obligations and mitigate

directors’ personal liabilities. A seminal 1987 article on board committees (Harrison, 1987)

observed that “protecting directors from excessive exposure to liability” was one of three key

reasons for boards establishing committees (the others being “maintaining corporate legitimacy”,

and “contributing to the formulation of corporate strategy”), since “the use of a board committee

tends to limit the liability of directors who are not members of the committee for actions taken

by the committee, and for actions taken by the board of the basis of information provided by the

committee…”.13

More generally, the establishment of a mandate-specific board committee has been observed by

many researchers to be a common structural approach to handling complex governance needs for

large organizations (although not small ones).14 The emergence of such board committees

instruments, including legal statutes of the jurisdiction(s) where the company is incorporated and / or operates, the

by-laws of the corporation, resolutions passed by the board of directors, and, in the case of corporations with capital

stock traded on securities exchanges (“public companies”), rules established by the regulatory agency that

administers the securities exchange. Historically, the primary functions of boards were to hire, set terms of

compensation for, and when necessary dismiss the company’s chief executive officer; appoint auditors; provide for

board continuity; and pass resolutions authorizing the corporation to assume debts or issue equity. With the

emergence of very large corporations in the twentieth century, these core board functions became increasingly

complex and time-consuming, leading boards to form committees of their members to focus on one or more specific

functions, giving rise “audit / finance committees”, “nomination / governance committees”, and “compensation

committees”. The formation of board committees concerned with “non-core” health, social, and environmental

issues represents a significant expansion in the traditional purview of a board.

13 Harrison reported that the American Bar Association also emphasized the liability mitigating advantages for the

board of establishing mandate-specific monitoring committees.

14 Klein (1998), Adams and Ferreira (2007) observed that large organizations commonly establish specialized board

committees to perform advisory and monitoring functions, even in contexts where not required by law to do so.

Reeb and Upadhyay (2010) found that the use of committees was more common in organizations having larger

boards and higher proportions of outside directors, after controlling for business operational complexity and

ownership structure. It is theorized that in large organizations, board committees are used for a variety of different

purposes, such as: (1) localizing and isolating oversight and control functions (mainly utilizing external directors) in

8

among large Ontario publicly-listed corporations in the years following Bill 208 was also

anecdotally observed by the primary researcher in his capacity as an OHS management

consultant.

Concurrent Forces Driving the Formation of Board Committees Concerned with OHS

Governance

While Bill 208 may have stimulated the establishment of corporate board health and safety

governance committees (hereafter simply abbreviated as “BHSCs” 15) amongst large Ontario

order to address risks of agency failures that can arise from overly familiar relationships and alignment of board

members with the chief executive officer (Brown, 2015); (2) increasing the efficiency with which complex issues

are analysed and in respect of which decisions and recommendations are made; (3) creating desired impressions on

external stakeholders through the mere existence of a committee mandated to deal with specific sensitive issues

(Harrison, 1987); (4) insulating the bulk of the board members from liability relating to the handling of specific

matters (Harrison, 1987); and (5) overcoming inefficiencies that arise from lack-of-expertise problems associated

with boards dominated by outsider / independent members (Reeb and Upadhyay,2010). It has also been proposed

that mandate-specific committees provide a forum that allows directors to develop expertise and focus on specific

matters of importance to the organization, and that the committee format allows the board to evolve its governance

structure in response to trends and challenges faced by the organization (Harrison, 1987; Brown, 2015)

15 Another requirement of OHS laws in Ontario, as well as most other Canadian jurisdictions, is that organizations

having more than 20 employees establish “workplace joint health and safety committees” (“WJCs”). This legislated

requirement pre-dates the phenomenon of voluntary formation of BHSCs by about a decade. It is important not to

confuse WJCs with BHSCs. WJCs have specific legislated functions relating mainly to day-to-day, implementation

of health and safety programs in the local workplace, and resolution of minor disputes between workers and

managers concerning OHS issues. Larger organizations typically have one or more WJC per workplace, and these

WJCs are comprised of a mix of employees, some of who have, and some of whom do not have (typically the

majority of the members) managerial functions and responsibilities. WJCs generally have only an advisory or

recommendatory role. In contrast, BHSCs are sub-units of a corporation’s board of directors. As such, the members

of the BHSC are, in theory, among the most powerful individuals governing the corporation, and are expected to

concern themselves with the most important issues affecting the welfare of the corporation and its shareholders.

There will invariably be only one BHSC for the entire corporation.

9

corporations in the 1990s, it was not the only factor. The decade witnessed a confluence forces

shaping corporate governance structures and processes that could reasonably be expected to have

increased the prevalence of BHSCs amongst corporations in Canada and abroad.

It has been suggested that the increasing global profile of corporate social responsibility and

environmental concerns during the 1990s also inspired the formation of board committees

concerned with a variety of social issues (Carson, 2002), and that by 2002, between 1/4th and

1/3rd of stock exchange listed companies in North America and Europe had established

committees concerned with environmental, health and safety, sustainability, and / or social

responsibility issues (Pilko, 2004). Roy (2009) reviewed a snapshot of 288 large American

corporations from Fortune’s magazine’s “Most Admired Companies List” published March

2007, and found that 63 (22%) had board committees focusing specifically on matters falling

within the broad domain that she considered to be “corporate social responsibility”, and that also

published committee charters permitting examination of the types of issues addressed by the

committees. Sixty-five percent of those committees included corporate occupational health,

safety and environmental compliance in their ambit.

In the United Kingdom, the 1992 Cadbury Report on corporate governance recommended the

adoption of a variety of processes to promote transparency, effectiveness and accountability in

board governance of public corporations (Committee on the Financial Aspects of Corporate

Governance, 1992). The Report was a response to several highly publicized large-scale

corporate bankruptcies in the UK that caused loss of investor confidence in corporate governance

processes and financial reporting16, and led to a series of successor reports and regulatory codes

over the following six years that prescribed governance reforms for companies with shares

traded on the London Stock Exchange17.

The climate of corporate governance in the UK appeared to have had a spillover effect on OHS.

In the late 1990s the UK workplace health and safety regulatory agency – at the time called the

Health and Safety Commission (and later the Health and Safety Executive) – embarked on a

16 University of Cambridge Judge Business School. “The Cadbury Report – Origins of the Report”.

17 University of Cambridge Judge Business School. “Further Corporate Governance Reports – 1995 to Present Day”.

10

series of actions to encourage boards of directors to also implement processes (but not structures,

such as mandate-specific committees) to ensure proper management of OHS within their

organizations. The first such action was publication in 1999 of two guidance documents: (1)

Directors’ responsibilities for health and safety (Health and Safety Commission, 1999), which

listed 5 “action points” for chief executive officers and board members; and (2) Health and

safety in annual reports: Guidance from the Health and Safety Commission (Health and Safety

Commission, 1999), which recommended inclusion of various kinds of workplace health and

safety performance and management controls information in corporate annual reports. In June

2000, the UK Government released a policy paper entitled Revitalising Health and Safety –

Strategy Statement (Department of the Environment, Transport and the Regions, 2000), which

emphasized the need for corporate boards of directors to play an active role in driving

improvements in health and safety performance within organizations (Acona Ltd., 2006). As

part of this strategy, the Health and Safety Commission carried out surveys of over 250 large

employers in the United Kingdom, in 2001/02 and 2003, to assess the degree to which

organizations had implemented OHS governance processes (Health and Safety Executive, and

Greenstreet Berman Limited, 2003). The information gathered through these surveys led the

Health and Safety Executive in 2006 (formerly the Commission) to produce a two documents:

(1) Defining best practice in corporate occupational health and safety governance (Acona Ltd.

2006); and (2) Leading health and safety at work - Actions for directors, board members,

business owners and organisations of all sizes (Health and Safety Executive, 2006). These OHS

governance “best practices” largely align with recommended corporate board general governance

practices described in a document entitled The Combined Code on Corporate Governance,

which was originally published in 1998 by the United Kingdom Financial Reporting Council (as

one of several such documents produced as “builds” on the Cadbury Report), and has since

undergone a series of updates18. The web site of the Financial Reporting Council indicates that

companies with shares listed on the London Stock Exchange are required to comply with the

requirements of this “Code”.19

18 University of Cambridge Judge Business School. “Further Corporate Governance Reports – 1995 to Present Day”.

19 Financial Reporting Council “Corporate Governance”.

11

To summarize the discussion to this point, the introduction of new officer and director OHS

liability in the Ontario Occupational Health and Safety Act in 1990 can be viewed as a seminal

event the evolution of corporate OHS governance among the population of corporations (and

primarily large corporations) operating in Ontario. It was not, however, the only factor that may

have caused such organizations to consider establishing more formalized structures and

processes for corporate governance of OHS during the 1990s. There is anecdotal evidence for

the formation of BHSCs as an emergent structural governance feature during the period, and

reasons to believe that the aforementioned contextual developments may have influenced this

trend.

2 Corporate Governance Context

It is conceivable that the formation of BHSCs by large corporations in Ontario may have led to

the adoption of OHS corporate governance practices that could materially affect how those

organizations manage workplace health and safety, with resultant consequences for worker

protection, and health outcomes – i.e. rates and severities of employee occupational injuries and

illnesses. Since many large companies were (and continue to be) headquartered in Ontario, and /

or had shares listed on the Toronto Stock Exchange, it is reasonable to suspect that the 1990

change in Ontario law may have affected how those corporations managed OHS in Canada and

in their operations abroad. Hence, OHS governance practices emerging as a result of the

regulatory environment in Ontario could have a variety of far reaching effects beyond the

jurisdiction.

While it is known that “corporate social responsibility-type” committees have become increasing

prevalent in the past two decades amongst large corporations in several jurisdictions (Carson

2002, Pilko 2004, Roy 2009), that they commonly include OHS within their ambit (Roy 2009),

and that anecdotally BHSCs are known to have emerged as features of the governance structures

for some Canadian companies, little else is known about BHSCs. The phenomenon has not been

studied in relation to Canadian companies, nor elsewhere. In the Canadian context, there is no

published information on the prevalence of BHSCs generally nor in specific industry sectors, and

nothing is known of their mandates, activities, or impacts on their organizations or employee

health and safety.

12

Given the possibility that placement of an OHS governance structure at the apex of large

Canadian corporations could conceivably have significant positive impacts on the health and

safety of a large percentage of the adult population in Canada and elsewhere, with consequent

overall health and economic benefits for society domestically and in foreign host countries, this

is an important subject for study from a public health and health policy perspective. As such, the

lack of attention to the subject might be viewed as somewhat surprising, though less so if one is

familiar with the phenomenon, the institutional context for the disciplinary perspectives through

which the phenomenon might be viewed20, and the methodological and conceptual challenges21.

20 As a discipline in Canadian academic settings, occupational health and safety is approached from a technical and

science-based perspective, and programs are focused primarily on practitioner development. Research and

knowledge production in the field is also focused principally on technical and medical aspects, and there is very

little attention to organizational or management aspects. Governance and organizational behaviour is more

commonly studied in academic programs focused on business, sociology and psychology, and researchers from

those disciplinary perspectives are disadvantaged by lack of understanding of occupational health and safety

technical subject matter, industry issues, and the regulatory context. Government occupational health and safety

regulatory agencies, and funded workplace health-oriented research institutes, should have an interest in BHSCs

from the perspective of public policy and regulatory impact evaluation, but have not pursued the topic.

21 Research on corporate governance faces a variety of general methodological limitations. Organizations, their

executives, their boards, and their operating environments are constantly changing. As a result, longitudinal studies

are often faced with the reality that the subjects under study are in fact different subjects from year to year (e.g.

executive teams change, board member make-up changes, etc.). Moreover, the unit of observation is often

ambiguous – are studies examining individual behaviours, collective actions of organizational groups, or

organizational outputs? Point-in-time cross sectional studies provide little more than snapshots. It is virtually

impossible to identify and control for all variables that might confound observed relationships between variables. In

terms of conceptual frameworks, the field of corporate governance utilizes a variety of well-trodden theories (e.g.

agency, resource-dependency, social embedding, etc.), in a variety of ways, in an effort to test and explore various

aspects of board phenomena, including composition, functions, performance, and relationships of specific board

attributes and individual member characteristics to specific corporate outcomes. There is a bias toward board

structural aspects in conceptual frameworks (e.g. ratios of internal to external directors, numbers of men vs.

women), and their associations with financial outcomes, corporate benevolent, fraudulent behaviour, etc., but little

in the way of explanation as to why these attributes might logically lead to one outcome or another. There is very

little research that “looks under the hood” to examine what actually transpires in the interactions amongst the

members of boards and committees, and how these dynamics affect board outputs, and in turn, their effects on

13

But why does the topic need to be researched anyway? As noted in the prior section of this

paper, an ideal / best practices approach would see the organization’s BHSC being supplied

perfect and timely information from the company with respect to management of health and

safety issues, risks, compliance obligations and outcomes (such as rates of accidents and injuries,

and government enforcement actions), and in turn, the BHSC would advocate to the board to

ensure adequate allocation of company resources, prod the chief executive officer (directly or via

the board) to remedy shortfalls, provide the benefit of their wisdom to aid in problem solving,

and use a combination of carrots and sticks to drive the operation of this virtuous cycle. If things

work this way, then we can conclude that BHSCs must have tremendous positive impacts on

how companies manage health and safety risks, and that in those companies, workers experience

comparatively lower risks and rates of workplace injury and illness in similar companies that do

not utilize BHSCs are part of their corporate governance framework. If that is the case, then the

answer to the question “Do BHSCs Make Any Difference” is a resounding “yes!”.

The problem with this rosy perspective is that there is abundant empirical evidence and theory in

the corporate governance literature to cause one to suspect that the “ideal / best practices”

approach is rarely observed in practice in relation to the boards of directors generally. Also,

there are many examples where profoundly dysfunctional corporate governance frameworks of

major enterprises resulted in spectacular corporate disasters, with examples such as Enron,

WorldCom, Tyco, Polly Peck, Bank of Credit and Commerce International and the Robert

Maxwell media companies being commonly cited examples. It is useful to review some of this

literature and consider its implications for the potential instrumentality22 of BHSCs in their

organizations, and the research questions that might be posited.

corporate structures, processes and outcomes. The dominant theories as to the purpose for boards, reasons for

member selection, and explanations of board behaviour are ostensibly agency theory, stewardship theory, and

resource dependency theory, and myriad studies that demonstrate their inadequacy for explanatory and predictive

purposes. Some of these issues are discussed in further detail in the commentary that follows.

22 This word is used in many places and contexts in this paper. In each instance it has the common usage meaning,

being “having the property of being instrumental”, where “instrumental” means “very important in helping or

causing something to happen or be done”. The “somethings” of interest in this study are changes in organizational

14

A Simplified Overview of the Field of Corporate Governance Research

To develop an understanding of the scholarship23 providing context for the study of BHSCs, it is

helpful to provide a “big picture” conceptual overview, which is presented in Figure 1 (next

page). The basic idea in Figure 1 is that board governance research can be conceptualized as

consisting of seven components, which are related to one another in the manner illustrated by the

directional arrows. Member selection determines board composition. The characteristics of the

board members, and the mix of those characteristics as a result of board composition, affects the

mechanics and dynamics of board operation. Mechanics and dynamics are also affected by the

type, amount and quality of operational intelligence about the business that is supplied to the

board members by company management, the individual performance of the directors in their

utilization of information and interactions with their peers and company executives, and the

mandate of the board, which sets its broad parameters of operation. The board mechanics and

dynamics in turn determine outputs of board activity – that is, advice, oversight,

recommendations, assistance and direction given to the company chief executive and the senior

leadership team.

The seven components are dealt with in three bodies of research. The first body of research is

interested in the attributes of members, how and why they are selected to serve on boards, and

their tenures, from “demand side”24 and “supply side”25 perspectives, with consideration of the

contextual factors26 that shape both demand and supply, the influence of social networks and

health and safety management practices or risk control practices that have the effect of reducing employee exposure

to workplace hazards and risks, with consequent reductions in rates of occupational injuries and illnesses.

23 It should be noted that the scholarship described hereafter pertains to corporate governance frameworks common

to the English law jurisdictions, and applicable particularly to large corporations with broad shareholdings. Much of

what follows is not necessarily translatable to small organizations in the same jurisdictions, nor to public agencies,

nor not-for-profits. None of what follows should be considered necessarily germane to any discussion of corporate

governance outside of the English law jurisdictions.

24 Meaning the reasons why companies need, want and seek out board members with certain functional attributes.

15

Figure 1 - Conceptualization of the Focus of Board Governance Research and Theory

chief executive officer agendas on member appointment, and the downstream effects of member

attributes on the other six components. This work is approached from two broad theoretical

perspectives: rational economic27, which is concerned principally with demand side phenomena

25 Meaning the role that the individual prospective or actual director plays in securing his appointment and his

subsequent board participation. Withers et al (2012) are acknowledged for use of the “supply-side” and “demand-

side” conceptualization.

26 Factors external to the firm, such as the regulatory environment, jurisdiction, stage of industry and company

lifecycle, etc.

27 The basic idea is that companies and boards decide who they select as directors, and how in turn how they

operation, in a logical and rational manner, with the goal of acquiring directors having functional attributes that are

16

and contextual variables; and social embedding28, which is concerned principally, but not

exclusively, with supply side phenomena. Both the rational economic and social embedding

perspectives can be viewed as “big tents” housing a variety of constituent theories. Much of the

published work describes theoretical refinement and application, and empirical research is

generally focused on sample sets of companies, seeking to reveal patterns and trends at the

macro level (groups of firms).

A second body of research is concerned with the composition of boards – particularly the

“internal” vs. “external” (or independent, or outside) status of directors, and board demographic

diversity (gender, racial, and vocational) – and the potential implications for mechanics,

dynamics, outputs, and downstream organizational outcomes (e.g. financial results, stock market

performance, likelihood of corporate turmoil, etc.). This research draws largely on agency

theory, stewardship theory, and resource dependency theory – each of which can be thought of as

constituent theories from the rational economic perspective. Much of the published research on

board committees, of which there is markedly less than on boards, has this focus, and the

empirical research also tends to examine macro level patterns.

A third body of research, rooted in sociology and psychology, is interested in “what actually

happens” when board members meet, and the roles of personalities, group dynamics, tenure,

team size, etc. as determinants of board decision processes, effectiveness and organizational

success. This literature also explores the effects on board mechanics and dynamics of three main

factors: operational intelligence supplied by the company to the board; the board’s mandate; and

how individual board members apply their functional attributes. Much of the work in this field

involves the application of group dynamics theories and empirical knowledge gained from

most likely to maximizing the economic welfare of the company. Those attributes may include abilities for

exercising oversight and control, strategic capability, or access to needed network resources.

28 This is a perspective that views boards as social units, and posits that the selection, composition, and dynamics of

boards cannot be properly understood without considering the affinities, biases, demographics, and cultural

characteristics of the board members. This perspective highlights both pros and cons of these phenomena. It is

analogous to the idea that boards are “old boys clubs”.

17

studies of teams (in both synthetic lab experiments and real-world settings, though typically not

utilizing company boards of directors), and case studies of individual companies and boards (and

hence has a micro focus).

With this overview in mind, we can turn to a discussion of some key findings from each of the

bodies of research, and a consideration of potential implications for BHSC instrumentality.

Board Member Selection, Composition and its Implications for BHSCs

Scholarship on board member selection, and its relationship to other components in Figure 1, is

perhaps the largest, longest running, and most complex. The conceptual diagram shown as

Figure 2 will be helpful in understanding the lay-of-the-land. It identifies “demand side” and

“supply side” factors considered to influence the selection of directors, and contextual factors

that influence the respective sides. The diagram envisions these factors feeding into what is

labelled the “Director Selection Algorithm”, which of course is purely conceptual, but included

to communicate the idea that for any given organization, board, and director, the various factors

are presumed to be integrated in some manner using a logic that leads to a selection decision. In

turn, those collective decisions result in a populated board comprised of individuals with certain

functional attributes.

The demand side suggests that companies (or more specifically, company chief executives and

the current board) rationally select board members based one or more of five functional needs

embodied by the candidate, hence the demand side falls within the rationale economic

perspective of governance. Those five functional qualities are: 1. Ability to monitor and

exercise governance-level control over some critical aspect of the business’ operations, which is

a reflection of agency theory, and predicts the selection of independent directors. 2.

Knowledge, skill and experience in some aspect of the business where counsel is valued,

18

Figure 2 – Conceptualization of Scholarship on Board Selection and Composition

19

consistent with stewardship theory, and predicts the selection of external directors with relevant

expertise and insiders with close knowledge of the business’ state and operations. 3.

Connections to external contacts and resources that are necessary for the success of the business

(e.g. government relations, stakeholder relations, legal or accounting expertise, sources of

financing, suppliers, customers, etc.), consistent with resource dependency theory. 4. A strong

public positive reputation or persona, which may “rub off” on the company and create positive

opinions of the company in the eyes of important audiences, which typically is conferred by

external directors of renown. 5. Some characteristic of the candidate that meets a quota

obligation imposed on the organization (such as stock market regulatory authority or legislative

rules regarding proportions of outside independent directors, or stakeholder expectations

regarding gender or ethnic diversity) ((Gutierrez and Saez, 2003; Withers, Hillman and Canella,

2012; Bryant and Davis, 2013; Rodrigues, 2013; Brown, 2015), or a desire on the part of the

company to realize some manner of capital market effect (for example, it has been observed that

re-structuring a board to achieve a majority independent make-up is often associated with an

increase in the price-to-earnings ratio of the shares of public companies (Dahya and McConnell,

2003)). The rational economic perspective notes that the importance of the demand side

functional attributes, and the desired combination at the board table appears to be influenced by

characteristics of the firm’s operating environment, including: the stage of the firm in its

lifecycle (e.g. firms heading to initial public offerings have been observed to stack their boards

with individuals having the first four attributes), the presenting challenges faced by the firm (e.g.

restructuring and merger scenarios have been associated with the addition of directors with that

type of specific experience), the regulatory and social context of the firm’s operations (e.g. those

with multi-jurisdictional operations often have directors drawn from those jurisdictions), and the

requirements of investors (e.g. where a large percentage of the firm is owned by one or a few

major investors, those investors will commonly appoint directors to perform the functions

desired by the investors (Withers et al, 2012; Sur, Lvina and Magnan, 2013)).

The supply side research points to the instrumentality of the director him/herself in his/her

appointment to the board, and falls largely within the social embedding perspective for viewing

boards. To the extent that rational economic considerations define functional needs on the

demand side, it should be the case, in theory, that the chosen director(s) have functional assets

20

and attributes matching the demand (Withers et al, 2012). However, the rational economic

perspective begins to lose predictive value at this point, as it has also been found that the

promotional efforts of the candidate often seem to play an important role in their selection.

Significantly, the likelihood of an individual being identified as a candidate and subsequently

selected is also strongly related to overlaps in the social and corporate networks with the board

and / or its executives (indicating the network effect also works from the demand site) (Davis,

1993; Withers et al, 2012; Rodrigues, 2013). Whether a candidate is keen to be on the board in

turn relates to the perceived attractiveness of the opportunity, for which the rewards may be

strengthened networks (presumably with future prospective benefits), compensation, status /

prestige, opportunities to do interesting work and to work with interesting people (Gutierrez and

Saez, 2003; Bryant and Davis, 2013; Rodrigues, 2013).

Falling within both the rational economic and social embedding perspectives is the recognition

that chief executive officers (“CEO”) and the board members themselves exert significant

influence over who is identified as a candidate, and their subsequent selection (Brown, 2015).

While in theory, directors are selected by shareholders (and in practice where one or a few

shareholders have dominant ownership positions this is commonly the case), in practice for most

public companies shareholders typically do not propose directors, but merely vote on a slate

presented to them by the company, and it is rare for all or part of the slate to be rejected

(Rodrigues, 2013). The slate is constructed by the CEO and board (or board nominating

committee), and research indicates that the candidate pools from which they draw are typically

very small, and filled with individuals who are in many respects very similar to the board and

CEO (Withers et al, 2012; Rodrigues, 2013; Brown, 2015). Social and corporate network effects

play a large demand-side role in CEO and board decision-making, and there is a tendency for

those players to select candidates whom they know and like (Withers et al, 2012; Rodrigues,

2013; Bryant and Davis, 2013). But does this does not preclude the idea that CEOs and boards

may select rationally to acquire functional capacity from within their networks (Withers et al,

2012).

Some researchers from the social embedding camp take the position that “it is a myth” that

directors are “selected on the basis of their substantive qualifications”, and that while functional

attributes are important to a degree, the main criteria is their expected willingness to support

21

management (Withers et al, 2012; Brown, 2015). There is evidence of CEO bias for board

candidates who have a history of being compliant supporters of CEOs in their prior directorial

experience, and are likely to be supportive of the CEOs agenda (Rodrigues, 2013; Brown, 2015).

It has been suggested that CEO interest in having a protective and supportive board has

increased as a result of heighted shareholder activism in the past two decades (Brown, 2015).

CEOs often develop cozy relationships with their board members, and since CEOs are often the

targets of candidates self-promotional efforts, those individuals, once on the board, may feel

indebted to the CEO, and may need the CEO’s continuing goodwill and support for the

preservation of concomitant perquisites (Rodrigues, 2013). Even if there is not an initially

strong sense of obligation by a new board member to the CEO, there is evidence for CEOs using

ingratiation and impression management methods to manipulate board members opinions and

decisions (Westphal 1998, Petrovic, 2008). Cozy board-CEO relationships potentially

compromise the board’s ability to exercise appropriate control and discipline over the CEO (a

predictive problem and contradiction of agency theory), and can result in a board collective state

of mind in which the board views itself as part of the executive team rather than its overseer

(Petrovic, 2008; Rodrigues, 2013; Brown, 2015). Some have gone as far as to say that boards

are often little more than a “pawn” of the CEO (Brown, 2015). Yet, despite these concerns,

there is evidence that CEO involvement in director selection is positively related to long-term

success of the enterprise (Withers et al, 2012).

How might the conceptual model of board candidate selection and board composition translate

to BHSCs. In performing such an analysis, it should be recognized that a BHSC is a subset of

the board, and hence, the functional attributes of the board members set the boundaries for the

functional attributes of the BHSC. In other words, if the board lacks the requisite demand side

attributes, so will the BHSC. What might the rational economic perspective predict about the

functional attributes of BHSCs? A firm’s approach to managing hazards to health and safety

relating to its business operations is subject to regulatory requirements in most jurisdictions, and

compliance is important for mitigation of liability and financial risks to the company and board.

Moreover, in developed countries, significant incidents causing harm to many employees would

attract adverse media and government attention, doing damage to the company’s reputation.

Managing health and safety at the local workplace level is not necessarily complicated, even in

complicated industries, and responsibilities for management activities are typically allocated

22

amongst front line managers and supervisors, workers themselves, local safety committees, and

technical subject matter experts. Within organizations, health and safety has only recently

become an executive-level portfolio, we would not expect there to be an abundance of

directorial candidates having had such experience. Given these considerations, we might predict

that the ability to exercise control and oversight would be the primary functional attribute of

BHSC members, and that this would be reflected in the BHSC’s formal mandate. For

organizations that combine the BHSC function into a committee with other broader social issues

responsibilities (e.g. the environment, corporate social responsibility, public relations, etc.), it is

conceivable that the external linkage and reputational support functions might also be important,

and reflected in committee mandates (Harrison, 1987). Finally, one can imagine that where a

board has specifically selected one or more external directors to fulfill a diversity quota function

and nothing more, that director might be weak in other functional areas, and have limited

capacity to contribute to a substantial amount of the board’s economic and strategic work. If so,

to address a “social loafing”29problem, they might be appointed to the BHSC.

Does the social embedding perspective make any predictions relevant to BHSC composition? It

seems unlikely that any director would be attracted to a particular company’s board for the

opportunity to work on its BHSC. As such, this perspective simply leads to the recognition that

the board members placed on the BHSC are likely to be demographically and psychographically

similar to the CEO and the other board members. This could have implications for

organizational safety culture and the perceived importance of safety and the BHSC to the

executives and organization generally, in that an organization with a pre-established strong

safety culture, or a desire to develop one, may be inclined to select like-minded directors, and

vice-versa. In other words, if the apex of the organization places or is increasing placing a high

value on safety, the same will be the case for the BHSC, and the opposite may be true also.

What are the implications of the foregoing for the normative characteristics of BHSCs? Firstly,

the BHSC should have a membership with sufficient competency to understand how the

29 This refers to a situation where a board member basically makes little or no actual contribution to the work of the

board. In these situations it has been suggested that boards will “make work” for the loafer (Harrison, 1987).

23

company should manage health and safety, and evaluate the adequacy with which the company

is doing so, and sufficient influence at the board and over the CEO to catalyse improvements

and corrective actions where practices and performance outcomes are unacceptable. Secondly,

the BHSC should have a formal mandate to perform these functions. Thirdly, the BHSC should

be attuned to the prevailing safety culture of the organization (or lack thereof), and pursue a

strategy to reinforce and strengthen it.

How realistic is to expect these conditions will be satisfied? The corporate board governance

literature offers abundant empirical and theoretical criticism of the board role discordance and

inherent conflicts of interest (Gutierrez and Saez, 2003; Pye and Petigrew, 2005; Petrovic, 2008;

Withers, Hillman and Canella, 2012; Bryant and Davis, 2013; Rodrigues, 2013; Brown, 2015).

In order to perform a control and oversight function, it is, in principle, necessary to: (a) have an

advanced level of comprehensive of the subject area that you are controlling and overseeing; (b)

have capacity to judge what is and is not acceptable; (c) be independent, and impartial; and (d)

unconcerned about the potential consequences of being critical of, or holding accountable the

CEO and executive team.

For oversight of certain aspects of company operations, such as finance, it is commonplace for

there to be expertise at the board table. It seems less likely that among most boards there will be

members with advanced knowledge and expertise with respect to how workplace health and

safety should be managed, and what constitutes acceptable practices and outcomes. For firms

with inherently low operating risks to health and safety (e.g. those that are predominantly office

based, or light industrial), advanced subject matter knowledge is unlikely to be warranted, and

its absence at a BHSC (if extant) may be immaterial. However, such knowledge is very

important for firms having inherently high operating risks to health and safety (e.g. those in

heavy industry, resource extraction and processing), and lack of expertise at the BHSC would be

expected to seriously constrain its control and oversight capacity. For the latter types of firms,

the most likely repository of expertise would be inside directors having intimate knowledge of

operations; but agency theory would suggest that BHSCs should be comprised by a plurality or

solely of independent directors in order to properly perform the control and oversight functions.

These outsiders would not be expected to have the time or proximity to company operations to

truly develop much depth of understanding of what in fact the company is doing, and hence

24

would have to rely on management for supply of intelligence. There is evidence that in such

circumstances, directors are often only told what management wants them to know (Langevoort,

2001; Brown, 2015). This has been observed to the case with boards (Hendry and Kiel, 2004;

Westphal and Bednar, 2005), and at BHSCs it is plausible that high degrees of insider

involvement may be required to supply the BHSC with sufficient competency to monitor and

comprehend what’s going on, and that this reliance on insiders could impede the oversight and

control functions. And conversely, efforts to preserve independence and impartiality of

oversight could result in counterproductive intelligence deficiencies.

The assumption that independent, impartial BHSC members will hold CEOs accountable is also

problematic. As noted earlier, evidence indicates that board members are in many respects

beholden to, and view themselves as closely affiliated with CEOs and their board peers. This

raises the concern they may be reluctant, as a general posture, to criticize or discipline CEOs and

their executive teams for unsatisfactory performance or outcomes, and there is evidence

supporting this concern in respect of boards and other types of board committees (Harrison,

1987; Petrovic, 2008; Withers et al, 2012; Rodrigues, 2013). For organizations where the costs

of poor management of health and safety are immaterial in relation to other business costs, or

where health and safety issues are of comparatively lower importance than other business issues,

or where CEO or company performance is financially strong despite poor management of health

and safety, it seems unlikely that BHSCs would be inclined to dispense penalties they would

perceive to be disproportionate to the offence and broader performance outcomes at the firm. If,

for any of the forgoing reasons, CEOs cannot or will not be held to account, then realistically the

BHSC performs only an advisory function and not a control function.

Board Mechanics and Dynamics, and Implications for BHSCs

Research on board member selection and committee composition can be characterized as being

concerned with the “structure” of board governance, and its downstream influences on processes

and outcomes. Research on “mechanics” and “dynamics” is concerned with developing

understanding of those processes, and how they affect outcomes. “Mechanics” refers to the work

the board actually carries out (e.g. meeting, discussion, writing, reporting, etc.). “Dynamics”

refers to the manner by which board members communicate and interact, with one another and

25

the CEO, develop norms, lead, and make decisions (Huse, 2005; Murphy and McIntyre, 2007).

In seeking to understand process, researchers have focused on subjects such as directors’

competencies, motivation, level of engagement, propensity to challenge the CEO and

management, and their interaction and information transmission channels and practices

(Maharaj, 2009). It is suggested that while corporate governance law and theory largely focuses

on structural aspects, board processes are more instrumental to the operation and success of the

firm (Hansell, 2003).

With respect to boards, there are logical and evidence-based arguments that speak to

dysfunctional mechanics and dynamics, which, to some degree, may reflect flaws in board

construction. Research has identified several apparent structural consequences of the board

composition (independent vs. internal), and candidate selection network effects, that can exert

downstream impacts on board mechanics and dynamics. This may have implications also for

the performance and effectiveness of BHSCs in large companies.

The first pertains to information asymmetry for boards with a plurality of independent directors.

Rodrigues (2013) writes:

The reality of today’s public corporate board… is one of limited information,

constrained time, and uncertain ability… reforms… have left us with… boards…

composed mostly of outsiders. There is no guarantee that directors populating these

boards have any knowledge of the corporation in general or the particulars of the

business they serve. With one exception (the financial expert) they need not have

advanced degree or a minimum level of experience in business or management… it

means that most members of the board rely on the CEO for knowledge of the corporation

and its business.

She argues that information asymmetry means that the only plausible role, that a board

comprised of a plurality of independent directors can properly perform, is to police situations in

which the self-interest of the corporation and that if its managers are in conflict, meaning, for

practical purposes, that the board simply hires, sets compensation for, and fires the CEO, and

oversees the audit function (Rodrigues, 2013). This means evaluation of financial reports and

outcomes, pure and simple, for which an understanding of “what’s under the hood” to make the

26

car move is not essential.

For BHSCs, the implication of this perspective would be that their members are unlikely to have

sufficient competency, or an adequate supply of information, to understand what is really going

on in the company with respect to management of risks to health and safety. Instead, they could

be entirely reliant on the “facts” as presented by management, and, in the absence of an external

health and safety audit function, unable to acquire an accurate picture of performance, nor

exercise proportionate control, nor ensure accountability.

Another structural consequence of candidate selection is that boards tend to be relatively

homogeneous with respect to age, social status, political leanings, religious affiliation,

education, and experience (Brown, 2015). From a process perspective, low diversity has the

advantage of promoting team cohesion, cooperation and collaboration, and reducing risk of fault

line formation, thereby facilitating the work of boards (Petrovic, 2008; Kaczmarek, Kimino and

Pye, 2012). On the other hand, it can also undermine monitoring (Brown, 2015), foster a

climate where airing dissenting viewpoints is against group norms, and lead boards into modes

of operation where information and decision-making becomes centralized in the hands of a small

sub-group of the board (Kaczmarek et al, 2012). A frequently cited phenomenon is the setting in

of “group think”, where the members’ shared reluctance to challenge the prevailing consensus

viewpoint results in failure to identify opportunities, or recognize and resolve serious problems

These dynamics have been observed and proposed as instrumental to some of the major

corporate financial disasters of the past two decades (Kaczmarek et al, 2012; Brown, 2015).

For BHSCs, diverse membership, combined with the technical complexity of the subject area

and information asymmetry, could significantly impede committee process, and / or lead to

fractious relations with management, rending the BHSC little more than window dressing.

Member homogeneity, combined with lack of expertise, could alternatively lead to group think,

non-recognition of deficiencies, and tolerance for sub-par management of health and safety risks.

However, there is evidence that sound group work mechanics can promote effective oversight

and strategic advisory functions. Noted features include: systematic planning of the focus of

board meetings over the course of the annual business cycle; sufficient numbers of board

meetings to execute the board’s mandate; adequate supply of intelligence from management;

27

member preparedness; ability of the members to stay focused during and after meetings on what

collectively are perceived to be the most important challenges; capacity of the chair to solicit

balanced and even contributions from all board members ; appropriate allocation of time

between control and strategic advisory functions; and board performance self-evaluation

(McIntyre, Murphy and Mitchell, 2007; Murphy and McIntyre, 2007; Petrovic, 2008; Maharaj,

2008; Maharaj, 2009; LeBlanc, 2013). These empirical findings relating to board mechanics are

largely reflected by a variety of normative practice advisories published by different authors and

agencies30. Finally, it might be imagined that if board process dysfunctionality was widespread,

we might expect to see a persistent pandemic of high profile business failures, which has not

been the case.

For BHSCs, the evidence respecting mechanics implies a need for a clearly defined mandate, a

charter of operations / terms of reference, a reliable supply of quality-assured intelligence from

the company, members with capacity to comprehend the supplied intelligence (and / or access to

expert support), periodic performance self-evaluation, and effective communication and group

work skills.

3 Formulating a Conceptual Framework to Study BHSCs

The foregoing information can be used to synthesize a conceptual framework for the study of

BHSCs. The corporate governance literature points to a variety of structural and process

characteristics that may determine the operational effectiveness of a BHSC in those companies

having same, BHSC influence on the board and company executives, and in turn, impacts on

workplace conditions, risks, rates of job-related injuries and illnesses, and levels of compliance

with OHS standards (that is, outputs). Viewed in this manner, we can utilize the Donabedian

model in its simplest form as inspiration for the conceptual framework.

30 Normative governance practices have been described by the UK Health and Safety Executive and Greenstreet

Berman Limited (2003), Acona Ltd. (2006), UK Health and Safety Executive (2006), and Minguillon and Yacuzzi

(2009).

28

As a starting point, a BHSC should have a clearly defined “mandate“, that is, a specific scope of

functions, responsibilities and authorities. The mandate may be officially established by the

board, formalized and published, or the BHSC may have a de facto mandate – that is, it would be

expected nonetheless to exercise a certain scope of responsibility and authority. In effect, the

mandate reflects the combination of possible “demand side” functional roles desired by the

board, those broadly being control and oversight, strategic advice, network access, reputational

support, and quota fulfillment (in line with the rational economic perspective of board

governance). It is a structural feature of our framework, and sets parameters for downstream

processes. The individual board members appointed to the BHSC should collectively supply

functional attributes matched to the mandate, with BHSC composition effectively being another

structural feature. As such, the mandate may affect BHSC composition, and in turn, member

attributes and outlooks may affect the evolution or interpretation of the mandate.

The mandate also broadly will set parameters or boundaries for the actual governance practices

of the BHSC, which are process features of the framework. In the context of corporate health

and safety, these have been characterized31 as ensuring inbound flow of relevant and reliable

information on company health and safety issues and performance; involvement in OHS

objective-setting and strategy formulation; outbound communications to the board and

executives; ensuring executive accountability for company performance; external disclosure and

reporting; and performance self-evaluation practices. Board committees also often have

“charters” or “terms of reference”, describing rules or procedures regulating the internal

conduct of business by the committee. Terms of reference may prescribe how certain

governance practices are carried out, how decisions are reached by the committee, and the

resources available to support committee operations. As such, terms of reference may bear a

relationship to how effectively the committee pursues its mandate. These are structural features

that drive mechanical processes, with the latter being consistent with research evidence with

31 Normative governance practices have been described by the UK Health and Safety Executive and Greenstreet

Berman Limited (2003), Acona Ltd. (2006), UK Health and Safety Executive (2006), and Minguillon and Yacuzzi

(2009).

29

respect to board effectiveness generally, and consistent with normative best practice advice

contained in reports produced from the corporate legal governance perspective.32

While the literature indicates that a formal mandate, a clear charter, and operation in accordance

with good governance practices predispose a committee or board for effectiveness (i.e. or in the

Donabedian schema, desired “outputs” and “outcomes”), research and theory on interpersonal

dynamics indicates that the mechanics alone are not sufficient. BHSC members must be able to

work together effectively as a group, and to have their opinions and recommendations hold sway

with their board peers and the CEO. As such, the individual personality characteristics and skills

of BHSC members (“inputs” in the Donabedian schema) will predictably affect the receptivity of

the board and executive team to the recommendations of the BHSC33.

Ultimately the outputs of the BHSC are cognitive in nature. It is the downstream actions and

decisions of executives and managers of the company that determine the degree of inherent

risk associated with the company`s operations34, and the risk management practices that are

implemented for protection of personnel and assets. In turn, these factors determine the degree

of exposure of the workforce to risks to their health and safety, which is expected to affect

rates and types of occupational injuries and illnesses experienced by the workforce (which are

the ultimate “outcomes”) of the organization’s health and safety program.

The possible relationships among the constructs described above are illustrated in a conceptual

framework show as Figure 3 (page 50).

The conceptual framework makes a series of propositions:

32 Ibid.

33 As noted in Section 2.0, a variety of personal attributes of board and board committee members, such as age,

tenure, wealth, titles, educational achievements, roles inside and outside of the company, etc., may be correlated

with their influence over board dynamics, board decisions, and actions of company executives.

34 Ultimately, the HS risks are a function of the core business and how it is carried out.

30

1. BHSCs have no direct influence on company health and safety performance outcomes, and

can only do so by influencing the actions and decisions of company senior managers.

BHSCs can influence the actions and decisions of company senior managers in two ways: (1)

exploitation of formal governance mechanisms that provide intelligence on company HS

issues, and enable BHSCs to issue directives for action, and (2) informal suasion. As such, if

BHSC operations are instrumental in health and safety program evolution and

performance improvements, there should be evidence of such BHSC influence.

31

Figure 3 - Conceptual Framework: Board HS Committee Influence on Workplace

Health and Safety Performance Outcomes

32

2. Whether a BHSC attempts to use either formal or informal means in an effort to influence

senior managers will depend to a large degree on the perceptions of the individual BHSC

members with respect to the need to act. This in turn will be affected by their understanding

of the presenting situation at the company and their perception of its significance to the

company and its stakeholders. This depends on the information they are getting from the

company, trends in the industry, the consequences of acting or not acting, etc. Finally, the

will and motivation of the individuals on the BHSC to exploit those formal or informal

mechanisms will be a factor in determining whether efforts are made to exert influence. That

may be affected by the basic orientation, predisposition, and attitudes of the senior managers

toward the issues, as well as the senior managers’ perceptions of the consequences likely to

flow as a result of compliance or non-compliance.

3. The degree to which the BHSC influences senior management actions and decisions will be

affected by the general level of support at the board of directors for the wishes of the BHSC,

degree to which it is a board norm to hold the CEO accountable, the influence of the BHSC

members in relation to the board, the influence of the board over the CEO, and the receptivity

of senior management to BHSC wishes. In turn, those conditions will be affected by the

broader rational economic and social embedding contexts that led to the formation of the

particular board, and the history of its relationship with the CEO.

4. Senior managers in turn cannot directly influence company health and safety performance

outcomes, but can only do so by making decisions and taking actions that ultimately affect

risk exposures experienced by their work force. Generally, risk exposures can be altered by

either (1) implementing measures to contain and control exposures to risks arising from

operations (which generally involves reducing exposures to hazards that cause harm), and /

or (2) making fundamental changes to operations that lower the risks arising from operations

(by reducing or eliminating certain risks). As such, whether the BHSC, board or executives

conceive of specific initiatives, or delegate the formulation and implementation of initiatives,

those initiatives need to reflect a logic model in which specific actions materially change

work force risk exposure profiles.

33

Chapter 2 The Research Questions and State of Knowledge

1 Study Purpose and Research Questions

This study was undertaken to develop increased understanding of BHSCs35 in the Canadian

community of public companies, and to seek evidence with respect to the impact of BHSC

formation and operation on company health and safety performance outcomes.

As noted in Chapter 1 of this paper, there is essentially no published research on BHSCs in the

Canadian context (nor any other, in fact), and as such, it was considered appropriate to undertake

a descriptive research project to establish an information baseline with respect to this subject,

and to test the utility of the Donabedian-inspired conceptual framework for the examination of

BHSC structures, processes and outcomes. With this in mind, a series of 12 specific research

questions were formulated:

i. What factors have driven the emergence of BHSCs amongst large public corporations in

Canada?

ii. How prevalent are BHSCs amongst Canada’s largest corporations?

iii. Have BHSCs become more commonplace over time?

iv. Are BHSCs more common in some types of businesses (or business sectors) than

others? If so, why?

35 A review of corporate annual reports and regulatory filings reveals that board committees having names such as

“social responsibility committee”, or “responsible care committee”, or “environmental committee” very often

include employee or workplace health and safety within their mandates. This was also noted in an earlier study on

corporate social responsibility committees of corporate boards of directors (Roy, 2009). Board committees that have

corporate health and safety governance in their ambit are the focus of this study, regardless of the name they go by,

or additional subjects in their ambit.

34

v. What are the BHSC’s mandates?

vi. Is there evidence that BHSCs function in accordance with good governance practices?

vii. What are the typical compositions of BHSCs, and what are the characteristics of their

members?

viii. Why do boards of directors of companies establish BHSCs?

ix. Do BHSCs operate in accordance with their stated mandates?

x. How much influence do BHSCs exert on the boards to which they report, and the

executives of their companies?

xi. Is there evidence that the formation and operation of BHSCs leads to (or at least is

correlated with) improvements in company OHS performance?

xii. In cases where BHSCs do appear to have been instrumental in the achievement of

improved company OHS performance, by what mechanisms did this happen?

2 The State of Knowledge on the Research Questions

Methods

To acquire an understanding of the state of knowledge with respect to the specific research

questions, a search of the literature was conducted in October 2010 following steps described by

Arksey and O’Malley (2005). A supplementary search and review was conducted in August

2013, and again in September 2015. The search was carried out with a view to obtaining

resources relevant to the specific research questions, as well as the broader scholarship on

corporate governance that provides context to the subject of this thesis, and is discussed in

Chapters 1 and 2. Details concerning the search methods are provided in the Appendix to this

Chapter.

Overview of the Literature Bearing on the Research Questions

Research relating to corporate governance practices, and the characteristics and dynamics of

corporate boards and their committees, has focused on public corporations (and mainly those

35

with large market capitalization and large work forces), presumably because of the availability

and ease of accessing such information for the latter, and the dearth of readily accessible

information on privately held corporations.

There is an extensive body of literature on board governance theory (e.g. agency, resource-

dependency, stewardship, social embedding, etc.) dating back to the 1930s, which considers the

reasons for boards being established, the relationships amongst owners and their agents,

selection of directors, the adoption of governance styles and practices, and impacts on corporate

performance outcomes. This body of literature provides little in the way of empirical

information bearing on the specific research questions of interest to this study, but provides

theoretical context and has potential predictive and explanatory value.

While there is an extensive literature on corporate board governance, with the topic approached

from legal, economic, organizational behavior, sociological, and psychological perspectives,

there is comparatively little information pertaining to board committees. The closest analogue to

the subject of this thesis is research on board social responsibility and environmental

committees. Papers in this area can be grouped into four categories: (1) authors’ conjectural

writings theorizing possible explanations for committee formation, typically without empirical

evidence supporting those theories; (2) point-in-time cross-sectional research correlating board

governance structures to company characteristics, such as size of the enterprise, or industry

sector; (3) summary reviews of corporate disclosure documents of public companies in certain

jurisdictions to gain insight into self-described committee functions; and (4) opinion surveys

directed to companies and board members. This small body of relevant literature is summarized

below.

What factors have driven the emergence of BHSCs amongst large public corporations? Why

do boards of directors of companies establish BHSCs?

Through descriptive studies, researchers have identified a variety of reasons why companies

form stakeholder-oriented board committees36, including,

36 Harrison (1987); Hillman (2000); Carson (2002); Arenas, Lozano and Albareda (2009); Kerr (2009); Roy (2009).

36

explicit regulatory requirements for certain types of committees (e.g. audit committees),

public relations considerations (i.e. wishing to foster a certain image for customers, the

general public and governments),

the practices of other companies (convergence of management practices, tendency toward

organizational homopholy),

a past experience of the company that caused concern over certain issues,

explicit or perceived requirements of institutional investors, and

inherent risks associated with the business that warrant special attention37.

These explanations largely reflect a combination of reasonable conjectures and the opinions of

company and board representatives.

It has been observed that the presence and number of board committees is associated with the

size of the corporation, and it has been suggested that as the size of the corporation increases so

does the firm’s visibility, and in turn the need for a dedicated group of directors to manage the

demands exerted by external stakeholders38. Organizational size has also been envisioned to

create more complex agency problems (that is, situations where there are multi-directional

conflicts of interest amongst shareholders, directors, and executives), giving rise to a need for

more complex board organizational structures to avert and manage such problems.39 These are,

however, explanations inferred by researchers based on theoretical premises, as opposed to those

37 Committees having social and environmental mandates have been noted to be more common amongst companies

in the primary extraction (raw materials, agriculture), and manufacturing industries (Jones 1999; Davidson, Nemec

and Worrell 2001).

38 Luoma and Goodstein (1999); Boone et al (2007); Khanchel (2007).

39 Khanchel (2007).

37

offered by the companies themselves. No specific information relating to BHSCs was located in

the literature.

How prevalent are BHSCs amongst large corporations?

Studies in the past decade in the United States, Canada, United Kingdom, Australia and Asia

involving close to 1000 publicly-listed companies have found that between one-quarter and one-

third have board committees with mandates concerned with environmental issues, workforce

health and safety issues, corporate social responsibility, and / or sustainability.40

Are BHSCs more common in some types of businesses (or business sectors) than others? If

so, why?

No relevant information pertaining specifically to BHSCs was located in the literature.

However, as noted earlier, social and environmental committees have been observed to be more

common in higher risk primary extraction and manufacturing industries than in lower-risk

service industries.

Is there evidence that BHSCs function in accordance with good governance practices?

The only publications identified through the search that specifically addressed board-level OHS

governance were a series of papers and reports published by the United Kingdom Health and

Safety Commission, Health and Safety Executive, and Department of Environment, Transport

and the Regions, as described in Chapter 1. As noted previously, these consisted of surveys in

2001/02 and 2003 to characterize prevailing board OHS governance practices, and guidance

documents describing OHS governance “best practices”, largely reflecting the generic board

governance recommendations flowing from The Cadbury Report and its offspring.

What are the typical compositions of BHSCs, and what are the characteristics of their

members?

40 Bondy, Matten and Moon (2008); Holder-Webb et al (2009); Roy (2009); Akhtaruddin and Haron (2010).

38

There is a small body of literature addressing board member characteristics and relationships to

other conditions. One large but somewhat dated (1988) study of the characteristics of members

of board committees found that directors who are appointed to serve on committees tend to be

older, have longer board tenure, are disproportionately male, and more likely to be an executive

by occupation (Kesner, 1988). Companies where financial committees had higher percentages of

“insider” board members have been found to have better financial results over the long term than

companies with lower percentages of insiders on these committees (Klein, 1998). Some studies

have reported an inverse correlation between the percentage of board members having high

levels of company stock ownership and the extent of the corporation’s discretionary disclosure

relating to social and environmental issues (Holder-Webb et al 2009; Akhtaruddin and Haron,

2010). In one study, external directors in the service industry self-reported higher levels of

interest and concern for social issues affecting the corporation than did internal directors

(Ibrahim, Howard and Angelidis 2003). Other researchers have found that a variety of personal

attributes of board and committee members, such as “inside” vs. “external” status (Kesner, 1988;

Klien 1998; Inbrahim, Howard and Angeldis, 2003) age, gender, tenure, occupation (Kesner,

1988), and shareholdings (Holder-Webb et al, 2009; Akhtaruddin and Haron 2010) can affect (i)

committee appointments, (ii) the influence of the director and the committee on senior

management, and (iii) corporate performance.

Accordingly, there may be systematic differences in the personal attributes of BHSC members as

compared to other board members, and in turn these differences could affect BHSC mandates,

activities, resources and vested interests.

Is there evidence that the formation and operation of BHSCs leads to (or at least is correlated

with) improvements in company OHS compliance and performance?

While many workplace health and safety requirements are regulated in industrialized

jurisdictions, many companies still view OHS as an element of corporate social responsibility

(“CSR”), and consequently OHS issues are sometimes in the mandate of board CSR

39

committees41. For this reason, studies on the relationships between the existence of board CSR

committees and corporate social performance provide the closest analogue to the relationships

between board BHSCs and company OHS performance outcomes.

The scholarly literature documents significant expansion in the nominal adoption of CSR

initiatives by public corporations and boards42, but it does not support the conclusion that board

CSRs lead to in better corporate disclosure or improved corporate conduct43. As such, the same

could be the case with BHSCs and company OHS performance, but the literature does not

specifically address OHS performance. Unfortunately, much of the literature to date on

corporate board-level CSR committees is descriptive in nature, and only one retrieved study

(Bondy 2008) examined the dynamics underlying the success or failure of corporate CSR

initiatives.

There are several anecdotal case reports44 attributing improvements in OHS outcomes to either:

(i) the establishment of processes to provide OHS performance information to boards; and / or

(ii) inclusion of OHS matters on the board agenda; and some authors attribute failures in OHS to

lack of board engagement45. However, none of these case reports provide empirical and

theoretical support for their conclusions, nor do they describe the hypothesized mechanisms by

41 Leonard and McAdam (2003); Pilko (2004); Jones, Comfort and Hillier (2006); Money and Schepers (2007);

Moon (2007); Bondy, Matten and Moon (2008); Welford, Chan, and Man (2008); Rodriguez-Dominguez, Gallego-

Alvarez, and Garcia-Sanchez (2009).

42 Leonard and McAdam (2003); Azeez, Martin and Craighead (2008); Welford, Chan and Man (2008).

43 Jones, Comfort and Hillier (2006); Money and Schepers (2007); Moon (2007); Bondy (2008); Bondy, Matten and

Moon, J. (2008); Kerr (2009); Holder-Webb et al (2009); Petrovic-Lazarevic (2010); Assmuth, Hilden, and

Benighaus (2010); Rodriguez-Dominguez, L., Gallego-Alvarez and Garcia-Sanchez (2009).

44 Brewer (1983); Ferry (1983); Thompson (1997); Pilko (2004); MacLean (2002); MacLean (2003); MacLean

(2005); Krueger (2006); Hedger (2007); Anonymous (2008); Dureborg (2009); Ciniceros (2010); Gunlicks et al

(2010).

45 Hedstrom (2004); Pilko (2005); Pilko (2006).

40

which board-level attention might result in performance improvements. An intuitive explanation

would be that board-level attention makes OHS a higher priority for company executives, which

in turn leads to a variety of operations-level initiatives to reduce risk, resulting in fewer work-

related injuries and illnesses. A cynical explanation might be that board-level attention makes

reduction in injury and illness rates a priority for executives, which in turn leads to operations-

level pressures for employees not to report injuries and illnesses, or for those that do occur to be

classified as non-work-related. A variety of other mechanisms might also be imagined.

In the past fifty years several workplace health and safety management system specifications

have been developed (Tania and Medeiros, 2005; Robson and Bigelow, 2010). These commonly

prescribe roles and functions for managers, but not for boards or BHSCs. Research on OHS

management systems in several jurisdictions has found that companies implementing such

systems often have lower accident rates than companies that do not46. However, none of these

studies have examined the extent of board attention to OHS, board influence on the decision to

implement the OHS management system, or the role of formalized OHS governance

mechanisms.

There has been extensive research concerned with the relationships between attitudes and beliefs

of managers and employees and OHS outcomes47. Many authors have concluded that when

managers and employees consider “safety” to be an important shared value, the organization’s

OHS outcomes tend to be superior over time48. It has also been observed that indices of “safety

climate” tend to be positively correlated with the presence of formalized health and safety

46 Cameron and Duff (2007); Bottani, Monica and Vignali (2009); Chen et al (2009); Törner & Pousette (2009);

Arocena and Nunez (2010).

47 Huang, Chen and Grosch (2010). Zohar (2010).

48 Michael et al (2005); Christian et al (2009); Singer et al (2009); Mearns et al (2010); Trerise (2010); Zohar

(2010).

41

management systems49, high levels of employee self-reported “trust of management” (Kath,

Magley and Marmet, 2010), management beliefs with respect to the likelihood of economic

benefits flowing from OHS (Kankaanpaeae, Suhonen and Valtonen, 2008; Mearns et al 2010)

and negatively correlated with workplace conflict (Antonsen, 2009). Unfortunately, this body of

research tells us little about the role of boards of directors or BHSCs in shaping organizational

safety culture or safety climate.

Questions for Which No Relevant Information was Identified

The search failed to identify any studies bearing on the following remaining five research

questions:

How much influence do BHSCs exert on the boards to which they report, and the


Do BHSCs operate in accordance with their stated mandates?

What are the BHSC’s mandates?

Have BHSCs become more commonplace over time?

In cases where BHSCs do appear to have been instrumental in the achievement of

improved company OHS compliance and performance, by what mechanisms did this

happen?

3 Conclusions Respecting the Research Questions

There are no published reports on the effects of BHSCs on company OHS performance

outcomes. It is not known if the emergence of BHSCs has had beneficial, adverse or no impacts

on company OHS performance outcomes. Research on board-level CSR committees at public

corporations suggests we cannot presumed that the establishment of a BHSCs will lead to

company OHS performance improvements (and this is wholly consistent with the broader

49 Tepe and Haslett (2002); Tania and Medeiros (2005); DeJoy et al (2010); Ramaswamy et al (2010); Sumner

(2010).

42

corporate governance literature). At the company level, the internal management and

governance processes of the organization, and external forces acting on the board and the

company, may affect decisions to create BHSCs, and may also affect their mandates, power and

influence on the organization. There is some information on the extent to which boards of

directors in the United Kingdom in the early 2000s followed generally accepted board

governance principles and processes in relation to OHS, but no information on practices in the

UK in the period 2003 onward, and no information on companies in other jurisdictions.

As indicated earlier, the published research on governance and boards is based on studies of

public corporations, and there is no corresponding information available for private corporations.

This raises the question of what we might we expect with respect to the adoption and

characteristics of BHSCs amongst private corporations? The answer may depend on what one

believes to be the key drivers for the establishment and operation of BHSCs.

Chapter 1 notes that over the past three decades public corporations in the English law

jurisdictions have been subjected to increasingly more stringent regulatory requirements for

transparency and information disclosure, as well as public pressures to conduct their business in

ways that are “socially responsible” and worthy of having “social license” to operate. This in

turn drives frequent and extensive disclosures of information to shareholders and the general

public relating to finances, management activities, governance practices, the results of third party

audits and evaluations, and personal characteristics of executives and board members; and

indeed, there are now extensive regulatory obligations for such disclosures. Being listed on a

stock exchange also permits public companies to develop larger and more diverse population of

shareholders, both individual and institutional, who in turn can, in theory, exert influence on

executives and boards. If, as might be expected, these external forces and ownership structures

are important drivers of certain public corporation governance practices – including the

appointment of external board members and the formation of mandate-specific board committees

– it may be the case that BHSCs are largely creatures of public corporations.

43

Appendix – Description of the Literature Search

The University of Toronto Library system was utilized to conduct the initial literature search,

using the search terms shown in Table 1.

Table 1 - Search Terms

Board of Directors

Board AND Safety

Board of Directors AND Health

Board of Directors OR Governance AND Performance

Board of Directors OR Governance AND Performance AND Safety

Health and Safety AND Performance

Safety Management

Board of Directors AND Safety

Board Committee AND Safety

Board of Directors AND Safety AND Health

Governance AND Safety AND Health

High Reliability AND Theory AND Safety

Board AND Corporate Social Responsibility

Health and Safety AND Performance AND Company

Health and Safety AND Performance AND Measurement

Safety Management AND Outcomes

The search scope was specified to include 100+ journal databases, and to return results dating

“from earliest” for the initial search, and then the intervening periods for the follow-up searches

in August 2013 and September 2015. The search terms resulted in two categories of outcomes:

results consisting of either “too many” (typically more than 900) or “not too many” records to be

practical for review of their titles for relevance. Where a search term combination resulted in too

many results, the terms were modified by the addition of terms using AND as the search

operator. Decisions to include and exclude search term combinations were also influenced by

general patterns observed in the results of specific searches (e.g. “health” typically resulted in an

overly large set of irrelevant records, “governance” tended to lead into literature concerned with

boards of directors). Successful search term combinations were also used to conduct a general

internet search of the grey literature using Google®.

Inclusion criteria for the search were as follows:

44

- Published in English.

- No limitation on publication date.

- Addressed one or more components of the model shown in Figure 1, or identified

additional potential components or dynamics of an expanded model.

- Was a published or unpublished primary study, PhD thesis, or literature review, using any

type of method.

Exclusion criteria for the search were as follows:

- Published in a language other than English.

- Purely an "opinion piece" or commentary lacking any empirical or theoretical supporting

content.

- Did not address any of the components of the model shown in Figure 1, or suggest

additional components or dynamics.

- Article was a book review or editorial.

For database searches resulting in 900 records or less, the titles of all records were reviewed for

potential relevance to the general subject area. Abstracts were read for titles of interest, and a

decision to retrieve the complete article was made based on apparent relevance. References

listed in bibliographies of all relevant articles were reviewed to identify additional records

having potential relevance, and retrieved when appropriate.

Web sites of the Institute for Work and Health, the Ontario Workplace Safety and Insurance

Board, the British Columbia Workers Compensation Board, the Quebec’s Occupational Health

and Safety Research Institute, the United States Occupational Health and Safety Administration,

the United States National Institutes for Occupational Safety and Health, and the United

Kingdom Health and Safety Executive were searched to locate and review the titles of research

studies funded or sponsored by these organizations.

Table 2 shows results for search term combinations yielding more than 1000 returns. In each

case the first 100 titles were screened to shape refinements in search terms.

45

Table 2 - Search Terms Yielding Excessive Returns

Board of Directors

Board AND Safety

Board of Directors AND Health

Board of Directors OR Governance AND Performance

Board of Directors OR Governance AND Performance AND Safety

Health and Safety AND Performance

Safety Management

Table 3 shows results for search term combinations yielding returns small enough to be

practicably screened, the numbers for which abstracts were reviewed based on titles, and the

number selected for full retrieval and review.

Table 3 - Search Terms Yielding Practicable Numbers of Results

Search Terms Yielding Manageable Results No.

Unique Records

Abstracts Review

Based on Title

Retrieved Following Review of Abstract

Board of Directors AND Safety 435 10 8

Board Committee AND Safety 161 13 1

Board of Directors AND Safety AND Health 191 17 4

Governance AND Safety AND Health 893 84 29

High Reliability AND Theory AND Safety 65 0 0

Board AND Corporate Social Responsibility 160 139 14

Health and Safety AND Performance AND Company 507 24 0

Health and Safety AND Performance AND Measurement

38 5 1

Safety Management AND Outcomes 634 87 7

References in Bibliographies of Articles Found via Search

30 9

Totals 3,084 409 73

A manual search of the bibliographies of those records retrieved identified an additional 30

records of potential interest, 9 of which were relevant and retrieved.

46

The internet search using Google® was limited to the search term combinations in Table 3, and

did not identify any additional relevant records beyond those identified using the University of

Toronto Library system.

Salient information from selected records was entered into a chart under the headings shown in

Table 4.

Table 4 – Literature Chart Column Headings

Search Terms

Author

Article

Peer Reviewed Journal

Full Article or Abstract

Type of Paper / Study Design

Key Findings / Assertions

Empirical Research Study?

Design

Study Quality

Author’s Conclusions

Commentary

Comments on Relevance to the Research Question

A literature map was constructed to illustrate the relationships between bodies of information.

Figure 1 presents one possible conceptualization of the various bodies of literature that bear on

the research question, and the relationships between them.

47

Figure 1 - Literature Map: Board Committee Impacts on Workplace Health and Safety Performance

Outcomes

48

Chapter 3 Overview of the Study and Organization of the Research Reports

1 Study Overview

This is a descriptive study that examines the relationship of BHSCs to specific outcomes –

changes in occupational injury rates – for or a specific population of organizations – large market

capitalization companies listed on the Toronto Stock Exchange (“TMX”) as of the end of 2010.

It explores the potential impacts of a public policy relating to occupational health and safety, and

the effects of that policy on organizational practices that are known to affect worker health

outcomes. As such, it can be characterized as an evaluation of health policy and management.

Since it explores the forces shaping board committee evolution and practice, and effects on

organizational practices and outcomes, it could also be characterized as a corporate governance

study.

The overarching question of whether BHSCs improve occupational health and safety

performance outcomes of companies is asked at two levels: the macro level (in this case being a

set of organizations fitting pre-determined inclusion criteria), and the micro level – meaning in

individual firms.

For this study, a specific group of TMX companies were selected as subjects for a variety of

reasons. Firstly, the jurisdiction of interest is Ontario – where most of the selected TMX

companies have their headquarters, as well as operations and employees, and where government

health and safety policy is believed to have encouraged committee formation through legislative

requirements of the Ontario Occupational Health and Safety Act. Secondly, the use only of

TMX companies having market capitalizations of over $1.5 billion as of 2010 yields a

manageable sample size for the study. Thirdly, the companies in the subject group employ large

numbers of people (in Canada, and abroad), and reductions in workplace injury risk across such

organizations have large health maintenance and cost avoidance benefits in absolute terms.

Fourthly, these companies are well-resourced, sophisticated, have comparatively mature

governance structures by virtue of their sizes and public listings, and hence if effects exist, they

49

might reasonably be identified in this population of organizations. Finally, and importantly for

research purposes, there is a large, comparatively uniform, and readily available repository of

administrative data – covering decades for most companies – describing their economic

outcomes, aspects of their governance and management structures and processes, characteristics

of directors and executives, company business operations, and aspects of their workplace health

and safety management practices and results.

The basic logic underlying the study is that for board health and safety committees collectively

to make a difference at the macro level, there must be, at the micro level in a high percentage of

those organizations, specific structures and linked processes that are in place and operative.

Those structures should serve to enable processes which, at their core, motivate actions by

directors and managers that ultimately reduce employee exposures to operational risks. The

motivation for directors and managers to do so is likely to depend in turn on their individual and

collective knowledge, capability, judgement, and motivations. In turn, evidence and theory

suggests that motivation and efficacy relates to the characteristics of individuals, the situational

context, past experiences, organizational characteristics, norms and behaviours. Many of those

board governance structural components and processes are regulated, institutionalized, or

normative, have been extensively studied in past, and have been reasonably well explored from a

theoretical perspective. However, if and how those structures and processes work in relation to

improvement of workplace health and safety outcomes has not been subject to study, and is

poorly understood. That was a key motivation for the study.

The conceptual framework evaluated by the thesis evolved inductively from the theoretical and

empirical literature concerning board corporate governance structures, processes and outcomes.

While the conceptual framework was formulated through an inductive process, the empirical

research program was deductive: empirical observations were carried out using various methods

to characterize the phenomenon and answer specific research questions, and assess the utility of

a putative conceptual framework to answer the central research question.

The thesis research is comprised of four discrete but related studies, each utilizing different

methodologies. This mixed methods approach was selected because it was recognized that

different data collection approaches would be required to answer specific research questions,

50

evaluate the phenomenon at the macro and micro levels, and that evidence adduced by different

techniques might permit more robust answers to some or all of the research questions.

First Study

The first study (Chapter 4) tracked the emergence of BHSCs among the target population,

extracted data on 60 variables relating to the individual companies having BHSCs for each year

of BHSC existence between 2001 and 2010, their BHSCs mandates, charters, and committee

member characteristics; and summarized these variables on an annualized and full period basis

for the group of companies, their BHSCs, and members. The rationale for the first study can be

explained as follows. As a first step in this research program, it was necessary to determine the

prevalence and operating history of board health and safety governance committees in the

organizational population of interest, since, if those committees did not exist for a reasonably

lengthy period of time, or did not appear to function in ways that reasonably could positively

affect company management practices and workplace health and safety outcomes, then logically,

such committees could not lead to better outcomes. The committee functional aspects examined

in the first study focused on constructs A, B and C of the BHSC conceptual framework described

in Chapter 2.

The first study utilized administrative data, focused on the macro level, and was modelled on

descriptive research precedents used to study corporate social responsibility committees (most

closely that of Roy, 2009) – many of which have had workplace health and safety in their ambit,

and in fact often had health, safety and environmental issues as their original sole focus.

However, the current study differs from those precedents in four main respects. First, as just

noted, the relevant board committee research focuses on social responsibility committees and

committee management of those issues in a broad sense, and not specifically on workplace

health and safety governance. Secondly, the published corporate social responsibility committee

studies were by and large point-in-time cross-sectional snapshots, using administrative data or

survey responses to characterize basic operational features - for example, committee existence,

mandate, terms of reference, composition, et cetera (substantially constructs A, B and C) – and to

a lesser extent perceived impacts. The current study is, in essence, a succession of retrospective

snapshots, taken over a decade, for the purpose of profiling the emergence of board health and

safety governance committees, and key characteristics and activities deemed by prior research

51

findings, normative writings, and organizational theory to be central to effective governance

processes and the exercise of influence. The retrospective longitudinal approach was necessary

because it is known that the effects of corporate workplace injury prevention initiatives are not

observed overnight: there can be latency of many years between implementation and improved

outcomes. Therefore, evidence for several years of BHSC operation was judged to be a

precondition for potential instrumentality; and where this condition was satisfied, it would permit

follow-on examinations in the manner described in Chapters 5, 6 and 7. The third key

difference in relation to the research precedents is that the current study inventories and describes

a considerably larger number of variables than has been the case in prior studies. The result is a

comprehensive profile of BHSCs in the subject group over a decade. Finally, much of the

longitudinal information from the first study is utilized in the fourth study (the case analysis) to

evaluate the reasonability of the selected BHSCs playing an instrumental role in the achievement

of performance improvements over time.

Second Study

The second study (Chapter 5) was a comparative time-trend analysis of the injury rates of

companies with BHSCs versus peer groups, covering a decade. The analysis focused on mining

and oil and gas companies with BHSCs, primarily because they constituted a large fraction of the

group of companies found to have BHSCs, and they disclosed their annual accident rate data;

and in part because identifiable peer comparator groups nominally exist. Like the descriptive

characterization study, the comparative analysis focused on the macro level, and explored

possible differences in outcomes – i.e. it compared constructs J and K of the conceptual

framework.

The comparative analysis was undertaken with the objective of delineating one of three potential

patterns: companies with BHSCs would show (1) clearly superior, (2) no different, or (3) clearly

worse performance outcome trends over time, in relation to reasonable comparators.

Third Study

The third study (Chapter 6) was a survey of BHSC members of companies identified as having

BHSCs in the first study. This was carried out to obtain additional information on governance

processes, member subject matter expertise, and perceptions regarding BHSC influence and

52

instrumentality – from the perspective of participants in the phenomenon – and to supplement

and expand on information obtained in the administrative data review with respect to certain

constructs of the conceptual framework. More specifically, the questionnaire was designed to

solicit information at both the macro and micro levels with respect to constructs A through H

(with emphasis on D, E and F). The questionnaire design was comparable in certain respects to

health and safety board governance survey instruments used in performing a series of surveys in

the early 2000s on behalf of the United Kingdom Health and Safety Executive, and a never used

survey instrument prepared by two researchers from the University of Buenos Aires (Minguillon

& Yacuzzi, 2009).

Fourth Study

The fourth study (Chapter 7) consisted of three case analyses, the subjects of which were three

large gold mining companies that formed part of the group of survey respondents from the third

study. The case analyses took a micro focus, utilizing and integrating information obtained in

the first three studies, and additional interview information, to assess whether the companies in

question showed supra-secular performance improvements over a time period corresponding to

BHSC operation, whether there were programmatic developments in that time period that could

plausibly result in performance improvements, and whether BHSC characteristics and actions

during the time period were instrumental in those programmatic developments. Each case

analysis utilized an original multi-step logic model to test plausibility. The case analyses

integrates information on the three companies obtained in the first three studies, and closely

examines the concurrent evolution of BHSC operations, company health and safety program

development, and performance trends over time, with the goal of adducing evidence for or

against BHSC instrumentality in each organization.

Each of the studies had specific objectives corresponding to several of the twelve specific

research questions.

The four studies utilized data covering slightly different time periods. This was due in part to the

manner in which the research program unfolded over time (the first study was carried out in

2011-2012, and hence covers data to 2010 which was the latest available at the time; the

subsequent studies were carried out in 2014-2015, and hence include more recent data), and in

53

part due to the timeframes for which data were available (i.e. some companies made available

data covering lengthier periods than other companies).

Table 1 (next page) shows which study was intended to contribute to answering the 12 research

questions.

2 Organization of the Research Reports

The content hereafter is organized as follows.

Chapter 4 describes the emergence and the characteristics of BHSCs amongst large Canadian

public companies, for the period 2001-2010.

Chapter 5 presents information and conclusions relating to accident rate trends of companies

with BHSCs and their peer groups, covering the period 2002-2014.

Chapter 6 describes the findings from the self-reporting survey distributed to the companies

identified as having BHSCs as of 2010.

Chapter 7 presents the case analyses for the three selected companies.

Chapter 8 provides an overall discussion of the findings from the research program, the degree to

which it provides answers to the 12 research questions, and comments on the utility of the BHSC

conceptual framework for understanding instrumentality.

54

Table 1 - Relationship of Research Questions to Research Phases

Research Question

Study

Literature Review

1 2 3 4

BHSC Character-

ization

Accident Trend

Analysis

BHSC Survey

Company Case

Analysis

i. What factors have driven the emergence of BHSCs amongst large public corporations in Canada?

√ √

ii. How prevalent are BHSCs amongst Canada’s largest corporations? √

iii. Have BHSCs become more commonplace over time? √

iv. Are BHSCs more common in some types of businesses (or business sectors) than others? If so, why? √

v. What are the BHSC’s mandates? √

vi. Is there evidence that BHSCs function in accordance with good governance practices? √ √ √

vii. What are the typical compositions of BHSCs, and what are the characteristics of their members?

√

viii. Why do boards of directors of companies establish BHSCs? √

√

ix. Do BHSCs operate in accordance with their stated mandates? √

x. How much influence do BHSCs exert on the boards to which they report, and the executives of their companies?

√ √

xi. Is there evidence that the formation and operation of BHSCs leads to (or at least is correlated with) improvements in company OHS performance? √ √ √

xii. In cases where BHSCs do appear to have been instrumental in the achievement of improved company OHS performance, by what mechanisms did this happen?

√ √

55

Chapter 4 The Emergence and Characteristics of Board Health and Safety

Committees Amongst Canada’s Largest Corporations

1 Introduction

This Chapter describes research conducted to document the emergence and characteristics of

BHSCs amongst Canada’s largest public corporations, which we arbitrarily defined as those

having a market capitalization of $1.5 billion or higher as of 2010, over the decade spanning

2001-2010. In doing so, it provides answers to the following research questions for the period

studied:



iv. Are BHSCs more common in some types of businesses (or business sectors) than others?

If so, why?


vi. Is there evidence that BHSCs function in accordance with good governance practices?


members?

2 Methods

In early 2011, stock market capitalization rankings of Canadian public companies were obtained

as of the end of their 2010 fiscal years from the online version of Canadian Business Magazine,

56

www.canadianbusiness.com50, resulting in the identification of 146 companies having values of

$1.5 billion Canadian dollars or higher as of the date of their fiscal year ends. In mid-2011, the

2010 annual reports and management information circulars were obtained for those companies

from the System for Electronic Document Analysis and Retrieval (www.sedar.com) of the

Canadian Securities Administrators. These documents were reviewed to identify companies with

BHSCs as of the end of fiscal 2010 (board committee information must be disclosed in one or

both of these documents). For companies found to have BHSCs as of 2010, annual reports and /

or management information circulars were then obtained and reviewed for each year over the

period 2001 to 2010. Based on these reviews, the information shown in Table 1 was identified,

extracted and recorded in a purpose-built database, to the extent that such information was

reported.

A timeline visual plot was prepared, covering the period 2001 to 2010, to illustrate the

emergence and prevalence of BHSCs for those corporations found to have BHSCs in 2010.

Information from the purpose-built database was used to produce descriptive statistics, for

presentation in tables and figures, to illustrate the organizational characteristics listed in Table 1.

Table 1 - Variables for Which Data Was Collected from Company Annual Reports and Management Information Circulars

Variable ID No.

Data

1 Company Name

2 Head Office Country

3 Head Office City

4 Business Operations Sector(s)

5 Geographic Scope of Operations

6 No. Members on Board of Directors

7 Market Capitalization of Company at Fiscal Year End

8 No. Board Committees

9 Total Revenues per Income Statement

10 Net Profit per Income Statement

50 Canadian Business Magazine.

http://www.canadianbusiness.com/

http://www.sedar.com/

57


Variable ID No.

Data

11 HS Policy posted on web site

12 HS Policy provided in Annual Report

13 HS Status Report provided in Annual Report

14 Word Count

15 Name of Committee

16 No. Members on Committee

17 No. Male

18 No. Independent Directors

19 Mandate Descriptors

20 Total Word Count of Mandate Description in Management Information Circular

21 Committee requires members to receive certain subject area training / tutoring?

22 Formal written charter / terms of reference?

23 Specified minimum number of members?

24 Require only independent directors?

25 Requires a chair?

26 Requires a vice-chair?

27 Chair appointed by board or committee?

28 Vice-chair appointed by board or committee?

29 Defines duties of the chair?

30 Corporation provides secretariat support?

31 Estimated spending on secretariat support

32 Specifies quorum?

33 Quorum as % membership

34 Any member authorized to call meeting?

35 Committee authorized to engage independent counsel or advisors at the expense of the corporation?

36 Individual committee members able to engage independent counsel or advisors at the expense of the corporation, with committee approval?

37 Committee provides report as part of Corporation's Annual Report?

38 Members

39 First Name

40 Middle Name

41 Last Name

42 Age as of Annual Report Year

43 Gender

44 Special Nominal Titles

45 Highest Educational Level

58


Variable ID No.

Data

46 Director Status

47 Company Role if Non-Independent Director

48 Current Primary Occupation (if Independent Director)

49 Total Compensation if in Company Role

50 Director Since

51 Total Value of Securities Held in Company

52 Total Compensation if not in Company Role

53 Committee Membership

54 Committee Members Since

55 No. Committee Meetings Attended

56 Committee Attendance Rate

57 Leadership Role on EHS Board

58 Other Leadership Role on Board

59 Other Current Company/Org Board Directorships?

60 Other Current Company/Org Executive Role?

Certain variables in Table 1 were subjected to additional analysis and coding. Mandate

statements extracted from the source documents (Variable No. 19, Table 1) were reviewed and

classified for all BHSCs, in order to create uniform task descriptors from the narratives contained

in annual reports and management information circulars. The classification system was devised

in order to create a set of discrete categories describing the tasks the BHSC would perform by

virtue of its mandate (e.g. "set OHS objectives", "approve OHS objectives", "review OHS

audits", "approve OHS plans", etc.). Each task was labelled as "passive" (e.g. review, approve),

or "active" (e.g. set, define, develop) for two reasons to assess changes in BHSC activism over

the study period, and to permit evaluation, through a subsequent survey and case analysis (later

papers in the series), of possible relationships between the "active-passive" character of a

BHSC's mandate, and the corporation's OHS performance trends. A timeline visual plot was

prepared, covering the period 2001 to 2010, to illustrating the prevalence of each task in the

subject companies. Descriptive statistics (e.g. % yes/no) were calculated for Variables No. 20

59

through 37 in Table 1 (terms of reference characteristics). Descriptive statistics (e.g. % yes/no)

were calculated for variables No. 43 through 60.

Table 2 describes the method of analysis for these variables.

Table 2 – Treatment of Data for Phase 1 Variables

No. Data Category Data Summarized/Mentioned? Graphed?

1 Company Info Company Name No, since not relevant. N/Applicable

2 Company Info Head Office Country All Canadian companies, mentioned.

N/Applicable

3 Company Info Head Office City Summarized in terms of numbers per city

N/Applicable

4 Company Info Business Operations Sector(s)

Summarized in terms numbers out of total

N/Applicable

5 Company Info Geographic Scope of Operations

Summarized in terms of numbers out of total

N/Applicable

8 Company Info No. Board Committees

Summarized in terms of median, min, max year to year basis, and missing data.

Yes, boxplot

6 Company Info No. Members on Board of Directors

Summarized in terms of median, min, max year to year basis, and missing data.

Yes, boxplot

7 Company Info Market Capitalization of Company at Fiscal Year End

Summarized in terms of median, IQR.

Yes, boxplot

9 Company Info Total Revenues per Income Statement


Yes, boxplot

10 Company Info Net Profit per Income Statement


Yes, boxplot

11 Company Info OHS Policy posted on web site?

Summarized in terms of percentage & missing data

Yes, bar graph

12 Company Info OHS Policy provided in Annual Report?

Summarized in terms of percentage & missing data

Yes, bar graph

13 Company Info OHS Member Report provided in Annual Report?

Summarized in terms of percentage & missing data (named differently – ‘statistics in annual report’)

Yes, bar graph

14 Company Info Word Count of OHS Member Report

Year to year median range. Yes, box plot.

15 Committee Info Name of Committee Summarized in terms of prevalent words and the presence of HSE in the name.

Table

16 Committee Info No. Members on Committee

Summarized in terms of median, IQE, Range

Yes, box plot

17 Committee Info No. Male Members Summarized in terms of percentage

Yes, bar graph

18 Committee Info No. Independent Directors on Committee

Summarized in terms of percentage

Yes, bar graph

60



19 Mandate Mandate Descriptors Summarized and graphed Yes

20 Mandate Total Word Count of Mandate Description in MIC

Summarized and lists missing data

21 Charter / TOR Committee requires members to receive certain subject area training / tutoring?

Summarized and specified Yes, bar graph

22 Charter / TOR Formal written charter / terms of reference?

Summarized and specified. Yes, bar graph

23 Charter / TOR Specified minimum number of members?


24 Charter / TOR Require only independent directors?


25 Charter / TOR Requires a chair? Summarized and specified. Yes, bar graph

26 Charter / TOR Requires a vice-chair?

Summarized No, trivial or no data

27 Charter / TOR Chair appointed by board or committee?

Summarized Yes, bar graph

28 Charter / TOR Vice-chair appointed by board or committee?

Mentioned No, trivial or no data

29 Charter / TOR Defines duties of the chair?


30 Charter / TOR Corporation provides secretariat support?

Summarized No, trivial

31 Charter / TOR Estimated spending on secretariat support

No data available – mentioned. No, no data

32 Charter / TOR Specifies quorum? Summarized and specified Yes, bar graph

33 Charter / TOR Quorum as % membership

Summarized and specified No, trivial

34 Charter / TOR Any member authorized to call meeting?


35 Charter / TOR Committee authorized to engage independent counsel or advisors at the expense of the corporation?


36 Charter / TOR Individual committee members able to engage independent counsel or advisors at the expense of the corporation, with committee approval?

Summarized Yes, bar graph

61



37 Charter / TOR Committee provides report as part of Corporation's Annual Report?

Mentioned No, trivial

38 Member Members Information

Total number of members mentioned

N/Applicable

39 Member First Name Not relevant N/Applicable

40 Member Middle Name Not relevant N/Applicable

41 Member Last Name Not relevant N/Applicable

42 Member Age as of Annual Report Year

Summarized using descriptive statistics

Boxplot

43 Member Gender Summarized in terms of total, not year by year.

Corresponds to Committee info variable…

44 Member Special Pre- and Post-Nominal Titles


No

45 Member Highest Educational Level


No

46 Member Director Member Summarized No

47 Member Company Role if Non-Independent Director

Summarized in terms of roles as a count and percentage

Table

48 Member Current Primary Occupation (if Independent Director)

Summarized No

49 Member Total Compensation if in Company Role

Grand statistics across year, reference to figure and mention missing data

Boxplots

50 Member Director Since Summarized

51 Member Total Value of Securities Held in Company

Grand statistics, reference to figure and mention missing data

Partial box plots due to

range…

52 Member Total Compensation if not in Company Role

Grand statistics across year, reference to figure and mention missing data

Boxplots

53 Member Committee Membership

Summarized as count and percentages

Table

54 Member Committee Members Since

Insufficient data Insufficient data

55 Member No. Committee Meetings Attended

Summarized in descriptive statistics

Boxplot

56 Member Committee Attendance Rate

Summarized in descriptive statistics

Bargraph

57 Member Leadership Role on Board HS Committee

Summarized in terms of and percentage of total individual listing

No

58 Member Other Leadership Role on Board


No

59 Member Other Current Summarized in terms of and No

62



Company/Org Board Directorships?

percentage of total individual listing

60 Member Other Current Company/Org Executive Role?


No

For each BHSC, and the set of BHSCs, a timeline visual plot was created, covering the period

2001 to 2010, to illustrate trends over time in Variables No. 42 through 60 in Table 2. This was

performed because board governance research has found relationships between several of these

member individual characteristics and board committee influence on the board51.

3 Findings

3.1 The 2010 Population of Canadian Large Cap Companies

Table 3 shows companies listed on the Toronto Stock Exchange having market capitalizations of

$1.5 billion or higher at the end of their 2010 fiscal years (146 in total).

Table 3 - Toronto Stock Exchange Listed Companies with Market Capitalizations $1.5+ Billion, 2010

BHSC? Company (Year End) Stock Symbol Mkt Cap ($-mil)

Work Force Size

Industry

Royal Bank of Canada (Oc10) RY-T $77,408 72,126 Banks

Toronto-Dominion Bank (Oc10) TD-T $64,526 68,725 Banks

Yes Suncor Energy (De10) SU-T $59,927 12,076 Oil and Gas

Bank of Nova Scotia (Oc10) BNS-T $57,016 70,772 Banks

51 A variety of personal attributes of board and committee members, such as “inside” vs. “external” status (Kesner,

1988; Klien, 1998, Inbrahim, Howard and Angeldis, 2003) age, gender, tenure, occupation (Kesner, 1988), and

shareholdings (Holder-Webb et al 2009, Akhtaruddin and Haron, 2010) can affect (i) committee appointments, (ii)

the influence of the director and the committee on senior management, and (iii) corporate performance.

63



Work Force Size

Industry

Yes Barrick Gold (De10) ABX-T $53,040 16,000 Mining

Yes Cdn. Natural Resources (De10) CNQ-T $48,379 4,671 Oil and Gas

Potash Corp. of Saskatchewan (De10) POT-T

$43,921 5,400 Chemicals

Yes Goldcorp Inc. (De10) G-T $36,629 3,140 Mining

Yes Teck Resources (De10) TCK.A-T $36,617 9,100 Integrated Mines

Yes Imperial Oil (De10) IMO-T $34,396 4,970 Oil and Gas

Bank of Montreal (Oc10) BMO-T $34,118 38,000 Banks

Research In Motion (Fe11) RIM-T $33,669 17,500 Telecommunications

Thomson Reuters Corp. (De10) TRI-T $31,036 55,000 Other Services

CIBC (Oc10) CM-T $30,724 42,354 Banks

Yes Canadian National Railway Co. (De10) CNR-T

$30,481 22,279 Transportation

BCE Inc. (De10) BCE-T $26,585 50,200 Telephone Utilities

Yes TransCanada Corp. (De10) TRP-T $26,450 4,230 Management &

Diversified

Yes Cenovus Energy (De10) CVE-T $25,049 2,375 Oil and Gas

Great-West Lifeco (De10) GWO-T $25,039 30,750 Insurance - Life

Yes Husky Energy (De10) HSE-T $23,648 4,380 Oil and Gas

Yes Talisman Energy (De10) TLM-T $22,547 3,000 Oil and Gas

Power Financial (De10) PWF-T $21,757 31,649 Finance and Leasing

Enbridge Inc. (De10) ENB-T $21,664 6,357 Pipelines

Yes Kinross Gold (De10) K-T $21,431 5,500 Mining

Yes EnCana Corp. (De10) ECA-T $21,419 4,169 Oil and Gas

Rogers Communications (De10) RCI.B-T $19,221 27,971 Telecommunications

Brookfield Asset Management (De10) BAM.A-T

$19,178 18,000 Management &

Diversified

Sun Life Financial (De10) SLF-T $17,283 14,755 Insurance - Life

Yes Cameco Corp. (De10) CCO-T $15,892 3,300 Mining

Telus Corp. (De10) T-T $14,661 34,800 Telecommunications

Agrium Inc. (De10) AGU-T $14,457 14,150 Mining

Silver Wheaton (De10) SLW-T $13,752 25 Mining

Yes Agnico-Eagle Mines (De10) AEM-T $12,924 4,500 Mining

Yes Canadian Oil Sands (De10) COS-T $12,815 30 Oil and Gas

Power Corp. of Canada (De10) POW-T $12,690 33,087 Management &

Diversified

Magna International (De10) MG-T $12,592 96,600 Automotive

Yes Trinidad Drilling (De10) TDG-T $12,090 3,000 Oil and Gas

Nexen Inc. (De10) NXY-T $11,986 3,925 Oil and Gas

Yes Crescent Point Energy Trust (De10) CPG-T

$11,795 275 Oil and Gas

Yes Loblaw Companies (Ja11) L-T $11,327 136,000 Food Stores

IGM Financial (De10) IGM-T $11,287 3,343 Investment

Yes Penn West Petroleum (De10) PWT-T $10,959 2,076 Oil and Gas

Yes Canadian Pacific Railway Ltd. (De10) CP- $10,934 13,619 Transportation

64



Work Force Size

Industry

T

Yes George Weston Ltd. (De10) WN-T $10,868 155,000 Food Stores

National Bank of Canada (Oc10) NA-T $10,821 18,322 Banks

Yes Eldorado Gold (De10) ELD-T $10,141 4,448 Mining

Bombardier Inc. (Ja11) BBD.B-T $9,836 65,370 Transportation Equipment

Shaw Communications (Au10) SJR.B-T $9,473 13,000 Telecommunications

Yes Yamana Gold (De10) YRI-T $9,467 4,513 Mining

Yes First Quantum Minerals (De10) FM-T $9,307 6,904 Mining

Pacific Rubiales Energy (De10) PRE-T $9,033 1,285 Oil and Gas

Yes SNC-Lavalin Group (De10) SNC-T $9,027 21,948 Contractors

Brookfield Office Properties (De10) BPO-T

$8,828 2,200 Property & Investment

Shoppers Drug Mart (Ja11) SC-T $8,596 52,160 Specialty Stores

Fairfax Financial Holdings (De10) FFH-T $8,366 6,584 Insurance - Property & Casualty

BPO Properties (De10) BPP.PR.G-T $7,771 0 Property & Investment

Ultra Petroleum (De10) UPL-N $7,288 108 Oil and Gas

Yes ARC Resources (De10) ARX-T $7,226 500 Oil and Gas

Tim Hortons (Ja11) THI-T $7,201 2,325 Food Stores

Canadian Utilities (De10) CU-T $6,851 5,731 Electrical Utilities

HSBC Bank Canada (De10) HSB.PR.C-T $6,830 8,255 Banks

Yes Iamgold Corp. (De10) IMG-T $6,618 5,030 Mining

CI Financial (De10) CIX-T $6,467 1,280 Investment

Saputo Inc. (Ma10) SAP-T $6,136 9,800 Food Processing

Yes Athabasca Oil Sands (De10) ATH-T $6,020 120 Oil and Gas

Fortis Inc. (De10) FTS-T $5,926 6,459 Electrical Utilities

Sino-Forest Corp. (De10) TRE-T $5,723 3,949 Forestry

RioCan REIT (De10) REI.UN-T $5,716 598 Property & Investment

Intact Financial (De10) IFC-T $5,705 7,500 Insurance-Property & Casualty

Yes Canadian Tire Corp. (Ja11) CTC.A-T $5,554 56,900 Retail

Niko Resources (Ma10) NKO-T $5,505 17 Oil and Gas

Yes Enerplus Corp. (De10) ERF-T $5,479 709 Oil and Gas

Baytex Energy (De10) BTE-T $5,300 200 Oil and Gas

Yes Equinox Minerals (De10) EQN-T $5,260 5 Mining

Yes Inmet Mining (De10) IMN-T $4,755 4,270 Mining

Metro Inc. (Se10) MRU.A-T $4,744 65,000 Food Stores

Yes Centerra Gold (De10) CG-T $4,680 3,049 Mining

Yes TransAlta Corp. (De10) TA-T $4,659 2,389 Electrical Utilities

Yes Finning International (De10) FTT-T $4,644 11,900 Wholesale Distributors

Yes Uranium One (De10) UUU-T $4,556 249 Mining

Bonavista Energy (De10) BNP-T $4,509 310 Oil and Gas

Pan American Silver (De10) PAA-T $4,412 7,138 Mining

Yes Lundin Mining (De10) LUN-T $4,214 1,400 Mining

65



Work Force Size

Industry

CGI Group (Se10) GIB.A-T $4,202 25,000 Computer Software

Pengrowth Energy (De10) PGF-T $4,167 582 Oil and Gas

Yes Vermilion Energy (De10) VET-T $4,113 428 Oil and Gas

Yes New Gold Inc. (De10) NGD-T $3,863 1,146 Mining

Yes Inter Pipeline Fund (De10) IPL.UN-T $3,850 634 Pipelines

Viterra Inc. (Oc10) VT-T $3,631 4,067 Agriculture

Empire Company (My10) EMP.A-T $3,627 90,000 Food Stores

Yes Pembina Pipeline Corporation (De10) PPL-T

$3,605 427 Pipelines

Emera Inc. (De10) EMA-T $3,593 2,300 Management &

Diversified

Gildan Activewear (Oc10) GIL-T $3,465 28,000 Clothing and Textiles

ATCO Ltd. (De10) ACO.X-T $3,426 7,700 Management &

Diversified

Alimentation Couche-Tard (Ap10) ATD.B-T

$3,368 53,000 Food Stores

Yes NovaGold Resources (No10) NG-T $3,340 65 Mining

Yellow Media (De10) YLO-T $3,199 4,600 Publishing & Printing

Quadra FNX Mining (De10) QUX-T $3,189 806 Metal Mines

Industrial Alliance Insurance (De10) IAG-T

$3,087 3,400 Insurance - Life

Yes SEMAFO Inc. (De10) SMF-T $2,927 2,000 Mining

Yes Trican Well Service (De10) TCW-T $2,913 4,099 Oil and Gas Field

Services

Nova Scotia Power (De10) NSI.PR.D-T $2,900 1,900 Electrical Utilities

Genworth MI Canada (De10) MIC-T $2,891 267 Insurance - Property & Casualty

Westcoast Energy (De10) W.PR.H-T $2,875 3,343 Pipelines

H&R REIT (De10) HR.UN-T $2,839 7 Property & Investment

Yes Methanex Corp. (De10) MX-T $2,802 878 Chemicals

Union Gas (De10) UNG.PR.C-T $2,764 2,207 Gas Utilities

TMX Group (De10) X-T $2,749 849 Other Services

Yes HudBay Minerals (De10) HBM-T $2,685 1,315 Mining

Petrobank Energy and Resources (De10) PBG-T

$2,682 76 Oil and Gas

CAE Inc. (Ma10) CAE-T $2,545 7,000 Transportation Equipment

Yes Sherritt International (De10) S-T $2,499 6,800 Mining

Yes Keyera Corp. (De10) KEY-T $2,457 543 Oil and Gas

PEYTO Exploration & Develop. (De10) PEY-T

$2,438 32 Oil and Gas

Yes Detour Gold (De10) DGC-T $2,435 31 Mining

Quebecor Inc. (De10) QBR.B-T $2,420 16,360 Publishing & Printing

Yes Thompson Creek Metals (De10) TCM-T $2,412 928 Mining

DundeeWealth Inc. (De10) DW.PR.A-T $2,400 1,008 Investment

Yes Paramount Resources (De10) POU-T $2,377 215 Oil and Gas

Yes Toromont Industries (De10) TIH-T $2,373 3,800 Wholesale Distributors

66



Work Force Size

Industry

ShawCor Ltd. (De10) SCL.A-T $2,339 5,449 Oil and Gas

Jean Coutu Group (PJC) (Fe11) PJC.A-T

$2,328 992 Specialty Stores

Ensign Energy Services (De10) ESI-T $2,303 7,355 Oil and Gas

Yes SouthGobi Resources (De10) SGQ-T $2,235 544 Mining

Yes Silver Standard Resources (De10) SSO-T $2,215 750 Mining

Yes Alamos Gold (De10) AGI-T $2,201 501 Metal Mines

Labrador Iron Ore Royalty (De10) LIF.UN-T

$2,152 2,082 Mining

Yes China Gold Int'l Resources (De10) CGG-T $2,151 1,018 Mining

Dollarama Inc. (Ja11) DOL-T $2,108 13,500 Retail

Sears Canada (Ja11) SCC-T $2,075 31,470 Retail

Canadian REIT (De10) REF.UN-T $2,072 160 Property & Investment

Valener Inc. (Se10) VNR-T $2,032 2,013 Oil and Gas

Brookfield Office Properties (De10) BOX.UN-T

$2,017 0 Property & Investment

WestJet Airlines (De10) WJA-T $2,011 6,291 Transportation

Yes West Fraser Timber Co. (De10) WFT-T $2,006 7,300 Forestry

E-L Financial Corp. (De10) ELF-T $1,999 2,189 Insurance-Property & Casualty

Heritage Oil (De10) HOC-T $1,886 132 Oil and Gas

Rona Inc. (De10) RON-T $1,854 22,000 Retail

Just Energy Group (Ma10) JE-T $1,842 702 Gas Utilities

Home Capital Group (De10) HCG-T $1,794 560 Finance and Leasing

Astral Media (Au10) ACM.A-T $1,793 2,800 Entertainment Services

Cogeco Cable (Au10) CCA-T $1,738 2,463 Telecommunications

Canadian Western Bank (Oc10) CWB-T $1,690 1,828 Banks

Canfor Corp. (De10) CFP-T $1,584 4,690 Forestry

Corus Entertainment (Au10) CJR.B-T $1,580 1,768 Entertainment Services

AGF Management (No10) AGF.B-T $1,527 825 Investment

3.2 Canadian Large Cap Companies with BHSCs

From this population of 146 companies, 58 (40%) were found to have BHSCs (identified by

“Yes” in column 1 of Table 3). A review of annual reports and management information

circulars for the group revealed that approximately 40% had BHSCs dating back to the start of

the study examination period in 2001, with the remaining 18 companies from the group of 58

introducing BHSCs in subsequent years, such that by 2010, 97% of those 58 companies had

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BHSCs (one company appeared to terminate its BHSC in 2006, and another did so in 2010).

Table 4 and Figure 1 show the tenures of the BHSCs for each of the 58 companies between

2001-2010, and the percentage increase in prevalence during the study period respectively.

Table 4 - Emergence of BHSCs Among Canada's Largest Companies, 2001 to 2010

(Shaded Cells Indicate Existence of BHSC)

COMPANY NAME 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Canadian Tire Corporation 1 1 1 1 1

Teck Resources Limited 1 1 1 1 1 1 1 1

Toromont Industries Ltd. 1 1 1 1 1 1 1 1 1 1

Loblaw Companies Limited 1 1 1 1 1 1 1 1 1 1

Pembina Pipeline Corporation 1 1 1 1 1 1 1 1 1 1

TransAlta Corporation 1 1 1 1 1 1 1 1 1 1

George Weston Ltd. 1 1 1 1 1 1 1 1 1 1

Inter Pipeline Fund 1 1 1 1 1 1 1 1 1 1

Cameco Corp. 1 1 1 1 1 1 1 1 1 1

Methanex Corporation 1 1 1 1 1 1 1 1 1 1

Canadian National Railway 1 1 1 1 1 1 1 1 1

Canadian Natural Resources 1 1 1 1 1 1 1 1 1 1

TransCanada Corporation 1 1 1 1 1 1 1 1 1 1

Finning International 1 1 1 1 1 1 1 1 1 1

Barrick Gold 1 1 1 1 1 1 1 1 1 1

Inmet Mining Corporation 1 1 1 1 1 1 1 1 1 1

Husky Energy Inc. 1 1 1 1 1 1 1 1 1 1

Sherritt International Corporation 1 1 1 1 1 1 1 1 1 1

Suncor Energy Inc. 1 1 1 1 1 1 1 1 1 1

Kinross Gold Corporation 1 1 1 1 1 1 1 1 1 1

Imperial Oil Limited 1 1 1 1 1 1 1 1 1 1

Goldcorp Inc. 1 1 1 1 1 1 1 1 1 1

Enerplus Corporation 1 1 1 1 1 1 1 1 1 1

Crescent Point Energy 1 1 1 1 1 1 1 1

Vermilion Energy Inc. 1 1 1 1 1 1 1 1 1

Yamana Gold Inc. 1 1 1 1 1 1 1 1 1

SNC-Lavalin Group Inc. 1 1 1 1 1 1 1 1 1

Canadian Pacific Railway Limited 1 1 1 1 1 1 1 1 1

West Fraser Timber Co. Ltd. 1 1 1 1 1 1 1 1 1

Keyera Corp. 1 1 1 1 1 1 1 1 1

First Quantum Minerals Ltd. 1 1 1 1 1 1 1 1 1

Paramount Resources Ltd. 1 1 1 1 1 1 1 1 1

Alamos Gold Inc. 1 1 1 1 1 1 1 1

Centerra Gold 1 1 1 1 1 1 1 1

Hudbay Minerals Inc. 1 1 1 1 1 1 1 1

ARC Resources (formerly Trust) 1 1 1 1 1 1 1 1

Encana Corporation 1 1 1 1 1 1 1

Trinidad Drilling Ltd. 1 1 1 1 1 1 1

Uranium One Inc. 1 1 1 1 1 1 1

Thompson Creek Metals 1 1 1 1 1 1

Lundin Mining Corporation 1 1 1 1 1 1

Iamgold Corp. 1 1 1 1 1 1

Penn West Petroleum Ltd. 1 1 1 1 1 1

Agnico-Eagle Mines Limited 1 1 1 1 1

Canadian Oil Sands Limited 1 1 1 1 1

Talisman Energy Inc. 1 1 1 1

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Table 4 - Emergence of BHSCs Among Canada's Largest Companies, 2001 to 2010

(Shaded Cells Indicate Existence of BHSC)

COMPANY NAME 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Equinox Minerals 1 1 1

Silver Standard Resources Inc. 1 1 1 1

New Gold Inc. 1 1 1 1

SEMAFO INC. 1 1 1

NovaGold Resources Inc. 1 1 1

Athabaska Oil Sands 1 1 1

China Gold Inter'Resources 1 1 1

Trican Well Service Ltd. 1 1 1

Cenovus Energy 1 1

SouthGobi Resources Ltd. 1 1

Eldorado Gold 1 1

Detour Gold 1 1

NUMBER 23 31 35 39 43 44 46 53 57 56

PERCENTAGE WITH BHSCs 40% 53% 60% 67% 74% 76% 79% 91% 98% 97%

3.3 Industry and Economic Characteristics of Companies with

BHSCs

Table 5 provides basic information about the industry sectors and geographic scale of operations

of the 58 companies as of 2010, and the weighting of each industry sector in the initial

population of 146 companies examined.

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Table 5 - Industry Sector and Geographic Scope of Operations

Industry Sector of Primary Operations N

% of the Group of 58

Companies with BHSCs

% Weighting in the Original Group of Companies with Market Cap $1.5

Billion+

Metal & Mining 24 41% 21%

Oil & Gas 19 33% 21%

Pipelines 3 5% 3%

Transportation 2 3% 2%

Retail 1 2% 3%

Power Generation 1 2% 3%

Transportation Equipment 1 2% 1.5%

Merchandising - food stores 1 2% 4%

Industrial Products 1 2% 2%

Forestry, Pulp & Paper 1 2% 2%

Food Processing & Distribution 1 2% 0.5%

Engineering and Construction 1 2% 0.5%

Diversified Energy and Resources 1 2% 3%

Diverse – Other 1 2% 3%

Total 58 100 Not applicable*

* Total percentage for companies in the original group does not equal 100% due to non-representation of many sectors amongst the group of 58 companies with BHSCs.

Locations of Company Facilities and Operations N %

Broad Global 14 24

Limited Global 19 33

North America 11 19

Canada 14 24

Total 58 100

Almost three quarters (43/58) of the companies were in the metal & mining (24) and oil & gas

(19) industries. Other sectors represented include pipelines (3), transportation (2), diversified

energy & resources (1), power generation (1), retail (1), food merchandising (1), engineering and

construction (1), forestry (1), pulp and paper (1), parts and services for equipment and engines

(1), industrial production (1), and a single company with diverse operations. Nine sectors from

the original group of companies with $1.5 billion+ in market capitalization were not represented

in the group of companies with BHSCs.

Table 5 shows the industry sectoral weightings for companies with BHSCs (from amongst the

original group of 146) versus the weighting of that industry sector amongst the population of

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companies having market capitalizations of $1.5 billion or higher in 2010. These data are plotted

in Figure 2, which illustrates that the percentage of large cap companies in mining and in the oil

& gas industry with BHSCs outweighs their sector weighting, whereas for all other industries the

percentage of companies with BHSCs is similar to their large cap sector weighting. In other

words, it appears that the tendency to have a BHSC is higher in mining and in oil & gas than in

other sectors, an observation that makes sense given the inherently high potential for exposures

to operational hazards in these two sectors. This is consistent with the findings of prior studies.52

In terms of geographic scope of operations, 14 had broad global operations (defined here as

North America plus two or more continents), 19 companies had a limited global scope of

operations (defined for this study as operations in North America and at least one other

52 Jones (1999); Davidson, Nemec and Worrell (2001).

71

continent), 11 had operations only in North America, and 14 had operations limited to Canada.

As such, geographic scope of operations does not appear to be an obvious factor predicting the

presence or absence of a BHSC amongst large capitalization Canadian companies.

Figure 3 shows trends in the market capitalization for the companies between 2001 and 2010. In

Figure 3 (and all similar figures that follow), the black diamond shows the mean for N, the black

horizontal line is the 50th percentile value, the bar with vertical stripes shows the 25th and 75th

percentile values, and the thin vertical line is the range.

Over this period, the grand median market value was $4.02 billion CAD (with the grand

interquartile range being $1.78 billion to $12.62 billion CAD). In 2010, the largest company by

market capitalization, Royal Bank of Canada at $77 billion, did not have a BHSC. The third

largest by market capitalization, Suncor, at $60 billion, did have a BHSC. In 2010, the mean for

the top 150 companies was $9.6 billion, whereas it was similar at $10.6 billion for the subset of

companies with BHSCs.

72

Figures 4 and 5 show reported total revenues and after tax net profit between 2001 and 2010.

For the period examined, the grand median for total revenue was $1.78 billion CAD (grand IQR

$0.66 billion to $5.87 billion CAD). The grand median for net profit was $0.23 billion CAD

(grand IQR $0.09 billion to $0.66 billion CAD). In 2010, the mean net profit for companies

with BHSCs was $0.69 billion, while the mean for the 146 largest by market cap was

approximately $0.4 billion.

73

Note that data for market capitalization and net profit were available for the full 10 year period

for only 33 of the 58 companies. For the other 25 companies, only partial data covering 2 to 9

years were available. Data gaps were caused by companies undergoing new stock market

listings, de-listings, or mergers into other companies during the period. However, the data that

are available do not point to any significant systematic differences in the market value or

profitability of large cap companies that have and do not have BHSCs.

To summarize, these variables – profitability, market value, and geographic scope of operations

– do not appear to be correlated with the propensity of a company to have a BHSC. However,

companies in sectors known to be associated with more inherently dangerous operations53

(namely mining and oil & gas) do tend to be more likely to have BHSCs.

53 And, it might be noted, have a history on a global scale of major loss incidents (e.g. major oil spills, refinery fires

and explosions, mine structural collapses), and media attention.

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3.4 Health and Safety Information in Annual Disclosures

There was considerable variation with respect to the health and safety information published in

the annual public filings of the 58 companies for which annual reports and management

information circulars were available for the period 2001 to 2010. In any given year, about half to

two-thirds of the companies published some type of health and safety performance statistics

(most commonly accident rates), even in years prior to the inception of their BHSCs (Figure 6).

About a quarter to half provided a short health and safety status report (146 to 245 words on

average over the period) within their annual reports. The average length of these health and

safety reports changed little over the period, with the exception of one company where the length

grew from approximately 870 words in 2002 to 3900 words in 2011 (Figure 7). None of these

reports were ever described as being prepared by or attributed to the BHSC. It was rare for

corporate health and safety policy statements to be published (Figure 8).

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3.5 Governance Characteristics

3.5.1 Published Mandates

BHSC mandate descriptors were available for all 10 survey years for 20 of the 58 companies

(34%). Mandate descriptors for the 38 of the companies (66%) were available for periods

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between 2 and 9 years. Generally, once a company started to publish it is BHSC mandate in its

annual report or management information circular it continued to do so for every successive

year.

On review of the mandate statements, it was apparent that some of those statements described

activities that were fundamentally “passive”, and some could be characterized as “activist” with

varying degrees of intensity. Mandate statements that were considered to reflect a more

“passive” role for the BHSC used words such as: “assess”, “evaluate”, “observe”, “monitor” and

“oversee”. Mandate statements reflecting a more “activist” role for the BHSC used words such

as: “advises”, “recommends”, “approves”, “implements”, “develops”, “reports”, “ensures”,

“enforces”, “promotes”, “manages”, and “investigates”.

A year by year summary of the number of mandate statements published for each BHSC in

annual regulatory filings is presented in Figure 9 (one mandate statement per row). Figure 9 uses

solid black shading to denote “passive” mandate statements, and grey shading to denote

“activist” mandate statements.

In general, an increase is seen for all three parameters over the course of the study period.

However, the slope of line of best fit calculated for the data indicates that the total number of

mandate statements increases as a function of year at approximately 3.5 times the rate of the

increase in the number of “activist” mandate descriptors, and approximately 3 times the rate of

increase in numbers of BHSCs. In other words, as the numbers of BHSCs increased over the

decade, mandates expanded at a higher rate, with “passive” mandate tasks representing most of

that expansion. From the perspective of board governance theories, “passive” mandate

expansion can be viewed as evidence of agency theory in operation – in that the BHSC is taking

an increasing active oversight role; and “activist” mandate expansion can be viewed as

stewardship theory in operation – in that the BHSC members are lending their experience and

expertise to guide senior management in how to best manage these issues.

80

The absolute numeric trends in mandate statements, type (i.e. passive vs. activist), and BHSCs is

shown in summary format in Figure 10.

81

3.5.2 Charter of Operations / Operating Terms of Reference

During the initial 3 years of the period examined (2001-2003), 56% to 73% of companies with

BHSCs indicated in their annual regulatory filings that their BHSCs had formal charters of

operations. By 2010 this rose to 93% (Figure 11).

FIGURE 10 Expansion in BHSCs and Mandates Over Time

y = 14.552x - 29057 R 2 = 0.9827

y = 4.3939x - 8755.1 R 2 = 0.8207

0

50

100

150

200

250

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Year

Number

Total Mandate Items Grey Mandate Items Total No. BHSCs in Year Linear (Total Mandate Items) Linear (Grey Mandate Items)

82

Charters addressed a variety of subjects, including:

minimum numbers of members on the BHSC;

subject matter training for BHSC members;

requirement for “independent” members;

selection and duties of the chair and vice-chair;

quorum;

authority to engage independent counsel and advisors.

Between 2001 and 2009, companies with BHSCs typically did not specify the number of

members required for the BHSC (only 4% to 28% did so year-to-year), but this figure jumped

markedly in 2010 with 63% of companies doing so (Figure 12).

83

In 2001, only 30% stated a requirement for BHSC members to receive subject matter training,

with this rising to 51% in 2010 (Figure 13).

84

Most companies (84%-93%) did not require BHSC members to be independent directors (Figure

14), which is somewhat surprising given that “passive” mandates amongst the group of BHSCs

expanded over the same period, and one might reasonably expect that oversight functions would

best be performed by a committee comprised of a majority of independents. This may suggest

that boards consider it more important for BHSC members to be insiders having knowledge of

company operations and health and safety issues, than arm’s length overseers of management

practices. This particular finding favours stewardship over agency theory.

A formal requirement for there to be an BHSC chair was reported54 by 44% to 58% of the

companies with BHSCs between 2001 to 2009, with this figure rising to 82% in 2010 (Figure

15)55. Reporting on the method of BHSC chair appointment also changed over the study period.

54 Presumably there were always chairpersons for the BHSC, but the tendency to state a requirement for same in

corporate disclosures increased over time.

55 Only one company described a requirement for a vice-chair of the BHSC, and indicated that the appointment was

made by the board of directors.

85

In the first 9 years of the study period, 72% to 93% of the companies with BHSCs provided no

information about how the BHSC chair was appointed. However, in 2010, 63% indicated that

the BHSC chair is appointed by the board.

There was also progressively more information provided over time with respect to the duties of

the BHSC chair. During the first two years of the study period none of the companies with

BHSCs provided any information on the chair’s duties in their annual reports or management

information circulars. However, in 2010 the duties of the chair were described by 61% of

companies with BHSCs (Figure 16).

86

Over time, charters also were specific in stating that the BHSC chairperson was selected and

appointed by the Chairperson of the Board (Figure 17).

87

Similarly, more information was provided over time relating to BHSC quorum requirements.

From 2001 to 2009, the percentage describing quorum figures rose from 4% to 25%, and 54% in

2010 (Figure 18). For most companies, quorum was 50% or 50% plus one member.

Reporting practices relating to the authority of the BHSC as a whole to engage independent

counsel or advisors at the expense of the corporation also changed over the study period. In

2001, this authority was described by only 7% of companies with BHSCs. It rose to 39% in

2009, and 64% in 2010. Interestingly, reports of BHSC members having authority to

individually retain independent counsel or advisors declined over the same period (Figure 19),

another observation that seems to argue against an agency theory perspective on the role of

BHSCs.

Information provided in the annual reports and management information circulars also suggests

that individual BHSC members may have lost the authority to call their own meetings of the

88

BHSC, or alternatively, reporting of this authority went-out-of-style. In 2002, 41% of

companies with BHSCs described this power, while only 22% did in 2011. This could, of

course, be simply a reflection of changes in reporting tendencies over time, as opposed to actual

changes in underlying operational practices.

3.6 BHSC Composition and Member Characteristics

3.6.1 Gender

A total of 501 unique individuals were identified as BHSC members of the 58 companies

included in the 10 year period reviewed. Of those, 401 (~80%) were believed to be male and 48

female (~10%), based on their names and / or the use of the titles “Mr.”, “Mrs.” or “Ms.”.

Gender could not be confirmed using these indicators for the remaining 52 members (~10%).

3.6.2 Age

Figure 20 shows the age distributions of members of the various company BHSCs over the

period examined. The average age for BHSC members in each year was approximately 60, with

the 25th and 75th percentile ages generally in the mid-50s to mid-60s. Some BHSC members

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were as old as mid-80s, and as young as mid-20s. The gradual rise in the upper age limit appears

to be a result of a small number of older BHSC members remaining in position from 2005 to

2010.

3.6.3 Academic Attainment

The highest levels of academic attainment varied considerably for the pool of BHSC members.

Thirty-one (6.2%) possessed research (e.g. PhD, EdD, ScD) or medical doctoral degrees, 108

(21.6%) held masters degrees (and five of those were also awarded honorary doctoral degrees),

24 (4.8%) held Juris Doctor or Bachelor of Law degrees, 199 (25.7%) obtained undergraduate

degrees (and six of those were also awarded honorary doctoral degrees), 3 (<1%) members had

no post-secondary education, and data was not available for the remaining 200 (39.9%). These

BHSC committee educational patterns were not compared to board patterns generally, and as

such it cannot be concluded that there was a tendency to put more highly educated board

members on BHSCs. However, the appointment of highly educated board members to BHSCs

would be reasonable from stewardship and resource-dependency perspectives.

90

3.6.4 Years of Board Experience

For each identified director, we determined his or her total years of experience on the board of

the subject company, as of the last year when that director was listed. BHSC members varied

considerably in years of experience as board directors for their companies (Figure 21).

Approximately 40% had been directors for under 5 years, and about 30% had served as directors

for more than 10 years. These data are based on 432 members, as data for 69 others were not

available.

3.6.5 Independent Status

The majority of BHSC members (365, ~81%) were considered to be independent directors, 75

(~17%) were listed as non-independent56 directors, and data were missing for 9 (~2%)

individuals.

56 A “non-independent” director is a person who is a member of the board of directors, and also holds an executive

officer in the company that the board governs (e.g. President, Chief Executive Officer, Executive Chair, etc.). An

91

3.6.6 Compensation and Shareholdings

The data indicate that in general, directors of large publicly traded companies are well-

compensated for their work. The non-independent BHSC members, who by definition would

also be company executives, had grand median annual compensation over the 10 year review

period for their combined executive management and directorial functions of $1.9 million CAD

(interquartile range $0.98 million CAD to $3.45 million CAD). Figure 22 shows a summary of

the total compensation received (in absolute figures, not inflation adjusted) by the non-

independent BHSC members by year. There is a clear increasing trend over time, but it should

be noted that data were only disclosed for 4% to 28% of the non-independent members in any

given year, which means that a reliable picture for the entire group cannot be provided.

The non-independent members (i.e. company executives) held widely varying values of shares in

their companies: from the low thousands at the lower end to $0.6 billion at the high end, with a

grand mean for the entire group of close to $28 million (skewed by some very high values), and

“independent” director is a person who is not employed by the company, nor provides services in any capacity other

than member of the board of directors and its committees.

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a grand median of close to $3 million (Figure 23). However, in most years, the 25th percentile

was several hundred thousand dollars, and the 75th percentile was several million dollars.

For independent members, the grand median total annual compensation received for services as a

board director was significantly lower at $0.13 million CAD over the period (interquartile range

$0.09 million CAD to $0.18 million CAD) (Figure 24). This figure was comparable to a

Conference Board of Canada study released in late 2011, which found average director

compensation amongst Canadian public corporations to be $0.122 million CAD in 2010.57

57 Conference Board of Canada (2011).

93

The independent members held widely varying values of shares in the companies: from zero

dollars to $380 million, with a grand median for the entire group being $617,000 (Figure 25).

Figure 26 provides higher resolution information on the means and 25th to 27th percentile values,

by excluding the ranges and adjusting the ordinate accordingly. For the period examined, the

grand mean shareholding for independent directors was approximately $3.3 million.

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In the first year of the review period, total compensation data were available for only 5% of the

independent members, and rose to 23% in year 2 and 98% in year 10. Data on securities held by

independent members were available for 86% to 93% of participants throughout all the survey

years.

3.6.7 Attendance at Meetings

Attendance rates for BHSC members improved notably over the period examined. In 2001, only

60% of members attended 100% of meetings. By 2010, 94% of members attended 100% of

meetings (Figure 27). This may reflect changes in the perceived importance of the issues

addressed by the BHSCs over time, or concerns of boards over the perceptions of stakeholders if

BHSC members failed to attend a high percentage of meetings, or general expectations relating

to diligent director conduct. Over this period, the number of BHSC meetings held annually was

relatively stable (4 per year on average).

95

3.6.8 Board Leadership Roles

Sixty-eight (14%) of the BHSC members were identified as chairs or committee chairs, and 2

(<1%) members were listed as vice chairs. It is assumed that the other 431 (~85%) individuals

were simply BHSC members. Several BHSC members were also listed as having other

leadership roles on the board, with 8 (2%) members serving as lead directors, 29 (6%) serving as

chairs of other board committees, 18 (4%) listed as board chairs, and 444 (89%) members not

identified as having any other board leadership roles.

3.6.9 External Executive or Board Involvement

Of the 501 individual members identified, 311 (62%) were listed as having some role on another

board. Eighty-five members (17%) had other executive roles within the company, and hence

were non-independent directors. As such, while BHSC charters typically did not mandate a

majority of independent members, it appears likely that such majorities were commonplace,

reinforcing the agency perspective of the purpose for BHSCs.

96

4 Contribution to Answering the Research Questions

How complete and accurate are the data?

The data in the series of Figures 1 through 27 vary in completeness, and consequently accuracy.

Readers should note the following:

Public companies are required by law to disclose the names of their board committees,

and as such, information on the existence of BHSCs amongst the subject companies can

be taken as complete and accurate in each of the years indicated.

Financial information presented in Figures 1 through 5 was consistently disclosed by all

of the subject companies in each fiscal year, and the accuracy of those figures is

contingent only on the accuracy of the source information produced by the companies.

Figures 6, 7, and 8 describe information disclosure practices for the numbers of subject

companies in each year, and require no qualification.

Figure 9 characterizes mandates. If a company disclosed a description of its BHSC

mandate in “year 1”, in every case the company continued disclosing the mandate in

every subsequent year for so long as the BHSC was extant. As such, Figure 9, and Figure

10 which is derived from Figure 9, accurately portrays mandate evolution.

Figures 11 reports on the existence of BHSC charters over time, and is based on

information drawn from regulatory filings and voluntary disclosures for the numbers of

companies indicated in each year. Some companies that described the existence of BHSC

charters in their “year 1” continued doing so in subsequent years, while other companies

did not do so consistently in each reporting year. As such, values in each year are

reflective of reporting and disclosure preferences, as opposed to the existence or

elimination of a formal charter.

Figures 12 through 19 describe governance characteristics or practices of BHSCs

described by BHSC charters, for those companies publishing charters in the years

indicated. As with Figure 11, they do not necessarily provide a complete picture as a

97

result of year-to-year differences in which companies elected to publish their BHSC

charters.

Annual disclosure of the names of board members is legally mandated, and most

companies in most years identified the board members belonging to the BHSCs. As such

data respecting BHSC member genders are believed to be very accurate.

Companies’ practices with respect to disclosure of board member ages varied between

companies and over time, resulting in different numbers of board members contributing

to the average age calculation in any given year. As such, Figure 20 is not based on

complete data. However, the average ages were observed to be similar over the time

period despite the differences in the sample composition in each year, and as such may be

reasonably accurate despite the gaps in source data.

Data on years of company board experience (Figure 21) and independent vs. non-

independent status were available for over 85% of BHSC members, and as such those

data are likely to be reasonably accurate.

Financial information relating to director compensation and shareholdings varied across

companies and over time, as did disclosures relating to director attendance as BHSC

meetings. As such the data presented in Figures 22 through 27 are incomplete in each

year, and qualified accordingly.

Statistics presented with respect to board leadership roles and external executive or board

involvement are based on information available for the cohorts of BHSC members in

each year, and may be understated as individuals may have performed such roles without

their companies disclosing those facts.

In view of the above, where Figures display time trends, the overall directional trend during the

subject period is likely to be more meaningful than the individual year-to-year variations in

values. These qualifiers should be borne in mind in the discussion that follows.

How prevalent are BHSCs?

98

As of 2010, 40% of Canadian publicly listed companies with market capitalizations of $1.5B+

had BHSCs (58 companies out of 146). This is generally consistent with, but higher than

findings of previous studies in the past decade from the United States, Canada, United Kingdom,

Australia and Asia, which suggested one-quarter to one-third.58

Have BHSCs become more commonplace over time?

In 2001 approximately 40% of the subject companies had BHSCs. By 2010, 97% did.

Are BHSCs more common in some types of business or sectors than others? If so, why?

It appears that BHSCs are statistically more likely to be created by mining and oil and gas

companies. As noted earlier in this paper, metal and mining companies constituted 21% of the

group of companies with $1.5 billion+ market capitalization values in 2010, but 41% of the

companies in that group had HSCs. There was similar over-representation in the oil and gas

sector, which constituted 21% of the companies with $1.5 B+ market capitalizations but 33% of

the companies having BHSCs. This is consistent with the expectation that companies engaged

in business operations with high inherent risks are more likely to establish BHSCs than those

with low inherent risks.

Companies in many sectors tend to emulate each other’s structures and processes, including

those in the area of corporate governance. One explanation for this, offered from a legal

perspective, is that officer and director liability risks are reduced by the adoption of practices

that confirm to norms for their organizational peers and context (Harrison, 1987). Simply stated,

if BHSCs are becoming a fixture of corporate governance, they would be expected to become

more prevalent generally over time. Another explanation is the theory of organizational

homophily, which, in its simplest sense, means that organizations copy one another’s structures

and processes. This phenomenon has been extensively studied59. Pathways for management

practice knowledge transfer amongst companies in the same sector include movement of

58 Bondy, Matten and Moon (2008); Holder-Webb et al (2009); Roy (2009); Akhtaruddin and Haron (2010).

59 Greenhalgh, T., Robert, G., Macfarlane, F., Bate, P., & Kyriakidou, O. (2004).

99

management personnel between organizations, and information sharing through fora such as

industry conferences and participation as members of industry associations.

Management practice diffusion amongst peers may offer an explanation for the evolutionary

pattern and prevalence of BHSCs among mining and oil and gas companies in the subject group.

Figure 28 shows that many of the mining companies in the group of large cap companies (19/27

= 70%) having BHSCs were members of one or more of Canada’s three major mining industry

associations: the Mining Association of Canada, and / or the Ontario Mining Association or

Mining Association of British Columbia60.

Figure 28 - Large Cap Mining Companies with BHSCs (Year Established and Operating) and

Membership in National or Provincial Mining Industry Associations, 2001 to 2010

Not a Member of Any Associated Indicated Below (Black Shaded Cell)

Mining Association of Canada Ontario Mining Association Mining Association of BC

COMPANY NAME 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Teck Resources Limited 1 1 1 1 1 1 1 1

Cameco Corp. 1 1 1 1 1 1 1 1 1 1

Barrick Gold 1 1 1 1 1 1 1 1 1 1

Inmet Mining Corporation 1 1 1 1 1 1 1 1 1 1

Sherritt International Corporation 1 1 1 1 1 1 1 1 1 1

Suncor Energy Inc. 1 1 1 1 1 1 1 1 1 1

Kinross Gold Corporation 1 1 1 1 1 1 1 1 1 1

Goldcorp Inc.

Yamana Gold Inc.

First Quantum Minerals Ltd. 1 1 1 1 1 1 1 1 1

Paramount Resources Ltd. 1 1 1 1 1 1 1 1 1

Alamos Gold Inc. 1 1 1 1 1 1 1 1

Centerra Gold 1 1 1 1 1 1 1 1

Hudbay Minerals Inc. 1 1 1 1 1 1 1 1

Uranium One Inc. 1 1 1 1 1 1 1

Thompson Creek Metals Company Inc.

Lundin Mining Corporation 1 1 1 1 1 1

Iamgold Corp. 1 1 1 1 1 1

60 Determined by review of the web sites of the cited associations.

100

Figure 28 - Large Cap Mining Companies with BHSCs (Year Established and Operating) and

Membership in National or Provincial Mining Industry Associations, 2001 to 2010

Not a Member of Any Associated Indicated Below (Black Shaded Cell)

Mining Association of Canada Ontario Mining Association Mining Association of BC

COMPANY NAME 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Agnico-Eagle Mines Limited 1 1 1 1 1

Equinox Minerals 1 1 1

Silver Standard Resources Inc. 1 1 1 1

New Gold Inc. 1 1 1 1

SEMAFO INC. 1 1 1

NovaGold Resources Inc.

China Gold International Resources 1 1 1

SouthGobi Resources Ltd. 1 1

Eldorado Gold 1 1

Detour Gold

The Mining Association of Canada has developed and adopted a voluntary industry corporate

social responsibility standard called “Towards Sustainable Mining” (“TSM”). The standard was

formulated by the members of the Association, and was intended to codify what were considered

to be consensus best practices for mining companies, relating to environmental protection,

community impacts and relations, and health and safety. Among other things, the TSM “Health

and Safety Framework” states the member companies have agreed to: “Establish clearly defined

and communicated responsibility and accountability at the board and senior management level

for the company’s safety and health performance.”61

Figure 29 shows that all of the oil and gas production companies in the group of large cap

companies that had BHSCs at some point between 2001-2010 were members of the Canadian

Association of Petroleum Producers (the main association for such companies in Canada)62.

61 Mining Association of Canada.

62 Canadian Association of Petroleum Producers.

101

Figure 29 - Large Cap Oil & Gas Companies with BHSCs (Year Established and Operating) and

Membership in the Canadian Association of Petroleum Producers, 2001 to 2010

(Bars denote Membership in the Canadian Association of Petroleum Producers for the year indicated)

COMPANY NAME 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Canadian Natural Resources Limited

Husky Energy Inc.

Suncor Energy Inc.

Imperial Oil Limited

Enerplus Corporation

Crescent Point Energy

Vermilion Energy Inc.

Paramount Resources Ltd.

ARC Resources

Encana Corporation

Penn West Petroleum Ltd.

Canadian Oil Sands Limited

Talisman Energy Inc.

Athabasca Oil Corporation

Cenovus Energy

The Canadian oil and gas industry has its own industry supported safety association called

“Enform”, which has established a variety of practice guidelines and protocols. The Chemical

Industry Association of Canada (to which many oil and gas companies also belong) promulgates

a voluntary safety standard called the Responsible Care Program®. Common to these are

requirements to establish processes for senior management oversight and accountability with

respect to health and safety issues. 63

What are the BHSC’s mandates?

BHSCs have a mix of passive (monitoring, reviewing) and activist (developing, establishing,

recommending) functions. From the rational economic perspective these may alternatively be

characterized as control and oversight, and strategic functions, respectively. Between 2001 and

2010 there was an overall trend of BHSC mandate enlargement, consistent with evolving agency

63 Enform; Canadian Chemical Producers Association.

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and stewardship roles. Typically, company disclosures provided no insight as to the reasons for

mandate changes, where they occurred, nor are their obvious reasons for the trend in

comparatively greater enlargement in the control and oversight functions as opposed to the

strategic functions. It is conceivable that as the committees “grow into” their role, or observe

events in their external environment (such as high profile industrial accidents or similar incidents

reported in the media, or prosecutions of companies for health and safety violations), they (or

their boards) become more aware of the importance of control and oversight, and amend their

mandates accordingly. From a director liability management perspective, it would also be

prudent to choose not to become more heavily involved in a strategic advisory function in

relation to health and safety issues, particularly if the BHSC members themselves are not experts

in the subject area. Finally, the idea of liability being mitigated by adoption of the normative

industry practices would predict that if several companies with BHSCs amend their mandates to

enlarge the control and oversight function, other companies will follow.


The governance practices described in the annual disclosures of the companies examined closely

correspond with those that are recommended by a number of generally accepted sources and

authorities on good governance.64 Given the extent to which the literature describes the

challenges of close adherence to board governance best practices, and some of the inherent

conflicts faced by directors in performing a control and oversight role, it is a surprising

observation. Review of administrative records does not, however, allow examination “under the

hood”, and consequently it cannot be known if the contents of company disclosures are

statements of fact, or public relations materials.


members?

64 United Kingdom Committee on the Financial Aspects of Corporate Governance (1992); United Kingdom

Financial Reporting Council (1998). United Kingdom Health and Safety Commission (1999); United Kingdom

Department of the Environment (2000); Acona Ltd. (2006).

103

BHSCs are comprised of directors who tend to be older, mostly male65, and are typically

professional corporate directors66 (who are most often retired or actively employed executives by

occupation), and most serve in the capacity of independent directors. With the exception of the

last point, these are largely the same observations made about board committees and boards in

general by Kesner (1988). For the companies studied, the predominance of independent

directors on BHSCs is not unexpected, given the predictions of agency theory and the

observations with respect to passive mandate expansion. Most BHSC members (2/3rds) had 10

years or less experience on their boards, and one-third had five years or less. Kesner (1989)

observed that board committee members tended to have longer experience than all board

members on average, and therefore from one perspective, the short duration skewing in board

tenure of the BHSC members was unexpected. However, it is uncertain if the corporate

directorship tenure patterns observed in 1988 would necessarily be the same two decades

onward. The current study did not compare the subject company board tenures of BHSC

members with their board peers overall.

The BHSC members, whether non-independent or independent, received what can only be

characterized as high to very high levels of compensation from their companies for their roles in

what are effectively part-time jobs. Many also held very significant shareholdings in those

companies. For boards, there is some evidence that the value of director shareholdings is

positively associated with longer board service (which could simply be due to there being more

time to acquire and be granted stock, as opposed to longer service creating share value), and

superior company financial results67 (which could simply be an autocorrelation). In the case of

65 Though in that respect the gender composition of BHSCs simply reflects the gender composition of boards of

directors generally. As of September 2014, it was estimated that 89% of directors of major Canadian corporations

were male (The Financial Post).

66 Here we used the term “professional corporate directors” to refer to an individual who holds or has held director

roles in more than one publicly traded corporation, and for whom this is his / her primary occupation.

67 Dayha and McConnell, 2003.

104

independent directors on BHSCs, compensation levels were virtually identical to director

compensation levels in Canadian public corporations generally for the same time period.

A question not explored in the current study is whether there might be a predicted relationship

between BHSC member compensation, the effectiveness of BHSC oversight and control

functions, and company accident rate and cost outcomes. The social embedding perspective

suggests that directors seek directorships in part to earn compensation, that they feel affiliation

with, and that they are often beholden to the CEO for continuation of their board position. One

can imagine a variety of organizational contexts where BHSC member compensation could, and

might not, have any implications for workplace health and safety conditions and performance

outcomes.

For example, if a company had a strong safety culture and had internalized excellent health and

safety management practices, and achieved consistently good results, there would likely be no

relationship between BHSC compensation and accident rate costs or outcomes. Why? Because

the consistently good outcomes would never give rise to a need for the BHSC to initiate

necessitate corrective intervention or to act to ensure CEO accountability, and hence, BHSC

members would never face a situation where their board member self-preservation motives

would come into conflict with their oversight and control functions.

However, if a company displayed a pattern of poor results, and BHSC intervention and direction

to the CEO was warranted, BHSC members with very high compensation levels would logically

perceive themselves with much to lose by attracting the displeasure of the CEO, which might

conspire to prevent proper discharge of the BHSC oversight and control functions. In such a

scenario, a variety of rationalizations or justifications for inaction can be imagined, such as

uncertainty as to the statistical significance of a pattern of poor results, whether such results are

random or a one-time event, or whether the company’s performance is materially different from

reasonable comparator firms, etc.

5 Potential Implications for Other Research Questions

Why do boards of directors of companies establish BHSCs?

105

The obvious answer to this question would seem to be “to ensure proper management of health

and safety issues by the company”, as is suggested by the mandates described herein, and the

tendency of such committees to be more common amongst companies in higher risk extractive

industries. However, the desire does not necessarily ensure results, and there could be other

motivations, the principal ones being to shape positive stakeholder impressions, or to institute a

normative industry practice believed to be beneficial for director liability mitigation in the event

of a serious loss or contravention.

Do BHSCs operate in accordance with their stated mandates?

The study described in this Chapter could not “look under the hood”, and hence provides no

insight into this question. Intuitively it might be imagined that if BHSCs do indeed operate in

accordance with their mandates, it could result in good management of health and safety by the

company, and improvements in performance outcomes. However, as noted in Chapter 2 of this

paper, there is considerable evidence that boards and their sub-structures often do not operate in

accordance with their mandates, and often lack the time, resources and knowledge necessary to

do so.

How much influence do BHSCs exert on the boards to which they report, and the executives

of their companies?

It is not enough for a BHSC to have and function in accordance with an appropriate mandate.

Boards must listen to and act on the advice of their BHSCs, which will often mean giving

direction to executives. The current observational study provides no direct evidence as to the

degree of influence that BHSCs wield in their organizations. However, the characteristics of the

BHSC members suggest that BHSCs are not necessarily a “dumping ground” for weak, non-

contributing or quota-satisfying token board members. On the contrary, the BHSC members of

the companies examined in this study are well educated, well qualified, accomplished, well

compensated, and generally “on par” with their board peers, and were mostly independent

directors on their boards.

This could mean a few different things. If the appointees to the BHSC are respected and

influential members of the board, then management of health and safety may have been an

106

important priority for the company. Alternatively, the company may have sought to convey an

impression concerning the importance of health and safety to the company, and surmised that

this could not be achieved by populating their BHSC with the weakest members of the board.



The study described in this Chapter provides no indication as to whether BHSCs may be

instrumental in driving OHS improvements. However, it appears on paper at least, that for most

BHSCs there are governance processes and structures, and individual members’ characteristics

that might reasonably be necessary for BHSCs to function in ways that could affect company

management of OHS.

In cases where BHSCs do appear to have been instrumental in the achievement of improved

company OHS compliance and performance, by what mechanisms did this happen?

The study described in this Chapter provides no information to answer this question. However,

it is explored in subsequent Chapters.

107

Chapter 5 Accident Rate Trends of Major Canadian Corporations Having

Board Health and Safety Committees, 2002-2014

1 Introduction

This Chapter describes research conducted to characterize the multi-year accident rate

performance of the BHSCs examined in Chapter 3 in relation to peer industry trends, to

determine whether there were significant differences. In doing so, it provides information

bearing on question xi for the period studied.

2 Methods

2.1 Collection of Injury Rate Data for Companies with BHSCs

As noted in Chapter 2, it has become increasingly commonplace over the past two decades for

companies to publish annual reports describing objectives, activities and achievements relating to

their efforts to minimize adverse effects on the natural environment, protect the health and safety

of their workforce and host communities, and generally advance community and / or global

welfare through philanthropic support of educational, health, arts and social institutions and

agencies. These are commonly entitled “sustainability reports” or “social responsibility reports”.

Consensus guidelines for “sustainability management” or “corporate social responsibility”

practices and reporting have been published by The Global Reporting Initiative68, and by the

International Finance Corporation of The World Bank69, and company reports frequently reflect

adoption of one or both guidelines.

68 The Global Reporting Initiative.

69 International Financial Corporation.

108

The search for these reports described in Chapter 3 determined that many of the companies

identified amongst the original set of 58 with BHSCs as of 2010 commenced reporting of

accident rate information at some time in the period 2002-2010, but there were differences in the

quantity and types of accident rate data published by those companies.

An internet search was performed to determine whether there were sustainability / social

responsibility reports posted to the internet for each the 58 companies originally identified as

having BHSCs as of 2010, either on the company’s web site or another site, as of 2013 or 2014.

Where such a report was located for any year, the search was continued to locate sustainability /

social responsibility reports for each prior year back to 2002, and up to 2014.

For each company all of the located reports were reviewed to determine whether the company

disclosed accident rate data, whether in the form of the annual Total Injury Frequency Rate70

(“TIFR”) or Lost Time Injury Frequency Rate71 (“LTIFR”), or both. Identified data were

extracted and recorded, and used to produce time trend plots showing rates for the years

reported. As a convention most companies reported actual rate figures, but some companies only

provided trend line graphs with axes, and in those instances the figures were estimated against

the rate axis.

2.2 Injury Rate Disclosure Practices of the Companies with

BHSCs

Of the initial set of 58 companies with BHSCs, 26 reported TIFRs for one or more years in the

70 Some companies call this the “All Injury Frequency Rate” (“AIFR”). This is the number of lost time (as defined

in the footnote hereafter) injuries plus the number of injuries that necessitated medical aid by a health care

professional (i.e. treatment beyond administration of first aid) but did not result in lost time, plus the number of

injuries that required re-assignment of the injured person to modified duties at the work place, per 200,000 person

hours worked in the calendar year.

71 A “lost time injury” is commonly defined as an injury that results in time away from the work place on account of

the injury, after the day on which the injury initially occurred. The “lost time injury frequency rate” is the number

of lost time injuries per 200,000 person hours worked in the calendar year.

109

period 2002-2014, and 22 reported LTIFRs for one or more years in the period 2000-2014. The

number of companies reporting injury rates in any given year ranged from one to 26 for TIFRs,

and one to 19 for LTIFRs.

Of the 26 reporting TIFRs, one company – Hudbay Minerals – reported TIFR rates that were

approximately 30 times higher than the mean for the other 25 companies at the start of the

period (with standard deviations for the 25 companies ranging from 19% to 94% of the mean

over the period), and approximately 5 times higher in the latest available reporting year for that

company (2012). However, Hudbay’s LTIFRs were comparable to other mining companies.

For this reason we suspected anomalies in Hudbay’s TIFR data, or use of a definition of “injury”

that was markedly different from the definition used by other 25 companies, and for these

reasons Hudbay was excluded from the data set.

2.3 Identification and Compilation of Peer Comparison Data

Searches were conducted with the goal of identifying accident rate data for Canadian employers

generally, and specifically the industry sector peers of the subject companies comprising the bulk

of the initial group of 58 companies with BHSCs:

1. An internet search was performed using the following combinations of words:

a. “accident (or injury) + rates + workplaces (or occupational) + Canada”

b. The terms in a. + “mining” or “oil and gas” or “oil”72

2. Searches were performed of the web sites of the following organizations73, in an effort to

locate comparative industry data:

72 The words “mining” or “oil and gas” or “oil” were used because approximately 2/3rds of the initial 58 companies

were in one of those industry sectors.

73 Accessed initially on September 9, 2015, and again on December 2, 2015.

110

a. The Mining Association of Canada

b. The Ontario Mining Association

c. The Mining Association of British Columbia

d. The Canadian Association of Petroleum Producers

e. International Labour Organization

f. Worksafe Alberta74

g. Worksafe British Columbia

h. Workplace Safety and Insurance Board of Ontario

i. Employment and Social Development Canada

3. Custom accident data reports were ordered from the Association of Workers

Compensation Boards of Canada, using the following specifications:

Year(s): 2001-2013

Provincial Jurisdiction(s): ALL

Filtered by the following Industries: Mining, Quarrying and Oil Well Industries

Lost Time Injury data: table of Industry data, Jurisdictions and Years across the top, where “Lost

Time Injury” means an injury where a worker is compensated for a loss of wages following a

work-related injury (or exposure to a noxious substance), or receives compensation for a

permanent disability with or without any time lost in his or her employment.

Some of the comparative data that was found included annual rate values, but some sources only

provided trend line graphs with numbered axes, and in those instances the figures were estimated

against the rate axis. Some rate figures were reported in different units than those conventionally

74 This organization and those listed thereunder are provincial and federal jurisdiction occupational health and

safety regulatory and enforcement agencies.

111

used (e.g. injuries per 1000 persons, versus injuries per 200,000 person hours worked), and in

those cases the data were converted to permit comparisons between data expressed in the same

units.

2.4 Data for Companies Not Having BHSCs

While this study is concerned with the performance of companies with BHSCs relative to

companies not having BHSCs, it was not practical to conduct a systematic review of the

sustainability / social responsibility reports of the 88 large market capitalization (i.e. $1.5+

billion CAD) identified in the 2010 fiscal year as not having BHSCs (listed in Chapter 3), in

order to obtain comparison data. In addition, as indicated in Chapter 3, the sectoral profiles of

companies not having BHSCs were somewhat different from those having BHSCs – most

notably, those without BHSCs were largely “white collar” service sector companies (e.g.

financial, insurance, property asset management), while those with BHSCs were mostly resource

or industrial companies. As such, practicality aside, the sectoral differences between the two

groups would preclude a fair comparative analysis given the considerable differences in the

inherent hazards attendant to the operations of companies in those different sectors.

In addition, the search for comparators determined that for the periods under study, “all

Canadian employer” data were available for reportable workplace injuries (i.e. TIFRs), and for

portions of the period under study there were Ontario mining industry, and Alberta petroleum

industry comparative data available.

For the above reasons, a decision was made to further segment the analysis of the reporting

companies having BHSCs, by focusing specifically on mining companies and oil and gas

companies, and comparing their performance to their broader peer sector reference groups.

3 Findings

Raw data for individual companies and comparators are shown in Tables 1a, 1b and 2.

Companies are listed in the table in order of the year of commencement of reporting.

114

Table 2 - Comparison Data

Parameter Data Source Year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

All Canadian Workplaces (Total Injury Frequency Rate)

Employment and Skills Development Canada

2.40 2.30 2.15 2.10 2.00 1.90 1.80 1.60 1.40

Alberta Upstream Oil & Gas Production / Exploration Companies (LTIFR)

Alberta Workers’ Compensation Board

0.24 0.23 0.18 0.17 0.12 0.12 0.10 0.11 0.12

Ontario Mining Industry Member Companies (LTIFR)

Ontario Workplace Safety and Insurance Board

1.75 1.40 1.25 1.32 1.15 0.97 1.00 1.13 1.87 0.80

Blank cells indicate no available data

115

4 Discussion

4.1 Historical Workplace Injury Rate Trends in Canada

Statistics compiled by the Association of Workers’ Compensation Boards of Canada indicate

that the average annual TIFR for all Canadian reporting companies75 has been declining

progressively over the past three decades (Figure 1)76.

75 “Canadian reporting companies” are all those which held accounts (voluntarily or as a statutory requirement) with

the provincial and territorial workers’ compensation agencies in each of the indicated years. The actual number of

companies in this group

76 Source: Employment and Social Development Canada calculations based on data from the Association of

Canadian Workers’ Compensation Boards (July 2012), and “Statistics Canada Labour Force Survey Estimates, by

sex and age group, annual (CANSIM Table 282-0002), Ottawa, Statistics Canada, 2011. TIFR and the “accepted

claims rate” are identical measures, representing the sum of lost-time and medical aid injuries. The sources do not

cite the number of employers represented by these data, but as of December 31 2014, there were over 300,000

employer accounts in Ontario alone (Ontario Workplace Safety and Insurance Board. http://www.wsibstatistics.ca/

(Accessed December 18, 2015)), leading to the expectation that the total number of employers nationally

represented by this graph would be in excess of one-half million.

116

Since this paper is focused on the period for which company data is available, the data from

Figure 1 for 2002 onward were converted to units of total injuries per 200,000 person hours per

year (the standard unit used by most companies and provincial / territorial workers’

compensation agencies), and is plotted in Figure 2 for the period of interest.

4.2 Companies with BHSCs versus All Canadian Reporting

Companies

Figure 3 shows the average annual TIFR for reporting companies with BHSCs compared to all

Canadian reporting companies for the period 2002-2010. The magnitudes and slopes of the two

trend lines for the annual averages are very similar, but the actual average values for the

companies with BHSCs show much higher year to year variation than the national averages. For

the period 2006 to 2010, the standard errors for the BHSC TIFR averages overlap with the

national averages. Table 3 shows the number of companies with BHSCs contributing to the

reported average TIFR in each year, and what that constitutes as a percentage of the large market

capitalization Canadian companies having BHSCs in each year. From Table 3 it can be seen

that prior to 2007 fewer than 20% of companies with BHSCs reported TIFR statistics. The

companies with BHSCs that did report TIFR statistics in each year cannot be considered a

117

representative sample of the entire group. As such, while Figure 377 suggests that the TIFRs of

companies with BHSCs are not markedly different from Canadian reporting companies overall,

the sample size in each year is too small to draw any conclusion with respect to the performance

of companies with BHSCs versus the comparator group.

77 Note: Several time-trend figures in this Chapter display equations showing slopes and intercepts, and the

associated R2 values. Where these R2 values appear they are strictly mathematical calculations of correlation, and

are not intended to imply the presence of a statistically significant correlation. Similarly, where standard error bars

are shown in Figures in this Chapter, they are strictly mathematical calculations of the descriptive statistic, and are

not intended to imply any specific degree of certainty with respect to the overall distribution of the data, nor to infer

relationships.

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4.3 Mining Companies with BHSCs versus Ontario Mining

Sector

While many mining companies with BHSCs report TIFRs, we were unable to find any mining

industry comparator TIFRs from any Canadian jurisdiction78. However, LTIFR data are

published by many of the subject mining companies, and comparator data are available for the

period 2004-2013 for the Ontario mining industry79. It should be noted that while many of the

BHSC mining companies have operations in Ontario and / or head offices located in Ontario, all

of the BHSC mining companies have mines in several jurisdictions within Canada and / or

internationally; and as such, those companies’ published LTIFRs are in fact composites of the

experience at all of their operations across the globe. In contrast, the Ontario mining industry

comparator data reflects experience solely for mining operations within Ontario. Consequently,

the Ontario industry is not in fact a properly matched group to compare with the BHSC mining

companies.

Figure 4 shows the average annual LTIFR for reporting mining companies with BHSCs

78 The Ontario Mining Association publishes TIFR data for its member companies, but of the 86 members (as of 2015), only 36

were actually extraction mining companies. The remaining 50 members included engineering consultants, technology services

companies, law firms, etc. As such, the Ontario Mining Association data are not a suitable comparator for the group of mining

companies with BHSCs, which is comprised only of companies engaged in actual mining operations.

79 Ontario mining industry obtained from the Ontario Ministry of Labour web site, citing Ontario Workplace Safety and

Insurance Board data. Comparison data were not available from British Columbia or Quebec, the other two major mining

jurisdictions in Canada.

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compared to the Ontario mining industry for the period 2004-2013. The magnitudes of the two

trend lines for the annual averages are very similar over the period, but in the latter half of the

period the BHSC mining company rates are consistently lower than the Ontario mining industry

average. This pattern, in combination with higher rates for the BHSC mining group in the first

half of the period, produced a trend line with a steeper declining slope. For four of the 10 years

the standard errors for the BHSC LTIFR averages overlap with the Ontario mining industry

averages.

Table 4 shows the number of mining companies with BHSCs contributing to the reported

average LTIFR in each year, and what that constitutes as a percentage of the large market

capitalization Canadian mining companies having BHSCs in each year (using data from Chapter

3). From Table 4 it can be seen that from 2006 onward approximately 40% of mining

companies with BHSCs reported LTIFR statistics in each year. Figure 4 suggests that (a) the

magnitudes of LTIFR values of the two groups were similar in each year; (b) the directional

trends are similar, and (c) the mining companies with BHSCs have shown performance

improvements in excess of the Ontario mining industry overall. However, as with the overall

sample set shown in Table 3, different numbers mining companies with BHSCs reported LTIFR

statistics in each year, the absolute numbers reporting in each year were not large, the resultant

BHSC averages cannot be considered a representative sample of the entire group of mining

companies with BHSCs.

4.4 Oil & Gas Companies with BHSCs versus Alberta Petroleum

Production Sub-Sector

Many of the oil and gas companies with BHSCs disclosed TIFRs and LTIFRs for one or several

years during the subject period. Most of these companies have a large percentage of their

workforces at locations in Alberta, most are upstream industry producers, and have

comparatively little in the way of personnel or operations elsewhere in Canada or abroad. As

such, it was reasonable to use comparator data from the Alberta oil and gas industry, and such

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data were published by the Alberta Workers’ Compensation Board (“AWCB”)80. The

80 Alberta Workers’ Compensation Board. Custom report LR000199971, generated April 14, 2015, and

http://work.alberta.ca/documents/OID-upstream-oil-and-gas.pdf , and http://work.alberta.ca/documents/OID-upstream-oil-and-

gas.pdf. Comparator data were also available from the Canadian Association of Petroleum Producers (“CAPP”), which provided

rate data for its members. However, as with the Ontario Mining Association, CAPP’s membership is comprised of both

production companies (of which there are 90), and a variety of other types of companies (of which there are 150) not involved in

oil or gas production; and consequently the CAPP data are not suitable for comparison with the BHSC oil and gas companies.

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AWCB reports data for the “upstream oil and gas industry”, as well as the following sub-sectors

comprising that group: Petroleum Production/Exploration, Oilfield Maintenance and

Construction, Well Servicing with Service Rigs, Drilling of Oil and Gas Wells, Downhole and

Other Oilfield Services, Oil Sands, and Oilfield Trucking Services. LTIFR data were available

for a maximum of eight oil and gas companies BHSCs for the period 2006-2014, and six of

those companies were primarily producers (the other two were primarily pipeline or oil sands).

Therefore, data for the “Petroleum Production/Exploration” sub-sector was used for

comparison81.

Figure 5 shows the average annual LTIFR for reporting oil and gas companies with BHSCs

compared to the Alberta production/exploration sub-sector for the period 2006-2014. The

magnitudes of the two trend lines for the annual averages are comparable for 2006-2011, but

diverge markedly for 2012-2014. Trend lines were not added because of the obvious difference

in the directional trends.

Table 5 shows the number of oil and gas companies with BHSCs contributing to the reported

average LTIFR in each year, and what that constitutes as a percentage of the large market

capitalization Canadian oil and gas companies having BHSCs in each year.

From Table 5 it can be seen that from 2007 onward between 1/5th and 1/3rd of oil and gas

companies with BHSCs reported LTIFR statistics in each year. As with the overall sample set

81 For the period of interest, there were between approximately 5,000 and 7,000 employers per year in this reporting

sub-sector, and as such it is unlikely that the overall sub-sector rates are heavily influenced by the large sizes of the

reporting companies having BHSCs, and hence autocorrelation is not considered likely.

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shown in Table 3, the oil and gas companies with BHSCs that reported LTIFR statistics in each

year cannot be considered a representative sample of the entire group of oil and gas companies

with BHSCs. As such the sample size in each year is too small to draw any conclusions with

respect to the performance of companies with BHSCs versus the comparator group.

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5 Contribution to Answering the Research Questions


with) improvements in company OHS performance?

To answer this question in the affirmative, there should be convincing evidence that the OHS

performance improvements experienced by companies with BHSCs are superior to those of

companies that do not have BHSCs. Over the time period under study, there were progressive

year-over-year reductions in the Canadian national TIFRs, and also in the TIFRs of the Ontario

mining industry overall, and in the LTIFRs for the Alberta petroleum production / exploration

sector. For the overall group of companies with BHSCs, TIFR declined overall in the period

examined, but there was a decline followed by an upswing in the first half, with progressive

annual declines in the latter half. When the annual variability is set aside by use of trendlines,

the magnitudes and slopes were very similar to the national data. There are, however, severe

limitations associated with the data used in formulating those trendlines, as described below.

With respect to the trend observed in the group of companies with BHSCs, it is important to bear

in mind that for each of the years from 2002-2014, the actual numbers of companies with

BHSCs that elected to report their data varied (increasing each year), as did the types of data

reported (TIFRs and LTIFRs)82. As such, the “population” of companies with BHSCs actually

changed each year. Had the complete group of companies with BHSCs reported in each year,

the resultant overall and sectoral trend lines for the group might have looked very different,

potentially showing significantly better comparative performance (meaning that the available

data are susceptible to type 2 error), or not (meaning a correct conclusion of non-significant

differences). That being said, it would be reasonable to expect that companies with BHSCs

having comparatively better TIFR and / or LTIFR performance than their peers or industry rates

82 Of the initial set of 58 companies with BHSCs, 26 reported TIFRs for one or more years in the period 2002-2014,

and 22 reported LTIFRs for one or more years in the period 2000-2014. The number of companies reporting injury

rates in any given year ranged from one to 26 for TIFRs, and one to 19 for LTIFRs.

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generally would be inclined to trumpet their successes. As such, non-disclosure may have been

a reflection of poor performance, in which case, inclusion of data from non-respondents might

have shown the overall performance of the BHSC group to be worse than their sector

comparators and industry generally. Unfortunately we simply don’t know the real picture for the

period studied.

From the research described in Chapter 4, it is known that only 58 large Canadian public

companies had BHSCs as of 2010, and these very likely constitute almost all such committees

among Canadian corporations83. By comparison, there are estimated to be over 500,000

companies in Canada84. Of the latter group, the large majority are expected to be in industries

that are not as inherently hazardous as mining or oil and gas production, and if that assumption

is correct, then one would expect the overall rate for all Canadian employers to be lower than for

mining or oil and gas production.

However, more focused comparisons of accident rate trends of BHSCs in the mining sector and

the oil and gas sector with trends of their peer sectors also fails to reveal dramatic differences in

the magnitudes or rates of decline in accident rates between the groups. Again, we find no

evidence at the macro level of a performance-improving effect of BHSCs.

There are, however, several limitations inherent in the data for the subject mining and oil and

gas companies, that preclude a robust analysis. This includes: (1) small (and different) numbers

of companies with BHSCs reporting in each year; (2) differences in the jurisdictions of

operations of the companies with BHSCs (particularly for the miners); and (3) differences in the

composition of the TIFRs and LTIFRs reported in company sustainability / social responsibility

reports and provincial workers’ compensation agencies (the companies often include both

employee and contractor injuries in their rate calculations, whereas workers’ compensation data

83 We assume that smaller market cap public companies and privately-owned companies were far less likely than

large cap companies to have BHSCs.

84 Actual figure could not be located. Estimated based on there being 300,000 WSIB employer accounts in Ontario,

and that province constituting one third of Canada’s GDP.

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only reflect employee injuries). It is also possible that the companies that have chosen to

establish BHSCs engage in operations that are, on average, more inherently hazardous than

those of their industry peers, and if that is the case, rate comparability with the peer group could

be viewed as an indication of superior risk management by the companies with BHSCs.

In summary, this study of accident rate trends has not produced evidence to suggest that at the

macro level, the formation and operation of BHSCs leads to performance that is superior to the

peer secular trend. However, the limitations of this study similarly preclude rejection of the

hypothesis that BHSCs can be instrumental in driving superior performance outcomes. This

possibility is explored further in Chapters 6 and 7.

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Chapter 6 Survey of Governance Practices and Impacts of Board Health and

Safety Committees of Large Canadian Corporations

1 Introduction

This Chapter describes a survey of the BHSCs of 51 large Canadian corporations. The

objectives of the survey were twofold:

1. To obtain further information to answer the following research questions:

vi. Is there evidence that BHSCs function in accordance with good governance

practices?

viii. Why do boards of directors of companies establish BHSCs?

ix. Do BHSCs operate in accordance with their stated mandates?





2. To assess the extent to which elements and processes articulated by the conceptual

framework were consistent with the activities and circumstances of the BHSCs of major

Canadian corporations.

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2 Methods

2.1 Creation of the Survey Instrument

A self-reporting survey was developed with the goal of soliciting information from BHSC

chairpersons or their proxies to answer the specific research questions listed above, as they

pertained to the specific BHSC surveyed. In addition, the survey sought to acquire information

with respect to elements B, C, D, and E of the conceptual framework (Figure 1 below) for each

BHSC surveyed.

Figure 1 - Conceptual Framework: Board HS Committee Influence on Workplace Health and Safety

Performance Outcomes

In preparation for creation of the survey instrument the principal researcher evaluated the only

two known prior published survey instruments intended for use or used in characterization of

board health and safety governance practices.

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One was published by Minguillon and Yacuzzi (2009), and was a conceptual design modelled on

a questionnaire used by the Government of Argentina to evaluate candidate companies upon

which to bestow a National Quality Award. Evidently the purpose for modelling the survey in

that manner was to possibly permit it to be used in a similar manner for bestowing awards on

companies achieving high ratings on health and safety governance. No information could be

found on the measurement properties of the questionnaire upon which the Minguillon and

Yacuzzi survey was based, and there are no indications that their survey was ever deployed. It

was not published in a peer reviewed journal, but simply published on the internet, identifying

the authors as being affiliated with the Universidad del CEMA. The actual survey itself is

described by its authors as being organized under 12 themes, 38 dimensions, and 93 elements. In

fact, the survey asks 93 questions, most of which are to be scored on a 5 point Likert scale.

Possibly for reasons relating to translation from Spanish to English, several of the questions were

judged ambiguous or incomprehensible to the principal researcher, a native English speaker with

subject matter expertise in health, safety and management. For the reasons described above a

decision was made to not use or modify for use any parts of the Minguillon and Yacuzzi survey

for use in the current study.

The only surveys actually known to have been deployed to measure board health and safety

governance were three variants created by a private research firm, Greenstreet Berman Limited

(2006), under contract to the United Kingdom Health and Safety Executive (“UK HSE”). The

original survey was created by Greenstreet Berman to solicit information specifically of interest

to the UK HSE, via telephone interviews. The first version was developed by the researchers,

and evaluated solely for clarity and comprehension through a consultation session with

representatives of the UK HSE, and HS representatives of several UK companies. The first

variant was used in 2001, and minor variants later used in 2003 and 2005. No specific studies

were made of the measurement properties of the survey instrument, and no work was performed

to validate the accuracy of the self-reported information obtained via telephone interviews. The

final version of the survey instrument itself is published in the 2006 project report, and consists

of a series of open ended questions. Answers were coded by members of the firm’s survey

research team, in order to transform qualitative information into quantitative data for descriptive

statistical summarization. Neither the survey instrument nor the study reports were peer

reviewed, nor published in any scholarly journals.

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The survey used in the current study was developed in a manner similar to that followed by

Greenstreet Berman, in that questions were formulated with the objective of obtaining specific

information responsive to the research questions. However, unlike the Greenstreet Berman

survey, a series of questions and statements were drafted and designed to be answered

categorically with “yes” or “no” responses, or “degree of agreement” responses, using a 4-point

Likert scale. Categorical response options were selected to avoid the need for coding of

qualitative responses. The use of a 4-point scale (as opposed to 5-point) was intended to force

the respondent to select between two opposing choices, that simply varied in degree, and

preclude an indeterminate response option.

The draft survey questionnaire was administered to subject matter experts in health and safety, to

obtain feedback on clarity of language and instructions, potential for ambiguity or

misinterpretation of questions, time required for completion, construct validity, and sample

validity with respect to the conceptual framework. Construct validity was also evaluated by

side-by-side comparison of similar questions found in the surveys described above. Revisions

were made based on feedback. To assess reliability of individual respondents’ answers, several

questions were designed to solicit responses with respect to the same facts or constructs, or asked

questions for which the accuracy of responses could be checked against information acquired by

review of the public disclosures examined in the first study. The finalized survey questionnaire

is shown in Attachment 1 hereto.

2.2 Data Categories

The survey data categories and fields are shown in Table 1.

Table 1 – Survey Data Categories and Fields

Health and safety performance reporting to the committee.

Committee receives regular health and safety performance reports from the company?

Frequency with which those reports are provided.

a. There is a corporate standard that defines the content and format for the health and safety performance reports

b. Reports contain comprehensive information on injury / illness rates for business units and the company overall.

c. Reports contain comprehensive information on injury / illness costs for business units and the company overall.

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d. Reports contain comprehensive information on health and safety regulatory compliance for business units and the company overall.

e. Reports contain information on major health and safety adverse events (e.g. accidents / incidents / regulatory contraventions).

f. Reports present information in a manner that shows changes in outcomes over time.

g. Reports present information in a manner that shows differences between business units.

h. Reports present information in a manner that permits comparison of our company performance against our industry or peer group.

i. Reports provide explanations for the observed performance patterns and trends.

j. Reports are easy to understand.

k. Reports are useful for evaluating performance against targets, and to guide committee decision making.

l. There are internal controls in place to ensure that performance information is accurate.

If your company’s board committee defines and establishes such objectives or targets, which of the following types does it define and establish? (Select all that apply)

Employee injury / illness rates

Employee injury / illness costs

Levels of regulatory compliance

Implementation of corporate health and safety programs

Implementation of specific health and safety initiatives

Levels of planned spending on health and safety program administration / implementation

Approximately what percentage of the health and safety objectives or targets established or approved by committee are thereafter approved by the board of directors?

If the board of directors approves health and safety objectives or targets, which of the following goals (if any) does the board of directors seek to achieve? (Select all that apply)

Continuous improvements in the company's health and safety performance over time.

Health and safety performance outcomes that are comparable to those in our industry peer group.

Health and safety performance outcomes that are superior to those in our industry peer group.

Does your committee formulate or endorse strategies to achieve health and safety performance objectives or targets?

Are these strategies approved thereafter by the board of directors?

Does the board of directors thereafter instruct the Chief Executive Officer or other senior executives to implement the strategies?

Please indicate the degree to which you agree with the following statements.

a. The inherent risks to employee health and safety in our industry and operations are high in comparison to many other types of industries.

b. The liabilities or adverse consequences that could flow to the company as a result of inadequate management of health and safety are high in relation to other types of industries.

To the best of your knowledge, which of the following statements best describes the company's work force injury / illness rates as compared to the rates of other companies in your industry peer group, over the past three years?

To the best of your knowledge, which of the following statements best describes the overall trend in the company's work force injury / illness rates over the past decade?

To what degree do you believe the following factors (if any) have

a. The committee and board have encouraged senior management to make increased efforts to achieve improvements in health and safety practices and performance.

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contributed to the observed reduction.

b. The committee and board have set specific targets for health and safety performance improvement, and held management accountable to reach those targets.

c. There has been a general decline in workplace injury and illness rates in our industry over the past decade.

d. Technological changes in our operations have made our company’s workplaces inherently safer.

e. Our company has outsourced to third parties many of the higher risk operations that we used to perform ourselves.

f. There have been general improvements in health and safety management practices in our industry over the time period.

Please describe any additional factors that you believe to be responsible for the observed decline in injury or illness rates.

Whom might we contact at the company if we wished to obtain more details on annual workplace injury and illness rates?

Name:

Position:

Email Address:

Phone Number:

In which of the following ways (if any) do communications regularly occur between your committee, the board of directors, and senior management, on health and safety issues?

Periodically provides formal reports to the board.

Periodically provides formal recommendations to the board of directors relating to how the company should be managing health and safety issues.

The board of directors periodically provides formal direction to the Chief Executive Officer or other senior executives relating to company health and safety issues.

Members communicate verbally or in writing with company senior executives on health and safety issues, from time to time.

Does the board of directors require members of your committee to have,

a. Subject matter expertise or qualifications in health and safety?

b. Prior managerial experience that includes responsibility for workplace health and safety?

New members of the committee receive indoctrination / orientation training in relevant health and safety subjects to facilitate their work on the committee.

Please rate your own knowledge of the subjects below.

a. The company's health and safety performance in relation to the health and safety performance of other companies in the same industry sector.

b. Trends in the company's work force injury and illness rates and costs in the preceding 10 year period?

c. Best practices for health and safety management systems in our industry.

d. Significant hazards associated with the company's operations.

e. Good practices for controlling hazards and mitigating risks for the operations of the company.

f. Driving forces affecting our approach to health and safety management in our business units and locations.

g. The key requirements of the health and safety regulatory frameworks in the jurisdictions where the company operates.

h. Significant health and safety issues currently affecting the company and industry.

i. Specific health and safety-related legal duties of company directors, in all the jurisdictions in which our company operates.

j. How the company's health and safety management practices / programs / policies compare with those of other similar organizations.

k. Key requirements of common health and safety management system standards.

Number of committee meetings in a typical year?

Number of times in a typical year your committee members visit company workplaces to familiarize themselves with company operations and the associated health and safety issues?

Estimated total days spent per year performing work relating to committee meetings, preparation time, work

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between meetings, site visits, travel, etc.

a. Committee regularly utilizes external expert advisors to help it evaluate the company's health and safety performance, or set future directions for health and safety policy or programs.

b. Committee makes recommendations for executive bonus amounts giving consideration to whether corporate health and safety performance targets have been met.

c. Committee has had significant positive impact on senior management awareness of, and concern over, health and safety issues.

Actions to evaluate committee functioning and effectiveness.

a. Periodic self-evaluation of function and discharge of mandate.

b. Board of directors periodically evaluates committee functioning and discharge of mandate.

c. Committee's work is externally audited / evaluated by third party specialist.

Benefits delivered by the committee.

a. Employees face less risk of injury or illness in their work.

b. The company maintains a higher degree of health and safety regulatory compliance.

c. Members of the board of directors face less potential liability exposure

d. Health and safety is managed in a more professional manner within the company.

e. Rates of work-related injuries or illnesses have dropped.

f. Costs relating to work-related injuries or illnesses have dropped.

g. The company is viewed more favourably by its major customers.

h. The company is viewed more favourably by its employees.

i. The company is viewed more favourably by its major shareholders.

j. The company is viewed more favourably by the community / general public.

Factors affecting decision to establish the committee.

a. Concern for corporate social responsibility.

b. A general concern for protecting the health and safety of employees and stakeholders.

c. A desire to reduce risk of regulatory contraventions, prosecutions or law suits.

d. To reduce potential liability exposure for directors, or show due diligence.

e. A desire to improve the company's health and safety performance outcomes (i.e. rates and costs of workplace injuries and illnesses).

f. Expectations or requirements of major customers.

g. Expectations or requirements of securities regulatory agencies.

h. Expectations or requirements of workplace health and safety regulatory agencies.

i. Community / general public expectations

j. Expectations or requirements of major shareholders

k. There was a major accident or workplace health and safety incident that aroused concern over how the company was managing health and safety

l. A desire to follow a trend in the industry

m. A desire to apply good governance practices to ensure proper management of health and safety in the company

2.3 Identification of Survey Recipients

As of March 2015, 7 of the 58 companies with BHSCs originally identified through the research

described in Chapter 3 were no longer TSX-listed companies, leaving the 51 companies shown

in Table 2.

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Table 2 - Large Canadian Companies with BHSCs Identified in 2010 and Invited to Participate in the March

2015 Survey

Athabaska Oil Corporation

Barrick Gold

Cameco Corp.

Canadian National Railway Company

Canadian Natural Resources Limited

Canadian Oil Sands Limited

Canadian Pacific Railway Limited

Cenovus Energy

Centerra Gold

China Gold International Resources Corporation Ltd.

Crescent Point Energy

Detour Gold

Eldorado Gold

Encana Corporation

Enerplus Corporation

Finning International

First Quantum Minerals Ltd.

George Weston Ltd.

Goldcorp Inc.

Hudbay Minerals Inc.

Husky Energy Inc.

Iamgold Corp.

Imperial Oil Limited

Inter Pipeline Fund

Keyera Corp.

Kinross Gold Corporation

Loblaw Companies Limited

Lundin Mining Corporation

Methanex Corporation

New Gold Inc.

NovaGold Resources Inc.

Paramount Resources Ltd.

Pembina Pipeline Corporation

Penn West Petroleum Ltd.

Semafo Inc.

Sherritt International Corporation

Silver Standard Resources Inc.

SNC-Lavalin Group Inc.

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Table 2 - Large Canadian Companies with BHSCs Identified in 2010 and Invited to Participate in the March

2015 Survey

SouthGobi Resources Ltd.

Suncor Energy Inc.

Talisman Energy Inc.

Teck Resources Limited

Toromont Industries Ltd.

TransAlta Corporation

TransCanada Corporation

Trican Well Service Ltd.

Trinidad Drilling Ltd.

Uranium One Inc.

Vermilion Energy Inc.

West Fraser Timber Co. Ltd.

Yamana Gold Inc.

In early 2015, a search was made of public company records on www.sedar.com, company web

sites, the internet, and www.linkedin.ca, with the objective of identifying appropriate recipient

individuals for the Phase 2 survey at each of the 51 companies. Since the survey questionnaire

sought specific information about the BHSC, and was intended to be completed by an individual

having a high level of knowledge relating to the BHSC and company occupational health and

safety issues, efforts were made to identify, in order of preference, the BHSC chairperson, the

corporate secretary, a member of the BHSC other than the chairperson, the chairperson of the

board of directors, and the vice-president with responsibility for legal affairs. This led to

identification of BHSC chairpersons for 38 companies, BHSC members who were not the

chairpersons for an additional 10 companies, and board chairpersons for 3 companies. For all 51

companies, the survey was also directed to the attention of the corporate secretary or a vice-

president responsible for legal affairs (either of which were determinable for all companies), on

the expectation that these officers would ensure proper routing to the intended recipients. Hard

copy survey packages were marked “private and confidential”, and addressed to the party’s

attention at the company’s registered head office address.

http://www.sedar.com/

http://www.linkedin.ca/

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2.4 Survey Ethical Approval

The survey methods and instruments were approved by the University of Toronto Research

Ethics Board.

2.5 Survey Package

The hard copy survey package consisted of the following materials: a personally signed cover

letter on letterhead of the University of Toronto Institute of Health Policy, Management and

Evaluation, instructions for survey completion (which included an internet address to permit on-

line completion and submission), the survey in booklet format, and a perfect-bound 86 page

colour booklet containing a series of figures extracted from the research findings described in

Chapter 3, with descriptive information about BHSCs of large Canadian corporations. All

materials were professionally printed on high quality semi-gloss paper stock, and placed into

envelopes printed with the University of Toronto Institute of Health Policy, Management and

Evaluation logo.

2.6 Survey Delivery, Request for Return, and Clarification

Requests

The survey package was delivered to each targeted recipient by courier on March 12th, 2015.

The instructions provided with the packaged requested submission of the completed survey on or

before March 31st, 2015. At the request of several recipients, the survey completion deadline

was extended to April 22nd 2015. A few surveys were received after the extended deadline date,

and acceptance was closed off on May 14th, 2015. Three survey recipients and respondents

contacted the principal researcher to obtain clarification and assistance in answering specific

questions (one question in each instance).

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3 Survey Response Information

3.1 Overall Response Rates

Fourteen of the 51 companies completed and submitted the survey (27.5% overall response rate).

In all but one case the survey was completed using the internet survey tool. The overall response

rate was judged to be satisfactory as it was comparable to typical response rates for

organizational surveys seeking sensitive information85.

3.2 Industry Sector Response Patterns

Table 3 shows the response rates by sector.

Twenty-two survey recipient companies (43%) were in the oil & gas or pipeline sector, but only

three recipients (14% of the sector) completed the survey. Twenty-one survey recipient

companies (41%) were mining companies, and 10 recipients (47% of the sector) completed the

85 A review of several hundred studies involving surveys of organizations in the mid-2000s found an average overall

response rate of 36% with a standard deviation of 19% (Baruch, Y., & Holtom, B.C., 2008).

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survey. The remaining 8 recipients were spread across five different sectors, and only 1

completed the survey.

A chi-square test was performed to determine whether the percentages of responses received

from the mining sector versus the oil & gas and pipeline sector were significantly different. The

test found the differences to be statistically significant with a two-tailed P value of 0.0428

(Table 4).

Table 4 - Chi-Square Test: Response Rates for the Mining Sector vs. Oil & Gas and Pipeline Sector Companies

Sector No. Actual

Respondents Expected No. Respondents

Mining 10 6.3

Oil & Gas and Pipeline 3 6.7

P value and statistical significance: Chi-squared = 4.101 with 1 degree of freedom. Two-tailed P value = 0.0428

3.3 Respondent Company Characteristics

Characteristics documented in Table 1 of Chapter 3 of the 14 respondent companies were

compared to those of the 37 non-respondent companies. Ratio and interval data were assessed

for normality of distributions using standardized skewness and kurtosis measures to aid in

deciding upon the appropriate statistical test. In addition, and when appropriate, equality of the

variable’s variance were assessed using an F-test.

Depending on the type and nature of each individual variable, data were compared using chi-

square difference tests, Mann-Whitney U tests, or two tailed independent t-tests. For all

comparisons, statistical significance was set a-priori at a 95% confidence level (i.e. α = 0.05).

Note that for data expressed as percentages, an arcsin transformation was applied prior to

analysis to ensure that data did not have imposed limits (one of the assumptions of the t-test).

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Table 5 presents summary statistics for each variable, as well as the results of the statistical tests.

Note that the degrees of freedom listed for the comparisons differ due to missing data.

In the Company Information category, the only variable that reached statistical significance was

that related to posting of the OHS policy on the company website. Nine (64%) of respondent

companies had the policy posted while only 17 (39% of the available data) non-respondent

companies had the policy posted. This might reflect a greater degree of openness and

transparency in the respondent group.

Note that although not reaching statistical significance, it seems that respondent companies had a

higher market capital, total revenue and net profit for data available for the last year of the

survey. Higher degrees of financial health could in turn be conceivable correlated with a variety

of factors increasing the tendency to respond (e.g. ability to take time to response, access to

personnel to help collect information required for accurate response, better performance trends

and less reluctance to share information, etc.).

For the Member variable, several comparisons reached the statistical significance level. In

particular, the percentage of independent directors in non-respondent companies was slightly

higher for non-respondent companies (82% vs 74%, X2 (n = 214) = 10.4, p < 0.01). It is unclear

whether the statistical significance reached in this specific comparison is of any relevance, and is

most likely due to a larger non-respondent sample size.

In addition, BHSC members in non-respondent companies served as company directors for a

longer period than members from respondent companies (7 vs. 5 years, t (84) = 1.99, p = 0.04)

and also received a larger total compensation if serving in a company role ($5.2 million CAD vs.

$1.3 million CAD, t(99) = 3.11, p < 0.01). On the other hand, BHSC members of respondent

companies not serving in a company role received slightly higher total compensation (255,133

CAD vs. 214, 738 CAD, t (99) = 3.11, p <0.01).

Although not reaching statistical significance, it is noteworthy that two thirds of respondent

companies required BHSC member training. Such training was required for slightly less than

half of non-respondent companies. Training could conceivably affect BHSC member subject

139

matter competency, and in turn engagement, which could conceivably affect propensity to

participate in the survey.

Other notable differences relate to minimum numbers of committee members and appointment of

the chair of the BHSC by the board, which were more likely to be required by non-respondent

companies. It is conceivable that the non-respondent companies impose more constraints on

their BHSCs, which could constitute barriers to survey participation.

Table 5 - Comparison of Company and BHSC Characteristics of Survey Respondents and Non-respondents

(Summary statistics are presented as Mean ± SD, Median (Range), Percentages, or Counts)

Category Variable

Respondent

Non-Respondent Descriptive Statistics

Test statistic

p-value

Company Info

Head Office Country (All Canadian)

N/Applicable N/Applicable N/Applicable N/Applicable

Company Info

Head Office City Described N/Applicable N/Applicable N/Applicable

Company Info

Business Operations Sector

Described N/Applicable N/Applicable N/Applicable

Company Info

Geographic Scope of Operations

Described N/Applicable N/Applicable N/Applicable

Company Info

# Board Committees 4 (4-6) 5 (3-8) U = 211.5 0.54

Company Info

# Members on Board of Directors

10 (7-15) 10 (5-15) U = 273 0.86

Company Info

Market Capitalization (last fiscal year end)

$14.8 ± 13.9 billion

$9.1 ± 11.1 billion

t (52) = 0.005

0.99

Company Info

Total Revenues per Income State

$19.7 ± 55.6 billion

$6.6 ± 10.0 billion

t (52) = 0.77 0.44

Company Info

Net Profit $0.63 ± 1.1 billion

$0.72 ± 1.1 billion

t (52) = 1.09 0.27

Company Info

OHS Policy Posted on Website?

True: 9 (75%) True: 17 (39%) X2 (n = 55)= 4.7

0.02

False 3 (25%) False: 26 (61%)

Company Info

OHS Member Report Provided in Annual

Report?

False: 12 (100%) False: 46 (100%) N/Applicable N/Applicable

Company Info

OHS Member Report Word Count

166 ± 100 470 ± 864 t (37) = 0.77 0.45

Committee Info

# Committee Members

4.3 ± 0.6 4.2 ± 1.2 t(37) = 0.23 0.82

Committee Info

% Male

90 ± 12 88 ± 18 t (25) = 0.55 0.59

Committee Info

% Independent Director

76 ± 26 86 ± 18 t(15) = -1.23 0.23

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Category Variable

Respondent


Test statistic

p-value

Mandate Mandate Total Word Count

153 ± 137 115 ± 63 t(12) = 0.92 0.37

Charter / TOR

% Required Member Training

True: 67% True: 47% X2 (n = 55)= 1.52

0.21

False: 33% False: 53%

Charter / TOR

% with Formal Written Charter

True: 100% True: 91% X2 (n = 55)= 1.20

0.27

False: 0% False: 9%

Charter / TOR

% Specified Minimum # of

Members

True: 50% True: 65% X2 (n = 55)= 0.90

0.34 False: 50% False: 35%

Charter / TOR

Require Only Independent Members?

True: 0% True: 19% X2 (n = 55)= 2.61

0.10

False 100%

False: 81%

Charter / TOR

Require a Chair? True: 75% True: 84% X2 (n = 55)= 0.47

0.48


Charter / TOR

Require a Vice Chair?

True: 0% True: 2% X2 (n = 55)= 0.28

0.59


Charter / TOR

Chair Appointed by Board or Committee?

True: 42% True: 67% X2 (n = 55)= 2.64

0.10


Charter / TOR

Vice-Chair Appointed by Board or Committee?

True: 0% True: 2% X2 (n = 55)= 0.28

0.59


Charter / TOR

Duties of Chair Defined?

True: 67% True: 60% X2 (n = 55)= 0.15

0.69


Charter / TOR

Secretariat Support Provided?

True: 17% True: 21% X2 (n = 55)= 0.10

0.74


Charter / TOR

Estimated Spending on Secreteriat

Support?

NA NA NA NA

Charter / TOR

Specific Quorom? True: 58% True: 51% X2 (n = 55)= 0.19

0.65


Charter / TOR

Quurom as % of Membership?

Majority: 4 Majority: 6 X2 (n = 25)= 2.74

0.43

Two-Thirds: 0 Two-Thirds: 2

Half: 2 Half: 10

Other: 0 Other: 1

Charter / TOR

Any Member Authorized to Call

Meeting?

True: 17% True: 21% X2 (n = 55)= 0.10

0.74


Charter / TOR

Committee Authorized to

Engage Independent Counsel?

True: 63% True: 67% X2 (n = 55)= 0.06

0.80


Charter / TOR

Individual Committee Members Authorized

to Engage Independent

True: 33% True: 19% X2 (n = 55)= 1.19

0.27


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Category Variable

Respondent


Test statistic

p-value

Council?

Charter / TOR

Committee Report Required as Part of

Annual Report?

True: 100% True: 100% Not Computable

Not Computable False: 0% False: 100%

Member Member Age 59 ± 11 62 ± 8 t(63) = 1.89 0.06

Member Gender Redundant – see % Male variable

Redundant – see % Male variable

NA

NA

Member Director Status

% Independent: 74%

% Independent: 82%

X2 (n = 214)= 10.4

<0.01

% Non- Independent:

26%

% Non- Independent:

18%

Member Total Compensation In Company Role

1,308,597 ± 1,000,750 CAD

5,216,907 ± 2,940,481 CAD

t(39) = 2.96 <0.01

Member Total Compensation Not in Company Role

255,133 ± 99,814 CAD

214,738 ± 158,043 CAD

t(99) = 3.11 <0.01

Member # Years Serving as Director

5.0 ± 6.2 7.0 ± 6.0 t(84) = 1.99 0.04

Member Total Values of Securities Held

Median 659,289 (IQR 257,012 – 1,629,147) CAD

Median 876,560 (IQR 375,345 – 2,324,282) CAD

t(121) = 1.45 0.14

Member Lead EHS Role Chair Chair:

Other Other

Member Other Lead EHS Role

Member Org Board Director True: 72% True: 78% X2 (n = 232)= 0.79

0.37


Member Org Executive Role

True: 11% True: 20% X2 (n = 232)= 2.08

0.14


Member Meetings Attended Median 4 (IQR 2-4)

Median 4 (IQR 2-4)

t(137) = 1.41 0.15

Member Attendance Rate 95% ± 12% 95% ± 20% t(122) = 0.55 0.57

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3.4 Injury Rates of Respondent vs. Non-Respondent

Companies86

Figures 1A and 1B show average lost time injury frequency rates (“LTIFRs”) and total injury

frequency rates (“TIFRs”) from 2002-2014 for the survey recipient companies reporting such

data in each year. There was an increase over the time period in the number of companies

disclosing these data. In the latest year for which data were available 14 of the 37 non-

respondents (38%) reported LTIFRs, and 16 (43%) reported TIFRs. In contrast, four (26%) of

the respondents reported LTIFRs, and five (36%) reported TIFRs. Smaller absolute numbers and

percentages within each group reported rates in the earlier years, and as such, in each year the

average rate values reflect different samples from the groups. Consequently, the rate values and

trends should not be considered representative of their respective groups, and they do not permit

conclusions to be drawn with respect to systematic similarities or differences in the average

LTIFRs of the groups. Nonetheless, it is an interesting coincidence that for LTIFRs the

magnitudes and patterns of directional changes for the two groups were very similar over the

entire time period, as were the TIFRs in the second half of the period.

The survey did not ask respondents to explain their reasons for choosing to respond, and no

queries were made of non-respondents to determine why they failed to respond. As such, the

reasons for individual companies responding or not responding cannot be known with any

certainty. However, there are several hypotheses worth considering.

“Good Company” Response Bias. One possibility is that the respondents were companies

where BHSCs were considered to be well-run, functionally effective, and thought to have had

positive impacts on company HS performance outcomes. Those with less to boast about may

have chosen not to response. There is some evidence for this as possible explanation. First,

respondents generally had good things to say about their BHSCs and their impacts on company

86 Data drawn from Chapter 4.

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health and safety performance – none of the respondents provided unfavourable portraits of their

BHSCs, themselves or their companies. Second, two of the companies were known to the

principal researcher to be experiencing difficulties with the operation of their BHSCs, which may

have factored in their non-response. Third, in Canada the available data suggest that there have

been marked reductions in compensable lost-time injury rates87 in the mining sector overall, but

relatively little change in the oil & gas sector. These differences in rate trends over time might

account for greater openness about health and safety performance amongst mining companies

than oil & gas companies. Fourth, a number of the survey recipient companies were currently or

recently embroiled in significant high profile litigation, some of which related to health and

safety issues, and it would be reasonable to expect they would be reluctant to respond to the

survey. For example, one company (SNC Lavalin) had regularly appeared in the press over the

preceding year in relation to an alleged bribery and embezzlement scandal88, and another (Penn

West) for significant accounting irregularities89. One was party to a class action lawsuit

(Loblaws) filed around the time of the survey for two billion dollars relating to a highly-

publicized fire at a garment factory in Bangladesh that killed approximately 1,100 people90, and

led to over 40 arrests in Bangladesh for alleged criminal negligence causing death. Several had

been the subject of reports in the news media in relation to opposition to production and

transmission of Alberta heavy oil91 due to alleged health and environmental risks.

87 The “compensable lost-time injury frequency rate” is defined as the number of claims for work-related lost-time

injuries (i.e. those involving loss of time from work beyond the day of the occurrence) accepted by provincial

government workers’ compensation agencies in the year in question, per 100 person years worked by employees in

the workforce, organization, or sector of interest.

88 The Globe and Mail.

89 The Financial Post.

90 Ibid.

91 The Financial Post; Business News Network.

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High Risk Response Bias. One might conjecture that the subject matter of the survey would be

of greatest interest to companies having high risk operations, and in fact 100% of respondents

“strongly agreed” or “agreed” that their companies faced higher magnitudes of inherent HS risk

and potential adverse consequences in comparison to other industries (Figure 2).

However, this seems an unlikely explanation for non-responses, given that most of the non-

respondents were also mining and oil & gas companies.

Economic Health of the Oil & Gas Industry. Alberta is home to most of the assets and

operations of the oil & gas industry companies that were sent the survey. In the 9 month period

leading to March 2015, the price of Western Canada Select crude oil dropped from

approximately $90 USD in July 2014 to $36 USD in March 201592. This led to a significant

economic downturn in the Canadian oil & gas sector,93 and it is reasonable to expect that the

associated financial challenges would make companies less attentive to a request to participate in

a survey of BHSCs.

92 Alberta Government Office of Statistics and Information.

93 According to the Canadian Association of Petroleum Producers in May 2015 oil and natural gas companies

announced more than 4,500 direct layoffs in 2015, with an additional 23,000 jobs expected to be lost as a result of

lower drilling activity. Capital investment in the industry was forecast to decline more than $25 billion (33 per cent)

in 2015 (Canadian Association of Petroleum Producers. http://www.capp.ca/media/news-releases/alberta-budget-

keeps-oil-and-gas-industry-competitive (Accessed May 14, 2015)).

146

“Towards Sustainable Mining”. Fourteen of the surveyed mining companies (67%) are

longstanding members of the Mining Association of Canada (“MAC”), and 8 of the 10

responding mining companies (80%) were members (one of the 10 was a member only of the

Ontario Mining Association, and one not a member of either the national, Ontario, or British

Columbia mining associations). As such, 57% of the surveyed MAC members responded, and

43% did not. Over the past decade the Mining Association of Canada has championed a

corporate social responsibility initiative among its member companies, called “Towards

Sustainable Mining”, which includes recommendations for formal board governance of

environment, health and safety matters. This initiative may have heightened BHSC-level interest

and awareness of health and safety governance concerns, resulting in greater interest in and

receptivity to this research study, and hence the relatively high response rate amongst the mining

sector as compared to the oil & gas sector.

Other Reasons. Some of the non-respondent companies may simply not have been able to

provide a response in the time available, or found that the process of obtaining internal approvals

to participate was too onerous. It is also conceivable that the individuals receiving the surveys

had insufficient interest in the study and the subject matter to take the time to complete the

survey.

4 Findings in Relation to the Research Questions

Why Do Companies Form BHSCs?

Information in Chapter 4 indicated that there was a sizable increase in the number of TMX listed

companies having BHSCs from 2001-2010. The survey asked BHSC representatives “why” they

believed their companies’ boards established a BHSC. Figure 3 summarizes responses. The

most frequently cited reasons (70% “strongly agree” or “agree”) were those that might be

characterized as altruistic, namely “protecting… employees and stakeholders”, “improving HS

performance…”, “good governance”, “reduce risk”, “reduce… liability”, “community and public

expectations”, and “corporate social responsibility”. These could all be viewed as variants of an

agency theory driver. Reasons such as “following a trend”, or satisfying the expectations of

major shareholders, customers or regulatory bodies (the latter being reputational support

147

purposes), were judged relatively unimportant. About 1/3rd “agreed” that the occurrence of some

major accident or incident was a catalyst for formation of the BHSC. This motivation can be

viewed from the perspective of agency theory, or stewardship theory, or simply as a step in

director due diligence.


Quality of Health and Safety Intelligence

BHSCs will only be able to properly discharge their mandates if their companies provide them

with good intelligence relating to important HS issues and company performance. All BHSCs

reportedly received quarterly HS status reports from the company, and the status reports always

included information on any major adverse events (e.g. serious accidents). For the majority of

respondents, the respondents believed that their status reports provided information on HS

regulatory compliance for business units and company overall, and summarized trends in

outcomes over time. Most respondents indicated that there were internal controls in place to

148

ensure report accuracy (though the survey did not probe the nature of those controls), the reports

were easy to understand, information on performance trends over time was provided, and the

content was therefore useful for evaluating performance and guiding decision making. It was

less common for reports to explain reasons for the observed performance patterns and trends

(“the why’s”), or compare company performance against peers, or provide information on injury

/ illness costs for business units and the company overall. The tendency to not receive

information on injury / illness cost information was surprising, given that this can be a key

measure company prevention program effectiveness. It was also not common for the reports

provided to BHSCs to be prepared in accordance with any type of standardized industry or

company-specific standard prescribing report content and format94. Figure 4 presents the

responses (next page).

The description of the forms and contents of reports received by most of the BHSCs can be

viewed as analogous to financial accounting reports, in that the data provide outcome indicators,

and show patterns over time. Production of reports containing data on LTIFRs and TIFRs is

generally easy for most companies and their business units, so long as the incidents fitting these

categories result in the production of a claim form that is submitted to the provincial workers’

compensation insurance agency. Doing so creates the “transaction record”, that can then be

tabulated to provide simple summary statistics on accident rates, which can be updated each

quarter and reported. This approach also makes sense and would be expected to be

comprehensible to board members with backgrounds or experience in accounting or

management.

It was surprising, however, that reports of this kind would be adjudged by BHSC members to be

useful in guiding decision making, given that the reports generally were not said to provide

explanations for performance results of the company, nor any sense of where the company stood

94 To elaborate, company financial performance data (e.g. revenue items, expense items, margins, etc.) is generally

compiled and presented in formats that have become relatively standardized, and formal financial reports are

prepared in accordance with various accounting standards. To date it does not appear to have become common for

companies to prepare HS performance reports in any standardized manner.

149

in relation to peer comparators, nor were the accident rates translated into actual costs for the

company. This would be analogous to a board member receiving a quarterly figure on profit

with no information on revenues or expenses, nor any explanation of the reasons for any change

in profitability, nor any idea of how the company stood in relation to its main competitors.

Clearly, board members would not consider that type of skeletal financial report to be acceptable,

and yet BHSC members consider an equally skeletal health and safety performance report to be

acceptable. This finding speaks to the reality (demonstrated in the first study) that BHSC

members are invariably not subject matter experts in health and safety, have not held senior

managerial or executive roles in relation to health and safety in large enterprises, and

consequently, are likely to have only superficial comprehension of what constitutes good health

and safety management and reporting practices. Additionally, the characterization of the reports

received by BHSCs raises questions as to the underlying quality of the companies’ health and

safety management practices, if, as one might presume, the reports provided to the BHSCs are

indicative of the best of what the company’s monitoring, analytical and reporting systems are

capable of delivering. To the extent that is the situation, it raises the question of the general

quality of intelligence provided to BHSCs, the capacity of BHSC members to appraise the

information provided, and in turn how effectively BHSC members can discharge the oversight

150

and control, and strategic advisory functions stated in their committees’ progressively expanding

mandates.

Formulating Objectives and Strategies

Setting or endorsing objectives, participating in the formulation of strategies to achieve those

objectives, receiving information on progress, and holding responsible officials accountable for

results, are key governance activities. The survey found that BHSCs typically do not formulate

company HS objectives, but instead review and comment on objectives proposed by

management. This is consistent with a bias for oversight and control functions, as opposed to

strategic advisory functions; and consistent with the expectation that BHSC members – most of

whom are independent directors – are not sufficiently close to the business to set objectives and

strategy, but are nonetheless comfortable endorsing them. Respondents described considerable

variability in the types of objectives the companies were setting, as described in Figure 5 (next

page).

The types of quantifiable objectives or targets generally correspond to the types of information

reportedly provided by management to BHSCs in quarterly reports, with the exception of injury /

illness and costs (for which targets generally are not set, nor is information provided).

All respondents indicated their BHSCs were active in formulating or endorsing strategies to

achieve the approved objectives (Figure 5). Formal board endorsement and direction to the CEO

for strategy execution is less common.

Time Spent on BHSC Activities

Most BHSCs reportedly meet 3 times per year or more frequently. All reportedly carry out visits

to company workplaces (from 1 to 4+ times per year, 3 to 4 being most common) to acquaint

themselves with HS issues. In total, 60% of the BHSCs reported that their members spend 5 to 9

days per year on BHSC work, and 20% more than 15 days per year, which, for a complex subject

and business aspect, would seem to be the absolute minimum amount of time for performance of

an oversight and control function in an organization having a market capitalization of $1.5

billion or higher, and that presumes day-to-day management by sophisticated organizational

health and safety infrastructure. Figure 6 (next page) shows response patterns.

151

It is surprising that 10% of respondents indicated that the total number of days spent annually on

BHSC work was in the range of 1 to 4 days. It is difficult to imagine that this constitutes a

sufficient amount of time to carry out any manner of BHSC mandate for any company with

operations corresponding to a market capitalization of $1.5 billion or higher.

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BHSC Self-Evaluation

Virtually all BHSCs perform some manner of reflective self-evaluation of their own performance

against their mandate, or this is done by the board (Figure 7, next page). It is rare for such

reviews to be performed by external third party evaluators.


members?

Clearly, if a BHSC is to effectively monitor and guide the board’s governance of HS issues

affecting the company, it is essential for the BHSC members to have a reasonably good

understanding of the subject area, and how HS issues should be managed. For this reason, the

survey asked respondents to provide information on BHSC qualifications.

The survey responses indicate that many companies require BHSC members to have some

manner of subject matter expertise or qualification in HS (nature unspecified), or prior career

experience with operational responsibility for HS. Most companies provide some type of on-

boarding HS training for new BHSC members. Figure 8 summarizes the responses.

153

Responses with respect to “subject matter expertise or qualifications in health and safety” were

anomalous. A subject matter expert is generally understood to be a person who is an authority in

the subject area – meaning they have a significantly higher level of knowledge and skill than

persons who are not experts. In occupational health and safety this is generally acquired by way

of completion of a master’s degree, followed by several years of full-time career experience in a

practitioner capacity, after which one might achieve candidacy to acquire a professional

qualification, which in turn involves additional study and successful completion of a qualifying

examination. The records reviewed in the first study found no evidence of any such educational

or professional qualifications amongst the pool of BHSC members, and therefore in reality, the

percentage of companies requiring this is zero. The survey response pattern would seem to

suggest misunderstanding of either the question, or of what would generally be considered to be

a basis in Canada for occupational health and safety “subject matter expertise or qualifications”.

This in turn further raises concern with respect to the actual familiarity of the BHSC respondents

with the “subject matter”, and in turn, their capacity to comprehend health and safety issues and

appraise their companies’ management practices, and exercise appropriate oversight and control.

The board members chairing the BHSC also considered themselves (or were considered by the

survey respondent) to be reasonably knowledgeable about key subjects. They were considered

most knowledgeable about company-specific hazards and hazard control practices, industry-

specific HS issues and driving forces, and relevant director duties and liabilities; and moderately

knowledgeable about key HS regulatory requirements across all operating jurisdictions, industry

HS best practices and HS management system standards, and peer HS performance trends.

Figure 9 presents the responses.

154

These are unexpectedly high self-appraisals, given that almost all of the responding BHSC

directors were independent / outside directors, and, as noted above, there is no evidence that any

have formal education or qualifications in health and safety. Consider also the following:

a. Most of the respondents’ companies operate in multiple jurisdictions, each of which have

their own very extensive health and safety laws and regulations, and despite the obvious

learning challenge this presents, nearly 80% claim to have a “high” or “moderate” level of

knowledge of “key regulatory requirements in the operating jurisdictions”, and the “specific

HS legal duties of company directors”.

b. No BHSCs indicated that the periodic reports they receive from the company provide

information on company performance relative to peers, yet 100% claim either “high” or

“moderate” knowledge of their company’s performance in relation to the peer sector, and

90% claim “high” or “moderate” knowledge of how their company’s HS management

practice compare to their peers. If this information is not being supplied to the BHSC by the

company, it is unclear as to how these BHSC Chairs acquire such intelligence.

155

c. Respondents have consistently “high” or “moderate” knowledge of a variety of health and

safety subject areas, including key requirements of HS management system standards,

significant HS issues affecting their industry, best practices for HS management in their

industry, significant hazards associated with their companies’ operations, and good practices

for hazard and risk control.

To put this in perspective, these assertions for a non-expert in health and safety would be akin to

a non-expert in finance stating that they have a “high” or “moderate” level of knowledge of how

the capital structure of their firm and its profitability compares with its peers, trends in industry

equity and debt financing, an understanding of key securities and exchange commission rules

and regulations, and the key duties of directors with respect to financial reporting under

Sarbanes-Oxley.

These responses appear even more incongruous when compared against certain findings in the

case analyses presented in Chapter 7. For example, despite the well-known history of silicosis

and other dust exposure related lung diseases in the mining industry, the three mining companies

have only very recently implemented occupational hygiene programs, which are preventive

interventions to minimize miner exposure to airborne rock dusts and reduce risk of developing

silicosis and other occupational lung diseases. Two only recently created executive level

portfolios for management of health and safety programs across the enterprise – despite their

long corporate histories, sprawling multi-jurisdictional operations, and large workforce

populations. These seem to be oddly latent actions for companies that supposedly have BHSCs

chaired by individuals having such a high level of subject matter competency.

In summary, the responses in Figure 9 would seem to reveal much about the lack of depth of

subject area knowledge of the respondents, and further raises questions concerning the capacity

of BHSCs to exercise their oversight and control mandates.


of their companies?

Most BHSCs provide formal reports to their Boards, and informally communicate with Board

members and senior management officials on HS issues. Seventy-five percent of respondents

156

indicated the BHSC makes recommendations for executive performance compensation giving

consideration to the achievement of company HS objectives. Figure 10 summarizes the various

means by which BHSCs seek to influence executive actions.

While these responses, if accurate (and since they are consistent with what is known to be

customary board practice, there is no reason to believe otherwise), provide insight into certain

communication “mechanics”, they are merely proxies of potential influence.



Most centrally to the purpose for this study, respondents strongly believed that the work of their

BHSCs was an important reason for progressive improvements in injury / illness rates. Figures

11 and 12 (next page) show respondents’ characterizations of company performance in relation

to peers, and the general 10 year trends.

157

The claim by all respondents of a 10 year declining trend for their company is consistent with

national trends generally (see Chapter 5).

Respondents attributed improvements in their companies’ work force accident performance

outcomes (i.e. reductions in rates of occupational injuries / illnesses) to a variety of factors,

which are itemized in Figure 13 (next page). Figure 13 shows the percentage of respondents

who judged each of the identified factors as “not”, “minor”, “moderate”, or “strong” contributing

factors in the occurrence of improvements.

Over 80% of the BHSC respondents considered the efforts of the BHSC and board to be

instrumental in driving accident rate reductions, by encouraging management to take action to

achieve those improvements. Sixty percentage considered increased BHSC and board focus on

158

performance and management accountability to be instrumental in achieving those

improvements.

In addition to the above, respondents identified a variety of other benefits of BHSC operation,

shown in Figure 14.

It is noteworthy given the role of executives in the conceptual framework that 90% of

respondents strongly agreed or agreed that the BHSC produced “significant positive impact on

senior management health and safety awareness and concern”.

With respect to the beliefs and perceptions reflected in Figure 13, recall from Chapter 5 that

there has been a secular national decline in occupational injury and illness rates for several

decades, and that in the two sectors having the most BHSCs – mining and oil and gas – there was

no compelling evidence that companies with BHSCs experienced supra-secular rates of

performance improvements. This may mean that BHSC member perceptions of the importance

of secular declines, industry-wide improvements in management practices, technological

159

changes that reduce risk, and outsourcing of high risk operations are more important drivers of

performance improvements than the BHSCs imagine. It is also not unexpected that BHSC

members would discount the contributions of their committees to observed performance

improvements, just as one might expect the board to take credit for a year of fine financial

performance of the company, and blame the CEO or industry trends for a poor year.

Given the discussion above with respect to other survey questions that suggest deficiencies in

intelligence supplied to BHSCs, and in their capacity to understand and utilize it for evaluative

and decision-making purposes, it follows that if BHSCs are instrumental in driving performance

improvements, it is not likely to be through a strategic advisory contribution, but could, as the

respondents indicate, be via the effect of the BHSC’s existence and operation on the CEO and

senior executives’ perception of the importance of health and safety to the organization and their

own career progress. That idea, however, implies that BHSC members may not be as beholden

to CEOs as some corporate governance theory and evidence suggests, or that the relationship is

perhaps somewhat more nuanced and complex. For example, board members (and by extension

BHSC members) may indeed feel affiliation with, and a desire to not cross the CEO, but at the

same time, the CEO may feel the same reciprocally for the board members, and may consider it

important to adopt priorities and imperatives identified by the board (and by extension the

BHSC).

5 Implications of the Findings for the Conceptual

Framework

The survey findings were consistent with the elements and processes that the conceptual

framework suggests are necessary for BHSCs to effect work force occupational injury and illness

rates. The only problem with this finding is, as discussed in Section 4, that many of the response

patterns lack logical credibility, and may reflect how respondents would “like things to be”,

rather than “how they are”. If so, it suggests that in practice, the actual structures and processes

may not exist and operate in the manner depicted in the conceptual framework. Table 6 (next

page) summarizes the evidence from the survey in relation to the conceptual framework.

160

Table 6 – Survey Evidence Relevant to the Conceptual Framework

Element Survey Evidence

A - Mandate Not examined by the survey

B – Charter / Terms of Reference 90% of BHSCs meet 3 to 4 times annually, and 70% visit workplaces 3 to 4 times annually.

C – Committee Member Characteristics

40% of companies require BHSC members to have subject matter and management expertise as a condition of appointment. 80% of companies provide orientation training to help equip BHSC members for their role. Over 80% of BHSC respondents considered themselves to have high or moderate levels of understanding of key subject matter, such as applicable legal requirements, operational hazards, health and safety management practices and standards, performance trends, and driving forces.

D - Governance Practices

D1,2 – Nature and Quality of Information Supplied to Committee

BHSCs commonly receive quality-assured information relating to: Injury / illness rates and costs, compliance status, major adverse events, and peer comparison data. The information provided is considered useful for analysis and decision making.

D3,4 – Involvement in Objective Setting and Strategy Formulation

BHSCs are consulted to varying degrees on health and safety objectives and targets relating to various indicators (e.g. injury rates, costs, program implementation, compliance, etc.), and are consulted on or active participants in formulating strategies to achieve these outcomes.

D5 – Communications to the Board and Executive

All BHSCs make formal and informal recommendations to the board.

D6 – Ensuring Executive Accountability for Results

Half of BHSCs make recommendations to the board with respect to bonus compensation of executives based on achievement of health and safety performance targets.

D7 – External Disclosure and Reporting Practices

All the BHSCs surveyed publish certain types of information annually relating to the BHSC and company health and safety management and performance.

D8 – Performance Self-Evaluation

All BHSCs have their performance periodically evaluated by the board or by themselves.

E – BHSC Influence on Board and Executive Team

BHSCs consider their existence and activities to have significant impact on executive awareness, concern and attention to company health and safety issues and performance. This is reinforced by BHSCs making recommendations for performance compensation, and requiring executive accountability for results.

F – Executive Team Actions to Achieve Performance Goals

BHSCs perceive that performance improvements are very often due in large measure to executive action in response to BHSC and board directives.

G – Work Force Exposure to Risks

BHSCs believe that their existence and operation leads to health and safety program improvements, more professional approaches to managing health and safety in the company. and operational changes that reduce exposures to risk

H _ Risk Management Practices of the Organization

J – Work Force Occupational Injury and Illness Outcomes

BHSCs believe that their efforts have led to reductions in company work force injury and illness rates and costs

161

Appendix – Survey Questionnaire

172

Chapter 7 The Instrumentality of Board Health and Safety Committees in

Company Health and Safety Performance Improvements: Comparative Case Analysis of Three Canadian Gold Mining

Companies

1 Introduction

This Chapter takes a business case analysis approach in an effort to elucidate the mechanisms

whereby BHSCs might, or might not, influence company operations in ways that affect accident

rate trends over time, and addresses the following two research questions:





The business case analysis focuses on three companies with BHSCs, sharing the following

common features:

All are large Canadian publicly-listed gold and polymetallic mining, processing and

refining companies, with assets, revenues and market capitalizations exceeding $1 billion

in recent years.

All engage in their own exploration and new mine development and construction

operations.

All own and operate multiple large scale mines in Canada, and in several other regions

including the United States, Australia, and Latin America.

All are amongst the 10 largest such companies globally.

173

All have operating histories of 30 years or longer.

All have long histories as public companies, with similar governance models and

structures.

In essence, the business case analysis seeks to identify commonalities and differences among the

BHSCs of the subjects, and explore the potential instrumentality of each BHSC in the health and

safety performance outcomes of their respective companies.

Information for the business case analysis was obtained by review of the public disclosures of

the selected companies, responses to the survey described in Chapter 6, and interviews of two

senior officials at one of the three companies.

2 Selection of Subjects

The March 2015 survey of major Canadian corporations with BHSCs described in Chapter 5

obtained information on governance practices and self-reported accident rate trends for several

mining companies and several oil and gas companies. The original design envisioned for the

overall research program proposed selection of a sample of survey respondents for case analysis,

with the sample consisting of some companies reporting superior performance trends and some

companies reporting inferior performance trends, in relation to their peer industry sectors. The

objective was to determine whether there were evident differences in BHSC roles and activities

that might explain the performance pattern differences. Companies were to be selected based on

their willingness to have one or more persons having knowledge of the company`s BHSC history

and activities participate in one or more interviews with the principal researcher, intended to

extract fuller information relating to the instrumentality of the BHSC in shaping the company`s

health and safety programs and performance trends. Ultimately only one company (a large

global gold miner) expressed willingness to participate in this manner.

As noted Chapter 3, it has become increasingly commonplace over the past two decades for

companies to publish annual reports describing objectives, activities and achievements relating to

their efforts to minimize adverse effects on the natural environment, protect the health and safety

of their workforce and host communities, and generally advance community and / or global

174

welfare through philanthropic support of educational, health, arts and social institutions and

agencies. The search for these reports undertaken initially for the research described in Chapter

3 determined that there were differences in the quantity and types of accident rate data published

by the respondent companies. Comparatively few of the respondents reported comprehensive

data for the period of interest in this study. Overall, the mining company respondents provided

fuller disclosure than the oil and gas companies.

Reviews of these annual reports determined that in addition to variability in disclosure of

performance data, they also differed in the amount of information provided about company

health and safety programs and initiatives from year to year. For some companies there was

extensive information reported over a period of a decade or more, in a relatively standardized

format, which portrayed a reasonably clear picture of the evolution of the company’s health and

safety program, and changes in accident rates and fatality occurrences over time. Other

companies provided a less comprehensive picture.

Based on the foregoing, a decision was made to focus the case study analysis on three gold

mining companies that responded to the survey:

i. Goldcorp, which was the one that volunteered to participate in the interview process and

which also had a long history of reporting reasonably comprehensive information about

its health and safety programs, initiatives and performance.

ii. Barrick Gold, which declined to have its BHSC representatives interviewed, but

expressed support for the study, and like Goldcorp had a long history of reporting

reasonably comprehensive information about its health and safety programs, initiatives

and performance. Goldcorp and Barrick are the 2nd and 3rd largest gold miners globally,

and were therefore expected to be operationally and organizationally similar in many

respects. In turn, it was judged that having case analyses of two comparable

organizations could add robustness to the conclusions of the analyses.

iii. NewGold, which was considerably smaller than Goldcorp and Barrick, and had a shorter

history of reporting on its health and safety programs, initiatives and performance.

175

3 Methodological Considerations in the Analysis of

Subjects

An updated search of the literature in 2015 failed to find any relevant methodological precedent

that could be applied to elucidate the mechanisms whereby BHSCs might, or might not,

influence company operations in ways that affect accident rate trends over time. As such, it was

necessary to devise one specifically for this purpose. The original conceptual framework for the

research program (shown in Figure 1) was used as a starting point.

Using the conceptual framework, and information developed in papers 1 through 5 in the

research program, it was reasoned that for a company’s BHSC to be instrumental to the

achievement of long term health and safety performance improvement, a set of six conditions

must be satisfied.

First, the BHSC itself must be composed of individuals who are, (a) knowledgeable about the

company, its health and safety issues and performance, the feasibility, desirability and need to

making performance improvements (if warranted); and (b) if the BHSC decides that such

improvements are warranted, those individual must have the motivation and ability to influence

their board colleagues and senior executives, so that agency functions can be properly executed.

It was recognized that it was not practicable to directly gauge these BHSC member

characteristics (particularly for companies not agreeing to have BHSC representatives

interviewed), but certain public information provided in annual reports might reasonably be used

as proxy indicators, such as: BHSC member qualifications generally (such as academic

credentials, industry experience); their career roles and accomplishments (which can be

indicative of industry, company, and issues-related expertise; and signal status and perceived

influence); their tenure as members of the board of directors (reasoning that relevant knowledge

would increase over time, and continued re-election / re- appointment is an indicator that the

member is perceived as being competent and effective by the company’s leadership and key

shareholder interests).

176

Figure 1 - Conceptual Framework for BHSC Influence on OHS Performance Outcomes

177

Second, the BHSC’s mandate (as written, or de facto if not formally adopted) must,

a. provide the BHSC with adequate intelligence concerning the company’s health and safety

performance, issues and activities, to permit BHSC members to understand problems,

needs, potential solutions, set or endorse proposed objectives, and make appropriate

recommendations; and

b. empower the BHSC to set or endorse objectives, and intervene to ensure that needs are

addressed and problems are solved; and

c. allow the BHSC to hold the company’s senior executives accountable for successes and

failures.

From a board governance structural and process perspective, all three of these conditions must be

satisfied for the BHSC’s decisions or dictates to have any impact on the company’s health and

safety performance outcomes.

Third, the BHSC must show evidence of activity (meetings, site visits, etc.) that is consistent

with its mandate, and the apparent scale and complexity of the company’s operations. Many

BHSCs have activity frequencies defined by their charter / terms of reference (element B of the

conceptual framework), and or disclosed in annual corporate filings. For example, if a company

is engaged in inherently dangerous activities, is organized as 4 business units, and has a work

force of 25,000 spread across 10 operating locations on three continents, it is questionable as to

whether a BHSC could effectively discharge a mandate involving the elements described above,

if that BHSC only meets once or twice per year, and its members never visit or tour its operating

locations. For such a company and BHSC, quarterly meetings plus tours of several locations per

year might be the minimum level of activity needed to provide members with proper

understanding of the business and its health and safety needs and issues. These are, as indicated

previously, companies with sprawling operations, thousands of employees, and market

capitalizations of $1.5 billion or more.

Fourth, there is a need for evidence that the BHSC has made decisions or given direction with a

goal to promoting improvements in the company’s accident performance, and that this has

caused the company’s senior leadership in turn to make decisions and take actions to achieve the

178

same goal. In terms of the conceptual framework shown below, this means evidence that the

relevant BHSC “Governance Practices” (D) have been carried out, such as,

a. involvement in health and safety objective setting,

b. involvement in health and safety strategy formulation,

c. making recommendations to the board and senior executive team, and

d. ensuring executive accountability for health and safety performance results

leading to “Executive Team Actions to Achieve Health and Safety Performance Goals” (F)

(which in turn is indicative of the BHSC “Influencing the Board and Executive Team” (E)). This

is perhaps the critical criterion.

Fifth, there is a need to study the evolution of the company’s health and safety programs and

initiatives over a lengthy timeframe (for example, a decade), determine whether these are

consistent with prior BHSC decisions and directives, and judge whether those changes in

programs and initiatives could plausibly lead to performance improvements. Factors to consider

in making such a judgement will depend on the nature of the program, initiative, and intended

objectives, and may include:

a. An evident logic model that explains the processes leading to desired outputs and

outcomes, and the requisite inputs.

b. Evidence that the scope of implementation is appropriate (i.e. are they targeted on

specific high risks affecting specific locations, operation or occupations, or are they

designed to produce generalized effects across the entire enterprise?),

c. Evidence that the intervention could produce the expected magnitude of impact (for

example, if vehicle accidents were a major contributor to overall accident rates, an

intervention aimed at reducing such accidents could plausibly have a large impact on

overall rates), and

d. Evidence of the persistence of the program changes and interventions over a period of

many years (isolated and time-limited initiatives and interventions may not have

noticeable or lasting effects on accident rate performance).

e. Inter-relationships among the program changes and interventions (complimentary or

coordinated interventions implemented over many years could have significant impacts).

179

This corresponds to elements G, H and I in the conceptual framework.

Finally, the sixth and most important criterion is clear evidence of,

a. a pattern of performance improvement over time having a magnitude large enough to be

unlikely to attributable to chance,

b. a degree of change and fluctuation over time that is reasonable in view of health and

safety program changes and interventions (typically the improvements would be largest

in the first few years, becoming moderate for a time period thereafter, and eventually

plateau and show comparatively little change thereafter), and

c. the performance improvement being manifest after the program change or intervention

has been implemented and can plausibly affect risk levels or risk exposures.

This is element J in the conceptual framework.

These six criteria, their associated evaluative points, and the sequential evaluation process is

illustrated in the flow chart in Figure 2 (next page). This was the process used for the case

analyses.

4 Data Sources and Description of Analysis

Five data sources were utilized to obtain information with respect to BHSC and company

compliance with the six criteria described in the section above:

a. Information collected in the course of the first study, specifically the 10 year

retrospective review of information provided in company disclosures.

b. Information collected in the course of the second study, the survey of companies having

BHSCs as of the end of fiscal year 2010.

c. Information on accident rates reported in the third study.

d. Review of relevant content from available annual sustainability / responsibility reports of

the companies selected for the case analysis.

180

Figure 2 - Step-Wise Evaluation of BHSC Instrumentality

Y/P = “yes” or “plausible” N/Q = “no” or “questionable”

181

e. Interviews with the chair of the BHSC, and Vice-President – Safety, in the case of

Goldcorp only.

These data sources were used to evaluate the evidence for the existence of the elements and

operation of the mechanisms identified in the conceptual framework shown in Figure 1 above.

In essence, this was an exercise to determine whether there was specific evidence that the BHSC

influenced health and safety performance outcomes in the manner envisioned by the conceptual

framework. Table 1 (next page) describes the approach to data analysis for each of the three

companies.

182

Table 1 - Data Sources and Methods for Company-Specific Analysis C

rite

rio

n N

o.

Co

ncep

tual

Fra

mew

ork

Ele

men

t

Criteria Evaluative Points

Data Sources

Description of Analysis

i ii iii iv v

Stu

dy N

o. 2

Stu

dy N

o. 3

Stu

dy N

o. 4

Susta

inabili

ty

Report

s

Inte

rvie

ws

1

C BHSC

Composition

Characteristics

(Knowledge and

Influence)

Academic credentials and industry experience

X Review of data source, narrative summary of BHSC cohort characteristics, and subjective judgement of implications for relevant knowledge and influence over peers.

Career roles and accomplishments

X Positions / appointments of BHSC cohorts, and subjective judgement of implementations for relevant knowledge and influence over peers.

Tenure on the board X Duration prior to joining BHSC.

2

A BHSC Mandate Enables BHSC to acquire appropriate intelligence for analysis and decision-making

X X Review of data sources.

Permits BHSC to intervene in company affairs where necessary

X X Review of data sources

Confers authority to hold executives accountable for performance outcomes

X X X X Review of data sources i and ii. For data source iii: Reports accessed via internet; reports searched for health and safety content; content extracted, analysed and plotted on timeline. For data source iv: review of interviewee assertions.

3

B Evidence of

BHSC Activity

Typical frequency of meetings per year

X X X Review of all data sources, and subjective judgement of adequacy given BHSC mandate, and scope and scale of company operations and health

183

Table 1 - Data Sources and Methods for Company-Specific Analysis

Cr

ite ri o n

N o.

C o nc

ep tu al

Fr a m e w or k

El e m en t

Criteria Evaluative Points Data Sources Description of Analysis

and safety hazards.

Typical number of site visits / tours per year

X X X Review of all data sources, and subjective judgement of adequacy to inform BHSC members and guide action, given scope and scale of company operations and health and safety hazards.

Typical hours of work per year per BHSC member

X X Review of data source, and judgement of reasonability given mandate, meeting frequency, site visits, and reported significant issues (e.g. fatalities).

4

D BHSC Health

and Safety

Governance

Practices

Nature of information supplied to BHSC by company

X Review of data source. Qualitative assessment of the utility of information supplied.

Information quality assurance practices.

X Review of data source. Qualitative assessment of practices.

Involvement in health and safety objective setting

X X X X Review of data sources. “Yes / No” determination.

Involvement in health and safety strategy formulation

X X X X Review of data sources. “Yes / No” determination.

Communications to the board and executive

X Review of data source. “Yes / No” determination.

Ensuring executive accountability for health and safety performance outcomes

X X X Review of data sources. “Yes / No” determination, and narrative elaboration where considered informative for readers.

External reporting and disclosure practices

X X X Judged based on availability of information from data sources indicated.

BHSC performance self-evaluation

X Review of data source. “Yes / No” determination.

5

G, H, I Company Health An evident logic model that explains the

X X Review of data source. Conceptualization of a potential logic model that describes how the

184


Cr

ite ri o n

N o.

C o nc

ep tu al

Fr a m e w or k

El e m en t


and Safety

Program

Evolution

processes leading to desired outputs and outcomes, and the requisite inputs

reported inputs and processes lead to desired outputs and accident rate performance improvement outcomes.

Evidence that the scope of implementation is appropriate

X Review of data source. Professional judgement based on information provided in data source.

Evidence that the intervention could produce the expected magnitude of impact

X Review of data source. Professional judgement based on information provided in data source.

Evidence of the persistence of the program changes and interventions over a period of many years

X Review of data source. Plotting program and initiative persistence based on information from the data source and reasonable assumptions.

Complimentary inter-relationships and / or coordination among the program changes and interventions

X Review of data source. Professional judgement and analysis based on information provided in data source and the principal researcher’s industry experience.

6

J Company Health

and Safety

Performance

Changes

Pattern of performance improvement over time with magnitude large enough to be unlikely to attributable to chance

X X Review of data source and test of statistical significance.

Degree of change and fluctuation over time that is reasonable in view of health and safety program changes and interventions

X X Review of data source. Professional judgement and analysis based on typical patterns observed across reference industry groups over the same timeframes.

Performance improvement manifest

X X Review of data source. Confirmation that timeframes for improvements occur subsequent to

185


Cr

ite ri o n

N o.

C o nc

ep tu al

Fr a m e w or k

El e m en t


after the program change or intervention has been implemented and can plausibly affect risk levels or risk exposures

the change / intervention, with a delay that is plausible giving consideration to the logic model for the effect, and the principal researcher’s industry experience.

186

5 Case Analysis: Barrick Gold

5.1 Company Profile (December 2015)

Reuters95 offers the following summary description of Barrick:

Barrick Gold Corporation (Barrick), incorporated on March 10, 1995, is a gold mining company. The

Company is engaged in the production and sale of gold and copper, as well as related activities, such as

exploration and mine development. The Company operates in segments: eight individual gold mines,

Acacia and Pascua-Lama project. The remaining operating segments have been grouped into two other

categories: its remaining gold mines and its two copper mines. The Company sells its production in the

world market through the distribution channels: gold bullion is sold in the gold spot market; gold and

copper concentrate is sold to independent smelting companies, and copper cathode is sold to various

manufacturers and traders.

The Company has around 14 producing gold mines, located in Canada, the United States, Peru, Argentina,

Australia, the Dominican Republic and Papua New Guinea. It also holds a 63.9% equity interest in Acacia

Mining plc (Acacia) that owns gold mines and exploration properties in Africa. Its copper business contains

producing copper mines located in Chile and Zambia and a mine under construction in Saudi Arabia. Its

copper business contains copper mines located in Chile and Zambia and a mine progressing through

operational readiness located in Saudi Arabia. It also has projects located in South America and the United

States.

Among gold miners it had the third largest market capitalization at $9.42 billion USD, just

behind Newmont Mining at $10.83 billion USD and Goldcorp at $10.58 billion USD, as of the

date of this paper.

At the start of the period being examined (2000), Barrick had approximately 6000 employees

and contractors working in its operations, and by 2014 it had approximately 36000.

95 Reuters (2015).

187

5.2 BHSC Member Characteristics (Knowledge, Influence)

Table 2 provides information on selected characteristics of the BHSC members from 2002 to

2011. During this period the BSHC had between 3 and 5 members, with a total of 10 individuals

serving over the period. In each year, the independent directors constituted 50% or more of the

members. The BHSC was entirely male, until the addition of a woman in 2011.

Table 2 - Characteristics of Barrick BHSC Members, 2002-2011

Member

ID Sex

Highest

Formal

Education

Primary Non-

Board Role

Barrick

Director

Since

Years of Service on BHSC

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

CAR M Masters Vice-Chair of

Board and COO

1996 N N

COH M Doctoral External Lawyer 1988 I I I I

CRO M Masters Independent

Businessman

1993 I I I I I I I I I I

THO M Bachelor Executive Vice-

Chair of Board

2001 N N N

BIR M Unknown Executive Vice-

Chair of Board

1984 N N N N N N N

FRAN M Bachelor Investment

Fund CEO

2006 I I

HAR M Bachelor CEO Consul

Energy

2005 I I I I I I

REG M Bachelor Barrick CEO 2009 N N N

MOY F Doctoral Economist 2011 I

I = Independent Director N = Non-Independent Director (Company Executive)

188

The evidence for BHSC members possessing a degree of knowledge and influence that would

reasonably be necessary to garner full board support and motivate necessary action by the

executive team is discussed below.

5.2.1 Academic Attainment and Industry Experience

Most or all members of the various BHSC cohorts held bachelor’s degrees, and some master’s or

doctorates. Each cohort included a senior Barrick executive (Executive Vice-Chair, or Chief

Executive Officer), and one of the members, a serial entrepreneur who established a variety of

businesses including mining companies, belonged to all cohorts over the entire period.

5.2.2 Career Accomplishments

For most of the period, the “member years” were made up of individuals with progressive

experience in the mining industry, either in executive, legal or finance roles. All of the members

held multiple concurrent roles as executives and / or board members in several public companies.

One of the members was a lauded economist, but she only joined the board in the final year of

the subject period.

5.2.3 Board Tenure

The average board tenures for the BHSC cohorts ranged from 7.5 to 14 years. One member (the

Executive-Vice Chair joining in 2005) had been on the board for 21 years when commencing

membership on the BHSC.

5.2.4 Commentary on the Evidence

The evidence indicates that the BHSC members were likely to have had sufficient general

knowledge and influence to shape company health and safety programs and initiatives, though

none could be considered subject matter experts.

Each BHSC cohort would reasonably be expected to have strong knowledge of the mining

industry (and Barrick’s operations in particular, owing to the involvement of a very senior

executive officer), significant health and safety issues, and might reasonably be capable of

189

providing intelligent recommendations to the board and executive team. In addition, at all times

the BHSC had as a member either the second or third most senior corporate officers (i.e.

Executive Vice-Chair, Chief Executive Officer). If those officials endorsed BHSC

recommendations it is likely that board endorsement and senior executive implementation would

follow. However, at the same time, theoretical considerations would suggest the potential for the

committee’s work being tempered, or the information delivered being highly censored, as a

result of participation by such a senior official,

The average board tenures of the BHSC members were high, with three members of cohorts

having a decade or more of board membership when serving on the BHSC. This suggests that

many of the members of the BHSC cohorts were likely to be well regarded by the company

leadership and major shareholders, and capable of exerting influence over the decisions of the

BHSC, the board, and the executive team. Conversely, long tenure might also signify a pattern

of agreeability and unconditional support for the executive team, which would not necessary be

consistent with performance of an effective oversight and control function.

5.3 BHSC Mandate

Barrick’s BHSC was originally created in 1994, with a mandate focused primarily on

environment, which enlarged over time to include health, safety and social responsibility. This

pattern was observed in the first study to be common amongst the companies having BHSCs.

During the period 2001 to 2014, the health and safety mandate of the BHSC was virtually

unchanged, and was as follows:

i. To review company health and safety policies and programs

ii. To oversee health and safety performance of the company

iii. To monitor current and future health and safety regulatory issues

iv. To make recommendations to the board

This is component “A” of the conceptual framework, and describes the basic functions and

authority of the BHSC. It is also solely an oversight and control function, consistent with the

agency role of the board.

190

5.3.1 Mandate Enables BHSC to Acquire Intelligence for

Decision Making

Powers to “review”, “oversee” and “monitor” suggest that the BHSC would customarily be

provided with appropriate intelligence on health and safety programs and issues by the company.

The nature of the information that was provided to the BHSC over time was not disclosed, but it

is noteworthy that Barrick’s annual corporate sustainability reports do in fact provide a

reasonably comprehensive body of information pertaining to health and safety operations,

initiatives and performance outcomes. With information of that type being made publicly

available, there is reason to expect (but of course no certainty) that even more in-depth

information could reasonably have been supplied to the BHSC on a regular basis.

5.3.2 Mandate Permits BHSC to Intervene if Necessary

The mandate gives the BHSC power to make recommendations to the board.

5.3.3 Mandate Confers Authority to Hold Executives

Accountable

The mandate does not specifically do so. However, in corporate law and in agency theory, the

board is empowered to do so. That being said, Barrick is a company where the founder and

major shareholder served on the board in his capacity as CEO and Chair for most of his career,

and functioned as CEO for over 2/3rds of the period under study, and Chair for the entire period

under study. As such, it is hard to conceive of a scenario where the board acted to discipline or

hold the CEO accountable.


The evidence indicates that the stated and de facto mandate of the BHSC confers upon it the

ability to influence company health and safety programs, initiatives, objectives and strategies, via

recommendations made to the board, should it wish and need to do so.

191

5.4 Level of BHSC Activity

Table 3 summarizes Barrick’s level of BHSC activity, and shows it to be comparable to 14

companies responding to the March 2015 BHSC survey.

Table 3 – Barrick BHSC Activity Levels

Parameter Barrick Survey

Response

Most Common Patter for 14

Survey Respondents

No. Meetings per Year 3 - 4 3 - 4

No. Site Visits per Year 1 - 2 1 - 2

Annual BHSC Work Days per Member 10 - 15 5 - 9

The evidence suggests that the level of Barrick BHSC activity over the period was adequate,

though arguably just barely, for discharge of the BHSC’s mandate.

5.5 BHSC Governance Practices

5.5.1 Information Supplied by Company, and Quality Assurance

Barrick’s responses to the March 2015 BHSC survey (completed by the BHSC Chair) indicated

that the BHSC receives quarterly health and safety status reports from the company. These are

reportedly prepared in a standardized format, and contain comprehensive latest period and

historical comparative information on company and individual business unit work force

occupational injury and illness rates and costs (Barrick was an exception to the general pattern,

as most BHSCs did not receive cost data), regulatory compliance status, and significant adverse

occurrences. In the survey response it was also stated that internal controls were in place to

ensure reporting accuracy, and that the type, quantity and format of the information was

sufficient to permit BHSC analysis and decision-making.

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5.5.2 Involvement in Health and Safety Objective-Setting and

Strategy Formulation

Barrick’s responses to the March 2015 BHSC survey indicate that the BHSC is consulted on the

company’s annual targets, objectives and strategies relating to employee injury / illness rates and

costs, regulatory compliance, implementation of corporate health and safety programs and

specific initiatives, and levels of planned spending to achieve these targets and objectives; and

the BHSC either endorses or amends these.

5.5.3 Communications to the Board and Executive

Barrick’s responses to the March 2015 survey indicate that the BHSC periodically provides

formal reports and recommendations to the board of directors with advice on how company

should be managing health and safety issues, that the board endorses about 1/3rd of the BHSC’s

recommendations, and that those lead to either formal or informal direction to the Chief

Executive Officer or other senior executives. Given the ownership structure, and central role of

the founder as CEO and board Chair, it might be expected that board direction was generally

informal and advisory in character.

5.5.4 Ensuring Executive Accountability

The March 2015 survey responses indicate that Barrick’s BHSC makes recommendations for

executive bonus amounts giving consideration to whether corporate health and safety

performance targets have been met, and that this has had a significant positive impact on senior

management awareness of, and concern over, health and safety issues. Once again, given the

ownership structure, one might surmise that the executives subject to this method of evaluating

and reward were beneath the level of the CEO. A review of Barrick’s sustainability / social

responsibility reports between 2002 and 2014 indicates that the practice of linking executive

bonuses to safety performance was instituted by the board of directors in 2002, and that in 2003

193

key performance indicators were defined for individual executives in order to focus their efforts,

and measure the degree to which safety performance objectives were met.96

5.5.5 External Reporting and Disclosure

Barrick has reported on its health and safety programs and performance, and BHSC activities

since 2002, with the latest year reported being 2014 as of the date of this paper.

5.5.6 BHSC Performance Self-Evaluation

The March 2015 survey responses indicate that Barrick’s BHSC periodically evaluates its own

activities in relation to its mandate, and that its operations are also periodically reviewed by the

board and a third party evaluator.


The evidence indicates that the BHSC engages in a series of governance practices that logically

should permit the BHSC to discharge its mandate and positively influence company health and

safety performance, should it perceive the need to do so. Barrick has a reputation for

sophisticated corporate governance, and early adoption of governance innovations, and as such

there are reasons to believe the evidence is a reflection of actual practice.

5.6 Company Health and Safety Program Evolution

We reviewed Barrick’s sustainability / social responsibility annual reports for 2002-2014, to

identify information disclosed with respect to health and safety risk management programs and

initiatives. Relevant content from each annual report was cut-and-pasted or transcribed into an

Excel workbook, and labelled by reporting year. When completed, the information was

reviewed in totality, category labels were devised and applied to organize the information and

permit potential qualitative comparisons amongst the companies, and text was abbreviated to

produce short descriptions of each program or initiative. Following synthesis and parsing, the

96 Barrick 2002 Social Responsibility Report.

194

diagram show below (Figure 3) was prepared to depict the inception in time and continuation

over time or discontinuation of health and safety risk management programs / initiatives.

This provided an indication of the persistence (or not) of the program changes and interventions

(persistence is hypothesized as being necessary to effect performance over the long term). Each

program change and initiative was then evaluated to determine whether it could be considered to

be an element of the conceptual framework, and whether the overall set of changes and

initiatives effectively resulted in formation of a logic model that could plausibly result in

performance improvement. Table 4 shows the resulting evaluation worksheet.

196

Table 4 - Inventory and Analysis of Barrick Health and Safety Program Evolution

Health and Safety Program

Initiative

Dates In Place

Element in Conceptual Framework

Description Potential Impacts on Accident Rate

Outcomes

Governance Instruments and Structures

Health and Safety Corporate Policy

Pre-2002, continues onward

Not an element

This is a governance instrument that applies to the entire organization, but it is not specifically part of the conceptual framework.

Pre-dates the period examined.

Safety Performance Consideration for Executive Bonus Determination

2002 onward

D, E This is a Governance Practice (D) and mechanism whereby the BHSC “Ensures Executive Accountability for HS Results”, and thereby exerts influence over the Executive Team (E).

Progressive reductions in LTIFR and AIRF (“Work Force Occupational Injury and Illness Outcomes” (J)) occurred in virtually every consecutive year after this was implemented.

CSR Charter 2004 onward

B This document is a corporate charter, and effectively a policy statement, rather than a charter specific to the operations of the BHSC. However, it arguably reinforces the role and authority of the BHSC.

As above

CSR CEO Advisory Board

2012 onward

Not an element

Performance improvement trend (J) well established several years before this initiative, and rates did not significantly change subsequent to its establishment

Senior Leadership

Safety KPI in Senior Management Performance Commitments

2003 onward

D, E This is the operationalization of a Governance Practice (D) and mechanism whereby the BHSC “Ensures Executive Accountability for HS Results”, and thereby exerts influence over the Executive Team (E).

Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented.

Executive EHS Committee

2004 onward

F This is an organizational structural component for “Executive Team Actions to Achieve HS Performance Goals” (F), by influencing “HS Risk Management Practices of the Organization” (H), and the “Degree of Inherent HS Risk in the Organization’s Operations” (G).

Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented. Subsequent to the formation of this Committee, the number of “New and Sustained Initiatives” (essentially actions intended to reduce “Work Force Exposure to HS Risks” (I)) rose progressively each year from 20 in 2004 to 45 in 2014.

197



Initiative

Dates In Place



Outcomes

Publication of Annual Goals / Targets

2006 onward

D, E This is the operationalization of a Governance Practice (D) and mechanism for BHSC “Involvement in HS Objective Setting”, and is consistent with the BHSC Mandate (A) to “Oversee health and safety performance of the company”, and “Make recommendations to the board”. It is also logically related to setting Key Performance Indicators (“KPIs”) for senior management’s performance commitments, and resultant safety performance-related bonus consideration, and hence a Governance Practice for “Ensuring Executive Accountability for HS Results” (D), “Involvement in HS Objective Setting” (D), and exerting “influence on the Executive Team” (E).


Organizational Resources

4 Regional Executive Groups - Responsibilities Include Health and Safety

2005 onward

F This is an organizational structural component for “Executive Team Actions to Achieve HS Performance Goals” (F), by influencing “HS Risk Management Practices of the Organization” (H), and the “Degree of Inherent HS Risk in the Organization’s Operations” (G).

Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented. Subsequent to the formation of this Committee, the number of “New and Sustained Initiatives” (essentially actions intended to reduce “Work Force Exposure to HS Risks” (I)) rose progressively each year from 20 in 2004 to 44 in 2014.

Site Health and Safety Specialists


G, H, I These individuals are essentially implementation instruments for “Executive Team Actions to Achieve HS Performance Goals” (F), focused on: 1. Reducing the “Degree of Inherent HS Risk in the Organization’s Operations” (G); 2. improving the “HS Risk Management Practices of the Organization” (H); and 3. reducing “Work Force Exposure to HS Risks” (I).

The presence of these personnel pre-dates the period examined, and staffing levels are not reported for most of the period. However, logically it would not be possible to implement F or influence G, H and I in an organization of Barrick’s scale and operational complexity without having several such personnel at each operating location.

198



Initiative

Dates In Place



Outcomes

Director - Safety and Health


Potentially D

The individual in this role would logically perform an important supporting function for the Governance Practices of the BHSC, by compiling and consolidating HS performance information, and ensuring its quality, which in turn is essential for the BHSC to properly discharge its Mandate (A), and effectively carry out a variety of Governance Practices, including: “Involvement in HS Objective Setting”, “Involvement in HS Strategy Formulation”, and “Ensuring Executive Accountability for HS Results”.

Pre-dates the period examined. No information available on the instrumentality of the individual(s) in this role to BHSC function or other components of the conceptual framework.

Vice-President - Safety and Health

2008 onward

D, E, F The comments above with respect to the Director – Safety, apply with respect to this role. In addition, this is an executive position, and hence the individual in this role will contribute to “Executive Team Actions to Achieve HS Performance Goals” (F).

Performance improvements continued in each year after this initiative, but the trend was well established by 2008.

Sr. Vice President - Safety and Leadership

2011 onward

D, E, F The comments above with respect to the Vice-President – Safety and Health, apply with respect to this role.

Marginal performance improvements continued in each year after this initiative, but the trend was well established by 2011, and rates were comparatively low and appeared to be plateauing in the years afterward.

Industrial Hygienist Capacity

2011 onward (2009 initiative was reportedly not effective)

G, H, I These individuals are essentially implementation instruments for “Executive Team Actions to Achieve HS Performance Goals” (F), focused on: 1. Reducing the “Degree of Inherent HS Risk in the Organization’s Operations” (G); 2. improving the “HS Risk Management Practices of the Organization” (H); and 3. reducing “Work Force Exposure to HS Risks” (I).

This role is focused primarily on chronic disease prevention, and efforts in the period 2011 onward would not be expected to affect “Work Force Occupational Injury and Illness Outcomes” (J) in the three year period afterward.

Standards and Program Formalization

199



Initiative

Dates In Place



Outcomes

Corporate HS Internal Audit


Potentially D, F, G, H, I

The focus and scope of HS internal audits could include F, G, H, or I. The findings of same would be supportive of several BHSC Governance Practices (D).


Visible Felt Leadership (Field Observation & Feedback Training)

2002 onward

Potentially D, E, and certainly F, H, G

A decision to implement this program organization-wide would reflect F. Implementation of this program coincided with the establishment of safety performance-based bonus compensation system for company executives, meaning that it may have been motivated by the BHSC decision (D, E). The objective is to positively impact G and H.


Driver Accident Reduction and Vehicle Safety Initiatives

Drive First (Safety Driving Program)

2009 onward

H, G Barrick recognized that vehicle incidents were a significant contributor to overall accident rates, and this training program was implemented with the objective of reducing such incidents.

Barrick reported reductions in vehicle incidents in subsequent years as the program was implemented across the organization.

Cell Phone Usage While Driving Ban

2009 onward

H, G As above As above

Collision Avoidance Technology in Mine Heavy Haulage Trucks

2010 onward

H, G As above As above

Occupational Health Initiatives

Occupational Health Needs and Risk Assessments

2004, 2007, 2008

H, G, I Barrick recognized that dust exposure related respiratory illness and hearing loss were potential problems for the mining workforce. Barrick also provided primary health care to the work force and their families at locations where no other health care resources were available.

The work force component was focused primarily on chronic disease prevention, and efforts in the years indicated would not be expected to affect “Work Force Occupational Injury and Illness Outcomes” (J) in the ten year period afterward.

200



Initiative

Dates In Place



Outcomes

Corporate Occupational Health Policy and Program

2004 onward

H, G As above. As above.

Global Occupational Health Standards and Strategies

2005 onward

H, G As above. As above.

Global Smoke Free Policy

2007 onward

H, G This is a general health promotion initiative. This initiative would not affect J.

Global OH Data Management Software

2007 onward

H, G, I, J This is an enabling technology for other occupational health interventions.

As above.

Annual Health Report

2008 onward

Not an element

This is primarily focused on work force health issues that are not directly related to work place hazards (e.g. absenteeism).

As above.

Occupational Disease Data

2008 onward

I, J This involves collection of data on “Work Force Exposure to Health Risks”.

The work force component was focused primarily on chronic disease, and activities in the years indicated would not be expected to affect “Work Force Occupational Injury and Illness Outcomes” (J) in the subject period afterward.

Industrial Hygiene Program

2010 onward

G, H, I This program can be viewed as a specific strategy for “Executive Team Actions to Achieve HS Performance Goals” (F), focused on: 1. Reducing the “Degree of Inherent HS Risk in the Organization’s Operations” (G); 2. improving the “HS Risk Management Practices of the Organization” (H); and 3. reducing “Work Force Exposure to HS Risks” (I).

As above.

Respiratory Protection

2011 onward

H, I This program was implemented to encourage proper use of respiratory protection (example

As above.

201



Initiative

Dates In Place



Outcomes

Standard of H), and result in reduced exposure to respiratory hazard (example of I).

Exposure Controls Database

2011 onward

Not an element

This is an enabling technology for the occupational health program.

This will have no direct effect on J.

Pre-Employment Screening Program

2014 Not an element

This is a mechanism to verify fitness for work of prospective new employees.

As above.

Ergonomics Initiatives

Fatigue Risk Management Standard

2011 - 2013

I This focuses on shift and monotony-related fatigue as a factor in accident causation, particularly in relation to vehicle accidents.

This issue was studied but there do not appear to have been any interventions as a result, and hence it would not affect J.

Job Profiles 2012, 2014

I This is done in part to provide information for the Pre-Employment Screening Program, and in part to assess employee exposures to hazards in order to assess adequacy of hazard mitigation measures.

Logically these activities would not affect J.

Risk Identification and Management

Personal Field Level Risk Assessment

2004 onward

H, I This is a practice of requiring personnel to explicitly consider potential job task related risks in advance of performing the task, and ensuring adequate hazard mitigation measures are in place.


Risk Management Decision Making Approach

2009 G, H, I There was not sufficient information about this initiative and its fate after 2009.

Unable to judge.

202



Initiative

Dates In Place



Outcomes

Critical Risk Focus

2011, 2013, 2014

H, I This was initially implemented in response to 6 fatalities occurring in 2010. The objective was to review adequacy of hazard mitigation in relation to the highest risk tasks performed at Barrick sites, in order to reduce risk of fatality.

The absolute numbers of fatalities appear to have followed a downward trend between 2003 and 2014, and since the number of employees increased approximately 5x over that period, it is clear that the average fatality rate dropped by a similar factor in the same period. The numbers of fatalities between 2011 were variable and relatively low, making it difficult to determine if this initiative has reduced fatality risk.

Construction Safety

Critical Risk Construction Standard for Projects

2011, 2014

H, I This was part of a sporadic effort to update the contractor safety management program.

Logically these activities would not affect J.

Contractor Management Policy

2012 H, I As above. As above.

Focus on Contractor Management and Emergency Response

2006 H, I There was not sufficient information about this initiative.

Unable to judge.

Ground Support Standard

2003 onward

D, G, H, I “Ground support” refers to ensuring that overhead rock formations are stable and unlikely to collapse. Barrick’s reports indicate that this Standard was specifically reviewed and approved by the Board. This may have been related to 7 fatalities occurring in 2003.

The absolute numbers of fatalities appears to have followed a downward trend between 2003 and 2014, and since the number of employees increased approximately 5x over that period, it is clear that the average fatality rate dropped by a similar factor in the same period.

Barrick Safety and Health Management System

2002 onward

D, F, G, H, I

This is a management system modelled on OHSAS 18001, which involves the elements indicated. Barrick’s reports indicate that the System received Board approval in 2003.


203



Initiative

Dates In Place



Outcomes

Focus on Leadership, Personal Commitment, Training and Competence, Risk Management

2005 onward

G, H, I This is focused on developing safety-appropriate attitudes and behaviours of supervisory and management personnel.

As above.

Responsibility Information Management System

2002 onward

D, F This is an enabling technology for tracking corporate social responsibility information (including health and safety).

This will have no direct effect on J, but would logically provide information for BHSC “Governance Practices” (D) and “Executive Team Actions to Achieve HS Performance Goals” (F).

Training and Promotion

Internal Safety Recognition Awards


Not an element


New Personnel HS Site Orientation Training


Not an element


Courageous Safety Leadership Training

2004 onward

G, H, I This is focused on developing safety-appropriate attitudes and behaviours of supervisory and management personnel. All supervisors and managers were trained in 2004, and most employees and contractors in 2005. Refresher training occurred every year thereafter. Barrick appears to have considered it an important program for shaping pro-safety attitudes and behaviours.


TapRoot™ and Incident Cause Analysis Training (All

2006 to 2008

G, H Approximately 2000 supervisors and managers were trained in incident investigation and cause analysis.

The initiative was relatively short lived, and while rates declined in the subsequent years the contribution made by this training was not discussed in any Barrick reports.

204



Initiative

Dates In Place



Outcomes

Operations)

Risk Management Training

2009, 2012

G, H Insufficient information was provided on this initiative.

Insufficient information was provided on this initiative.

Powerful Leadership Training

2010 G, H Insufficient information was provided on this initiative.


SafeSpine Training (Australia)

2012 G, H, I This was training designed to teach manual material handling methods that reduced risk of back injury.

Barrick reported reductions in back injuries at the Australian operation following the training, but the magnitude of effect was not reported and the initiative does not appear to have continued after 2012.

Ergonomic Awareness Training

2013 G, H, I This was training designed to teach work techniques that reduced risk of musculoskeletal injury.


Compass Program for Health and Safety Staff

2005 - 2007, 2013 - 2014

Not an element.

This was a skills development and career pathing initiative for Barrick’s health and safety staff personnel.

Logically these activities would not directly affect J, but may support retention of qualified personnel, which would support other elements that could affect J.

"Managing Mining Lifestyle" Training

2014 H, I This was aimed at helping shift workers better adapt to shift-work related stressors, including those that might be factors in accidents.

Only implemented in last year of reported data so no impact on J.

205



Initiative

Dates In Place



Outcomes

Investigation and Analysis

2010 - 2012

G, H, I This was initially implemented in response to 6 fatalities occurring in 2010. The objective was to identify the highest risk tasks performed at Barrick sites, in order to direct interventions to reduce risk of fatality.

The absolute numbers of fatalities appear to have followed a downward trend between 2003 and 2014, and since the number of employees increased approximately 5x over that period, it is clear that the average fatality rate dropped by a similar factor in the same period. The numbers of fatalities between 2011 were variable and relatively low, making it difficult to determine if this initiative has reduced fatality risk.

Measurement, Review and Evaluation

Quarterly Status Reporting to Board EHS Committee


D Regular supply of quality information to the BHSC to enable informed decision-making is a key “Governance Practice” (D).

Logically having good information on performance would facilitate effective discharge by the BHSC of its Mandate (A).

Quarterly Status Reporting to Mgt EHS Committee

2005 – onward

F Regular supply of quality information to the Executive Team to enable informed decision-making is essential for “Executive Team Actions to Achieve HS Performance Goals” (F). This coincided with the commencement of the Executive EHS Committee’s operations.

Logically having good information on performance would facilitate effective discharged by the BHSC of its Mandate (A). Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented.

Emergency Response Capacity

Pre-2002 onward

Not an element.

This would affect survival in accident scenarios (hence severity and fatality rates), but not AIFRs or LTIFRs.

206


The evidence indicates that over the period 2002-2014, Barrick introduced approximately 30

new health and safety program components or initiatives on an enterprise-wide or site-specific

basis, and most of these were sustained in the years following initial introduction, as illustrated

by the Figure 4 below:

A high percentage of these were logically intended to reduce risks and hazards inherent in work

operations, improve risk and hazard control practices, and reduce worker exposures to residual

risks and hazards. The manner by which Barrick`s health and safety program evolved over this

period could plausibly lead to reductions in accident rates.

5.7 Company Health and Safety Performance Changes

Over the period 2002-2014,

i. Barrick`s AIFR progressively declined from 4.3 to 0.37 (a decline of 91.5%), which was

statistically significant (t-crit = 2.2, p = 2.02 x 10-5, = 0.05).

ii. The LTIFR progressively declined from 0.70 to 0.21 (a decline of 70%), which was also

statistically significant (t = 4.7, t-crit = 2.2, p = 0.00059, = 0.05).

iii. Absolute numbers of annual fatalities fluctuated between 1 and 8 per year, but the trend

line value in 2014 was approximately 5.5 versus 2.8 in 2002, despite a 5-fold increase in

the total work force over that period (indicating that the fatality rate trend line effectively

declined by a factor of approximately 10 over the period).

207

Based on the above, the magnitude and pattern of performance improvement over time is

considered unlikely to attributable to chance.

From Figure 3 it can also be seen that the improvements in performance occurred incrementally

over the period, with the largest year-to-year declines occurred at the start of the period,

becoming progressively smaller toward the middle of the period, and becoming very small

(effectively plateauing) toward 2014. It is also the case that these incremental improvements

occurred subsequent to the implementation of new programs and initiatives, making it possible

that an intervention started in year 1 began having effect in year 2 and continued on in

subsequent years, with successive initiatives exerting their own effects in subsequent years. In

other words, there is temporal plausibility to support a possible cause and effect relationship.

From Figures 5 and 6 there appears to have been a secular decline from 2002 to 2014 in the

average All Injury Frequency Rate (“AIFR”) and Lost Time Injury Frequency Rate (“LTIFR”)

amongst Canadian companies with BHSCs97, and that Barrick’s rates over the period were mid-

way between the average and the lowest for AIFRs, and in the lower third or quartile below the

average for LTIFRs.

97 Figures 5 and 6 shows AIFRs and LTIFRs for companies that were identified in Chapter 3 as having BHSCs as of

the end of the 2010 fiscal year, and that publicly disclosed their annual AIFRs and / or LTIFRs for some or all of the

period 2002-2014. This is the reason for the number of companies shown in each graph being less than the original

58 identified in Chapter 3. While the graph shows continuous trend lines the source data points are annual rates, and

as such it should not be assumed there were continuous rate variations within any year. Some companies reported

both rates while others reported only one. Hudbay Minerals met the BHSC and reporting criteria, but was excluded

from Figures 5 and 6 because its AIFR and LTIFR were markedly higher than the other companies, and inclusion

would have caused a change in the scale of the ordinate such that it would not be possible to visually distinguish

trend lines for the other companies.

210

5.8 Conclusions: Barrick

With Barrick, we have an example of a company that established a BHSC as a feature of a

comprehensive corporate governance framework. Barrick is a long-established company, and

world leader in its industry. Given the size, scope and complexity of Barrick as a company, it is

reasonable to expect that the board’s workload would be significant, and the formation of a

mandate-specific committee to deal with health and safety issues is consistent with the

observation, often made in the corporate governance literature, that board sub-structures are

more necessary and more commonly established by the largest corporations, which, on account

of their size, require supplementary governance structures to handle workload, and organize and

control information relating to specific areas of company operation.

The experience of Barrick over the period 2002-2014 is consistent with, and lends support to, the

hypothesis that the existence of a BHSC can drive improvements in company health and safety

performance outcomes, and the conceptual framework is, in the case of Barrick, useful in

organizing information to describe the structures and processes of the BHSC, and understanding

how its activities can plausibly flow downstream through the organization. The BHSC was and

is comprised of a very stable, long-tenured group of board members, who, based on their

individual characteristics, could plausibly have been appointed to the Barrick board to address

the complete list of five “demand-side” functional attributes. The BHSC has a formal mandate,

focused on oversight and control, consistent with agency theory. It has a charter of operations,

resulting in a level of BHSC work activity that is plausibly sufficient for the conduct of work

implied by the mandate. In terms of governance mechanics, it receives regular intelligence from

the company with respect to health and safety management processes, outcomes, and

comparators; it reviews and makes recommendations to the board and executives based on that

intelligence; it considers and endorses performance targets; it exercises control over executives

through the use of financial reward and punishment to compel actions to achieve targets; it self-

evaluates effectiveness; and sees that information on company health and safety issues,

initiatives and performance outcomes is compiled and disclosed to shareholders and the public.

These BHSC process characteristics of are reflective of normative good governance

recommendations, and the survey and case evidence suggests these were and are followed in

practice.

211

Social embedding theory suggests that personal affiliations and motivations of directors place

them in conflict with their agency role, and that this may create reluctance to exercise their

oversight and control functons. However, the Barrick BHSC has influence over executive

discretionary compensation, which it might not have sought to acquire if it was hesitant to act in

its agency capacity (which, in any case, is the focus of its mandate). As such, it is reasonable to

assume that executives are responsive to recommendations of the BHSC. Given the economic

scale of Barrick, it is also reasonable to presume that funding issues are not necessarily material

barriers to executive action in response to BHSC recommendations.

Review of the evolution of Barrick’s program over the 12 year period examined shows the

progressive implementation of a variety of initiatives. Initially, many of those initiatives were

obstensibly compliance driven, or aimed at reducing risks believed to account for a sizable

portion of the company’s accident experience, and often enterprise-wide. Later, as progress was

made with respect to those initial objectives, the company experimented with a series of

additional locally targeted risk reduction initiatives, implemented several non-specific enterprise-

wide initiatives intended to support safety-conscious attitudes and behaviours, and implemented

a more systems-oriented approach to health and safety management and reporting. Based on the

timing of different milestone events, it does appear that developments in the company’s health

and safety governance framework preceded and initiated program evolution, which in turn was

associated with a pattern of progressive improvements in performance outcomes.

6 Case Analysis: Goldcorp


Reuters98 provides the following summary description of Goldcorp:

Goldcorp Inc. (Goldcorp), is a gold producer engaged in the acquisition, exploration, development and

operation of gold properties in Canada, the United States, Mexico and Central and South America. The

Company's principal products are gold and the byproduct silver, copper, lead and zinc. Goldcorp's

98Reuters (2015).

212

operating assets include four mines in Canada and the United States, three mines in Mexico, and three in

Central and South America. Goldcorp also has a pipeline of projects, including the Cerro Negro project in

Argentina, the Eleonore gold project in Quebec, Canada, the Cochenour project in Ontario, Canada, and the

El Morro project in Chile. It also operates the Borden Gold project.

Among gold miners it had the second largest market capitalization at $10.58 billion USD, just

behind Newmont Mining at $10.83 billion USD, as of the date of this paper. At the start of the

period for which rate data is available (2004), Goldcorp had approximately 7,600 employees and

contractors working in its operations, and by 2014 it had approximately 18,000.


The following table provides information on selected characteristics of the BHSC members from

2002 to 2011. Like Barrick, during this period the Goldcorp BSHC had between 3 and 5

members, with a total of 9 individuals serving over the period (as compared to 10 at Barrick). In

each year, the independent directors constituted 100% of the members (versus 50%+ at Barrick).

As such, there were no senior executives on the Goldcorp BHSC board, in contrast to Barrick

where either the Executive Vice-Chair or Chief Executive Officer were BHSC members at any

given time. As such, it might be expected that the Barrick BHSC would have potential for

access to more in-depth information on company health and safety operations than would be the

case at Goldcorp, and the Barrick BHSC would be better positioned to provide strategic advice

than the BHSC at Goldcorp (though strategic advice was not formally part of the Barrick BHSC

mandate). The Goldcorp BHSC was entirely male from 2002 to 2007, until the addition of a

woman in 2008.

Table 5 - Characteristics of Goldcorp BHSC Members, 2002-2011

Member

ID Sex

Highest

Formal

Education

Primary Non-Board

Role

Goldcorp

Director

Since


20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

BEA M Masters University

Professor and

Corporate Director

1994 I I I

HUT M Bachelor Former

Government

Research Institute

Head

1998 I I I

213

Table 5 - Characteristics of Goldcorp BHSC Members, 2002-2011

Member

ID Sex

Highest

Formal

Education

Primary Non-Board

Role

Goldcorp

Director

Since


20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

QUI M Bachelor Hospital Executive

Vice-Chair,

Chiropractor,

Corporate Director

2000 I I I I

BEJ M Bachelor Former

Professional

Diplomat,

Corporate Director

2005 I I I I I I I

BEL M Doctoral Former Head, BC

Hydro and Power

Authority

2005 I I I I I

MAD M Masters Corporate

Executive, Mexico

2005 I

REI M Masters Gold Mining

Industry Sr.

Executive,

Corporate Director

2006 I I I I I I

BRI F Bachelor Corporate Director,

Chartered

Accountant

2006 I I I I

ROV M Masters Gold Mining

Industry Sr.

Executive,

Corporate Director

2006 I I


The evidence for BHSC members possessing a degree of general knowledge and influence that

would reasonably be necessary to garner full board support and motivate necessary action by the


6.2.1 Academic Attainment and Industry Experience

All members of the various BHSC cohorts held bachelor’s degrees, several held master’s, and

one a doctorate. In the early portion of the period (2002-2004), there were no members with

mining industry, or even private sector business experience. Conceivably, this would present

challenges to the BHSC from the perspective of developing a strong understanding of the

operational aspects of the business, its approach to managing health and safety, and evaluating

the adequacy of that approach. However, from 2005 onward the BHSC cohort had one or more

214

members with senior level business and / or gold mining industry experience, which should have

afforded opportunities for improved understanding of those aspects.


For most of the first half of the period, the “member years” were made up of individuals whose

career experience was primarily in the public sector. Echoing comments above, this would seem

to have impaired BHSC capacity to exercise agency and strategic advisory functions. In the

latter half, most of the members were individuals with progressive experience in the mining

industry, either in executive or finance roles. Over the entire period most of the members held

multiple concurrent roles as executives and / or board members in several public companies. At

least one member held an honorary doctorate.

6.2.3 Board Tenure

The average board tenures for the Goldcorp BHSC cohorts ranged from 1 to 7 years (as

compared to 7.5 to 14 years for Barrick), with an grand mean of 4 years. As such, the years of

in-company board experience of the Goldcorp BHSCs was considerably less than in Barrick.


The evidence indicates that some of the Goldcorp BHSC cohorts may have had comparatively

low levels of industry, company-specific knowledge, and health and safety knowledge, as

compared to Barrick’s BHSC cohorts. Specifically, the Goldcorp BHSCs in years 2005 to 2007,

where the average board tenures of the cohorts were 1 to 2 years, and some BHSC members had

only just become board members. The “newness” of many of the Goldcorp BHSC members also

calls into question their capacity and inclination to act in an oversight and control capacity, if

doing so might incur the wrath of the CEO, and warrants close evaluation of the evidence for

satisfaction of the criteria that follow.

215

6.3 BHSC Mandate

In contrast to Barrick, where the BHSC mandate was unchanged, the health and safety mandate

of the Goldcorp BHSC underwent significant evolution between 2002 and 2014, as illustrated in

Table 6.

It is noteworthy that over this period, the number of mandated functions grew 6 in 2002 to 12 in

2014. The new mandate statements were either “activist”-oriented functions (i.e. they conferred

specific powers of intervention), or re-phrasings of pre-existing mandate statements that resulted

in a more activist orientation. In 2010, the mandate was expanded to “Ensur(ing) the Company’s

directors are knowledgeable about their duties and responsibilities related to the scope of the

Sustainability, Environment, Health and Safety Committee.” There was a major mandate

expansion in 2011:

i. The BHSC’s longstanding role in relation to oversight of HS policies, procedures and

implementation resources expanded to “Work(ing) with management in the

development (emphasis added) of short and long term policies and standards…”. In

2012, it expanded further to “revis(ing)” HS policies.

ii. Their prior role in reviewing “material incidents” expanded to “Investigat(ing) any

extraordinary negative … health and safety performance…” and “Review(ing) …

health and safety issues and incidents to determine that management is taking

appropriate action… and that management has been duly diligent…”.

iii. Their prior function of “Receiv(ing) and review(ing) periodic operational and compliance

reports from management” and making recommendations was re-cast as “Review(ing)

and monitor(ing) management's activities to ensure that risks … are identified and that

sufficient resources are allocated…”.

iv. Specific functions were added to ensure that BHSC members had a significant level of

understanding of operationally-relevant HS subject matter and on-the-ground conditions

at mine sites, most notably to “periodically visit corporate locations to become familiar

with the nature of operations, and to review relevant objectives, procedures and

performance with respect to sustainability, environment, health and safety”.

216

It is, in fact, a remarkable mandate in several respects, as compared to the typical BHSC mandate

of the companies examined. The mandate clearly sets out the dual strategic advisory, and

oversight and control functions of the BHSC, and specifically recognizes the necessity of BHSC

subject matter conversancy, and familiarity with company operations, in order to properly

discharge those functions.

From the foregoing, it appears that the Goldcorp BHSC mandate would have enabled it to

acquire appropriate intelligence for analysis and decision-making, empowered it to intervene in

company affairs where necessary, and conferred authority to hold executives accountable for

performance outcomes.


While it may be coincidental, it is noteworthy that while most of the members of the BHSC

cohorts over the period 2002-2011 were relatively “new” to Goldcorp and its board, and

consequently may have had limited capacity to exert moral suasion over the board and the senior

executive team, they operated under a mandate that, on paper, accorded them significant powers

of inquiry and action, where they deemed it warranted. It would be reasonably to conclude that

the manner by which the mandate enlarged over the time period should have increased the ability

of the BHSC to monitor HS, evaluate HS adequacy, and give direction to management where

appropriate. Mandate enlargement also seems to be a reasonably strategy in the first half of the

subject period to counterbalance what might otherwise have been a weak BHSC posture owing

to the relative newness and lack of industry experience of the members. Viewed this way,

Goldcorp may be an example of an organization where BHSC influence was less based in the

“personal power” of individual BHSC members (e.g. long service board members and senior

executives – as may have been the case at Barrick, and more on fundamental governance

authority conveyed via the BHSC mandate. From the perspective of the conceptual framework

this can be characterized as more of “D” than “C” acting on “E”.

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Table 6 - Evolution of Goldcorp BHSC Mandate

Category Mandate Statement

Year

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Ensuring Adequate Policies, Procedures, Resources

Ensures that appropriate and effective health, safety and environmental policies and procedures are in place, operational and supported by sufficient resources

► ► ► ► ► ► ► ► ► ► ► ► ►

Reviews and monitors the health, safety and environmental policies and procedures of the Corporation and reports to the Board of Directors with any recommendations relating to those policies and procedures

► ► ► ► ► ► ► ► ► ► ► ► ►

Works with management in the development of short and long term policies and standards to ensure the principles set out in the sustainability, environment, health and safety policies are being achieved

► ► ► ► ►

Reviews, monitors and revises the sustainability, environmental, health and safety policies of the company

► ► ► ►

Achievement of Performance and Compliance

Promotes and supports improvements to the Corporation's health, safety and environmental record ► ► ► ► ► ► ► ► ► ► ► ► ►

Incident Investigation Reviews material incidents relating to health, safety and environmental issues and reporting to the Board of Directors with any recommendations relating to those incidents

► ► ► ► ► ► ► ► ►

Investigate any extraordinary negative sustainability, environment, health and safety performance, where appropriate

► ► ► ►

Review community, environment, health and safety issues and incidents to determine that management is taking appropriate action in respect of these matters and that management has been duly diligent in carrying out its responsibilities and activities;

► ► ► ►

Monitoring and Oversight

Receives and reviews periodic operational and compliance reports from management in relation to health, safety and environmental matters, and report to management and the Board with any recommendations relating to those

► ► ► ► ► ► ► ► ►

218

Table 6 - Evolution of Goldcorp BHSC Mandate

Category Mandate Statement

Year

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

reports

Review and monitor management's activities to ensure that the principle related risks and opportunities to the company are identified and that sufficient resources are allocated by management to address them

► ► ► ►

Monitors the implementation and management of the Company’s policies, procedures and practices relating to sustainability, environment, health and safety, corporate social responsibility and human rights matters

► ► ► ►

Arranges, implements and oversees environmental audits at any of the operations of the Corporation

Reviews results of operational community, environment, health and safety audits and management’s activities to maintain appropriate internal and external environmental and safety audits

► ► ► ► ► ► ► ► ► ► ► ► ►

Periodically visit corporate locations to become familiar with the nature of operations, and to review relevant objectives, procedures and performance with respect to sustainability, environment, health and safety

► ► ► ►

BHSC Subject Matter Competency

Ensures the Company’s directors are knowledgeable about their duties and responsibilities related to the scope of the Sustainability, Environment, Health and Safety Committee

► ► ► ► ►

Total Statements 6 6 6 6 6 6 6 6 8 12 12 12 12

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When interviewed in early November 2015, the BHSC Chair (who had been in that role for

nearly a decade), stated that the BHSC had adequate intelligence and did in fact carry out all of

its mandated functions each year. Mandate expansion from 2010 onward was initiated by the

BHSC and board, and was intended to afford fuller opportunity for BHSC members to

understand operational conditions at mine sites, establish rapport with local mine managers,

impress upon local personnel via BHSC member presence that protection of health and safety

was of paramount importance to the company, and verify that appropriate protective measures

were in place.


The following table summarizes Goldcorp’s BHSC’s level of activity, and shows it to be

comparable to companies examined in a prior examination of disclosures for the 58 companies

covering a ten year period, and 14 companies responding to the March 2015 BHSC survey.

Table 7 – Goldcorp BHSC Activity Levels

Parameter Goldcorp Survey

Response

Most Common Patter for 14

Survey Respondents

No. Meetings per Year 4+ 3 - 4

No. Site Visits per Year 3 - 4 1 - 2

Annual BHSC Work Days per Member 15 – 20+ 5 - 9

In addition to the activities listed in the table, Goldcorp’s BHSC Chair indicated that the BHSC

typically spends additional time conducting reviews of serious incidents in those years when they

occur. This was a unique mandated function for the Goldcorp BHSC within the population of

companies studied.

Goldcorp’s BHSC engaged in a much higher level of activity than Barrick over the period of

interest. The evidence suggests that the level of Goldcorp BHSC activity over the period was

adequate for discharge of the BHSC’s mandate.

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6.5.1 Information Supplied by Company, and Quality Assurance

Goldcorp’s responses to the March 2015 BHSC survey (completed by the BHSC Chair, and

confirmed via interviews with the Chair and Vice-President - Safety) indicated that the BHSC

receives quarterly health and safety status reports from the company. These are prepared in a

standardized format, and contain comprehensive latest period and historical comparative

information on company and individual business unit work force occupational injury and illness

rates (but not costs), often with commentary on the apparent reasons for the observed

performance, information on regulatory compliance status, and significant adverse occurrences.

Industry comparator information is also provided periodically. In the survey response it was also

stated that internal controls were in place to ensure reporting accuracy (though not described),

and that the type, quantity and format of the information was sufficient to permit BHSC analysis

and decision-making. This was substantially the same as Barrick.

6.5.2 Involvement in OHS Objective Setting and Strategy

Through responses to the March 2015 survey and interviews with the Goldcorp BHSC Chair and

the company’s Vice-President – Safety, it was determined that company senior management

takes the lead in setting targets and proposes strategies. The company proposes annual targets

for accident rates, levels of regulatory compliance, and implementation of new programs and

initiatives, and these are considered and either amended or endorsed by the BHSC. The

company generally does not set targets for accident-related costs or levels of planned spending to

achieve desired targets and objectives. By comparison, Barrick’s BHSC considered a wider

variety of objectives, including accident costs and planned spending.

6.5.3 Communications to the Board and Executive

Goldcorp’s responses to the March 2015 survey indicate that the BHSC periodically provides

formal reports to the board of directors with advice on how company should be managing health

and safety issues, that the board endorses about 4/5ths of the BHSC’s suggestions (as opposed to

1/3rd at Barrick). It was suggested that communications between the BHSC, the board and the

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executive team with respect to health and safety issues are predominantly informal, particularly

between BHSC and board meetings, since the executive team has generally taken action in line

with BHSC wishes without need for formal direction. However, it was also reported that the

board often provides explicit instruction to the chief executive officer or other executives based

on BHSC recommendations.

6.5.4 Ensuring Executive Accountability

The March 2015 survey responses and interviews with the Goldcorp BHSC Chair and the

company’s Vice-President – Safety indicate that Goldcorp’s board holds the executive team

accountable for achieving health and safety performance targets, and the outcomes currently

influence 30% of their potential annual bonus compensation awards. Barrick also linked a

portion of executive bonuses to health and safety performance, but does not disclose the

percentages.

6.5.5 External Reporting and Disclosure

Goldcorp has reported on its health and safety programs and performance, and BHSC activities

since 2004, with the latest year reported being 2014 as of the date of this paper.

6.5.6 BHSC Performance Self-Evaluation

The March 2015 survey responses indicate that Goldcorp’s BHSC periodically evaluates its own

activities in relation to its mandate, and that its operations are also periodically reviewed by the

board, though not by any third party evaluator (in contrast to Barrick).


The evidence indicates that the BHSC engages in a series of governance practices that logically

should permit the BHSC to discharge its mandate and positively influence company health and

safety performance, should it perceive the need to do so. The BHSC Chair (who has served in

that role for nearly a decade preceding the date of this paper) was strongly of the view that the

BHSC has functioned in accordance with the governance practices described above, and that this

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has been instrumental in promoting the development of the company’s health and safety

programs.


Goldcorp’s sustainability / social responsibility annual reports for 2004-2014 were reviewed,

extracted, and summarized in the same manner as described above for Barrick. The final version

of the resultant diagram is Figure 7 on the following page. The draft diagram was reviewed by

the Goldcorp BHSC Chair and Vice-President – Safety and discussed with the principal

researcher prior to being finalized. Table 8 shows the resulting evaluation worksheet.


The evidence indicates that over the period 2004-2014, Goldcorp introduced at least 25 new

health and safety program components or initiatives on an enterprise-wide or site-specific basis,

and most of these were sustained in the years following initial introduction, as illustrated in the

Figure 8 below:

A high percentage of these were logically intended to reduce risks and hazards inherent in work

operations, improve risk and hazard control practices, and reduce worker exposures to residual

risks and hazards. The manner by which Goldcorp`s health and safety program evolved over this

period could plausibly lead to reductions in accident rates.

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Table 8 - Inventory and Analysis of Goldcorp Health and Safety Program Evolution

Health and Safety Program Initiative

Dates In Place



Outcomes

Governance Instruments and Structures

Health and Safety Corporate Policy


Not an element

This is a governance instrument that applies to the entire organization, but it is not specifically part of the conceptual framework.


Board Sustainability, Environment, Health & Safety Committee


A, B, C, D This is a governance structure that applies to the entire organization.


Sustainability, Environment, Health and Safety review of major incident investigations

2007 onward

A, D, E This was a part of the BHSC mandate (A) dating back to 2002, but the annual sustainability reports suggest it did not become actual practice until 2007. This seems to have commenced in response to a cluster of four work place fatalities occurring in 2007. Conducting these investigations would logically enhance the quality of information available to the BHSC, guide objective setting and strategy formulation for prevention of re-occurrences, and promote executive level accountability – all of which are specific Governance Practices (D) and mechanism whereby the BHSC “Ensures Executive Accountability for HS Results”, and thereby exerts influence over the Executive Team (E).

A downward trend in LTIFR and AIRF (“Work Force Occupational Injury and Illness Outcomes” (J)) appeared to have emerged prior to 2007, and continued after inauguration of this practice. One or more fatalities annually continued after 2007.

Sustainability, Environment, Health

2007 onward

D This is a Governance Practice (information and intelligence) intended

Previously established downward trend in LTIFR and AIRF continued

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Dates In Place



Outcomes

and Safety visits to mine sites (typically 2-4 per year - up to 3 days on site)

to provide the BHSC members with good understanding of mining operations and the company’s specific health and safety issues across its various locations.

after the introduction of this practice.

Organizational Resources

Added Corporate Safety Director

2007 onward

F This individual would essentially be an implementation instrument for “Executive Team Actions to Achieve HS Performance Goals” (F). According to the BHSC Chair and Vice-President – Safety, Goldcorp had no corporate manager / director prior to 2007. The individual hired for this role was reported to have been instrumental in bringing to Goldcorp a variety of ideas and approaches for enterprise-wide management of health and safety, including programs intended to reducing the “Degree of Inherent HS Risk in the Organization’s Operations” (G); 2. improve the “HS Risk Management Practices of the Organization” (H); and 3. reduce “Work Force Exposure to HS Risks” (I).

A downward trend in LTIFR and AIRF continued after the addition of this role. It is noteworthy that the pace of initiating new programs picked up considerably from 2007 onward.

Added Regional Safety Directors

2013 onward

F This is an organizational structural component for “Executive Team Actions to Achieve HS Performance Goals” (F).

The downward rate trend was already established by 2013 and the additions are late in the timeframe and hence cannot be viewed as contributory to

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Dates In Place



Outcomes

the overall pattern.

Added Vice-President - Safety

2014 onward

F As above. As above.

Workplace Joint Health and Safety Committees

Pre-dates 2004

F These are joint management – worker committees that operate at specific sites and can be viewed as instruments of implementation.

Introduction mostly pre-dates the period examined.

Programs

Occupational Health and Safety Guidelines

2006 onward

H, I This document provided mine site level direction for management of hazards and risks.

Downward trend in LTIFR and AIRF continued after implementation.

“Golden Rules” 2007 onward

G, H, I This document prescribed protective measures to take in relation to 7 high hazard operational activities presenting potential for fatal injury.

As above.

“Golden Rules” Guide

2013 onward

G, H, I As above. The downward rate trend was already established by 2013 and the additions are late in the timeframe and hence cannot be viewed as contributory to the overall pattern.

Life Saving Rules 2013 onward

G, H, I As above.

Fighting Fatalities 2013 onward

H, I This was an initiative to re-emphasize the importance of absolute adherence to the above rules.

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Dates In Place



Outcomes

Industrial Hygiene 2013 onward


This program is focused primarily on chronic disease prevention, and efforts in the period 2013 onward would not be expected to affect “Work Force Occupational Injury and Illness Outcomes” (J) in the period examined.

Health and Safety Management Systems

Company-wide Health and Safety Management System

2005 onward

H As above. The purpose for such systems is to integrate health and safety compliance and performance management into other management systems of the company. These could plausibly lead to safety conditions and improved accident rates.


Company-wide Safety Management Information System for analyzing safety performance trends and statistics

2008 onward

H As above. As above.

Company-wide Aviation Safety Management System

2009 onward

H, I This was narrowly focused on safety of corporate and charter aircraft.

This would not affect overall accident rates.

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Dates In Place



Outcomes

Risk-based Safety Management System framework

2010 onward



Sustainability Excellence Management System

2014 onward

D, H Details unavailable. The downward rate trend was already established by 2013 and the additions are late in the timeframe and hence cannot be viewed as contributory to the overall pattern.

Promotion

“Safe Enough for Our Families” Vision Statement

2007 onward

G, H, I These promotional initiatives were intended to shape the safety culture of the company and develop a safety-conscious mindset among the workforce. These could plausibly lead to safer conditions and improved accident rates.

Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented. New Internal Safety

Achievement Awards

2008 onward

H

“Care, Think, Act” Video

2010 – 2012

H, I

Day of Remembrance

2013 onward

Not an element

The downward rate trend was already established by 2013 and the additions are late in the timeframe and hence cannot be viewed as contributory to the overall pattern.

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Dates In Place



Outcomes

Training

Safety Leadership Program

2007 onward

G, H,, I These training programs were components of a sustained initiative to increase management, supervisory and employee health and safety knowledge and competencies. These could plausibly lead to safer conditions and improved accident rates.


“DELTA” Employee Safety Training Course

2009 onward

H, I As above.

Leadership Regional Safety and Health Workshops

2010, 2012

F As above.

Training Plan for Safety Coaches

2013 H The downward rate trend was already established by 2013 and the additions are late in the timeframe and hence cannot be viewed as contributory to the overall pattern.

Information Sharing

Company-wide Safety Leaders Conference

2008 onward

F As above Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented.

Mining Roundtable Participation

2008 onward

H The Mining Roundtable is a forum for best practices information sharing amongst major mining companies.


Goldcorp Mine Rescue Summit

2013 Not an element

This would not affect overall accident rates during the period examined.

Investigation and Analysis

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Dates In Place



Outcomes

Communication of Company-wide Health and Safety Best Practices

2007 onward

G, H, I This could plausibly lead to safer conditions and improved accident rates.


New Incident Investigation Process

2010 onward

G, H, I As above. Progressive reductions in LTIFR and AIRF (J) occurred in virtually every consecutive year after this was implemented.

Increased Emphasis on Research and Analysis of Fatalities and Potential Fatality Occurrences

2012 onward

I This involved a rolling year-over-year 5 year retrospective analysis of performance data, to enable targeted interventions. This could plausibly lead to safer conditions and improved accident rates.

The downward accident trend was established by this date and continued through to 2014.

Assignment of Senior Executive Responsibility for Review of Fatalities and Potential Fatality Occurrences

2014 onward

E, F The company established a requirement for designated senior executives to analyse and produce reports and recommendations in relation to incidents occurring in specific business units for which they were not responsible.

The downward rate trend was already established by 2013 and the additions are late in the timeframe and hence cannot be viewed as contributory to the overall pattern.

Review and Evaluation

Review of Safety Strategy at Quarterly Leadership Team Meetings

2007 onward

F, G, H, I This could plausibly lead to decisions and actions affecting G, H, I, and hence improvements in J.


“Goldeneye” Health and Safety Program

2007 onward

D, F, G, H As above. As above.

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Dates In Place



Outcomes

Peer Reviews

Emergency Response Capacity

Newly Formed Mine Rescue Teams at 2 Locations

2007 onward

Not an element

This would not affect overall accident rates during the period examined.

Created Uniform Emergency Response Program Framework

2007 onward

Not an element

As above.

Assigned Full Time Corporate Mine Emergency Response Specialist to Guide Company-wide Program Standardization and Improvement

2012 – 2014

Not an element

As above.

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i. Goldcorp`s AIFR progressively declined from 6.2 to 1.38 (a decline of 91.5%), which

was close to being statistically significant (t-crit = 2.19, p = 0.056, = 0.05).

ii. The LTIFR progressively declined from 1.0 to 0.3 (a decline of 70%99), which was also

close to being statistically significant (t = 1.99, t-crit = 2.26, p = 0.078, = 0.05).

iii. Absolute numbers of annual fatalities fluctuated between 1 and 4 per year, with no

evident trend over the time period.

It was also the case that these incremental improvements occurred alongside the implementation

of new programs and initiatives, making it possible that an intervention started in year 1 began

having effect in year 2 and continued on in subsequent years, with successive initiatives exerting

their own effects in subsequent years. In other words, there is temporal plausibility to support a

possible cause and effect relationship.

From Figure 7 it can also be seen that the improvements in performance occurred incrementally

over the period, as was the case with Barrick. Goldcorp’s year-over-year declines in AIFR

showed less discontinuity than Barrick’s, and do not appear to have plateaued up to 2014.

Goldcorp’s LTIFR decline over the period showed more year-to-year variability than Barrick’s.

As with Barrick, Goldcorp’s rate reductions over the period occurred subsequent to or in parallel

with the implementation of new programs and initiatives, making it possible that an intervention

started in year 1 began having effect in year 2 and continued on in subsequent years, with

successive initiatives exerting their own effects in subsequent years. In other words, there is

temporal plausibility to support a possible cause and effect relationship.

As noted in the Barrick case analysis, Figures 5 and 6 suggests a secular decline from 2002 to

2014 in the average All Injury Frequency Rate (“AIFR”) and Lost Time Injury Frequency Rate

(“LTIFR”) amongst Canadian companies with BHSCs. Goldcorp’s AIFR rates over the period

99 Which coincidentally was the same percentage decline experienced by Barrick over the period 2002-2014.

233

were at the lower quartile between the average and the lowest for AIFRs, generally in the range

of 50% to 75% of Barrick’s rates. The pattern of Goldcorp’s LTIFR closely tracked the average

for the companies with BHSCs, but was typically about 75% of the average.

Based on the above, the magnitude and pattern of performance improvement over time could be

to attributable to chance, or simply consistent with a secular trend relating to extrinsic factors,

but it is also plausibly the result of the suite of preventive interventions implemented by the

company over the period.

6.8 Additional Information Obtained by Interviews

6.8.1 Chair - BHSC

The BHSC at the time of this paper had been a member of the Goldcorp board of directors since

2004. His brief career profile on the Goldcorp web site100 reads as follows:

(He) is a former Canadian Ambassador to the Ivory Coast and to Brazil. Currently, he is

an Honorary Consul to the Ivory Coast. He also served as High Commissioner to

Malaysia from 1993 to 1996. (He) was special advisor to the Canadian Minister of

Foreign Affairs and Head of the Canadian Delegation on environment issues during the

lead-up to the Earth Summit in Rio de Janeiro in June 1992, and was Canada’s chief

negotiator at the Earth Summit. (He) has been Chief Federal Negotiator for the Indian

Affairs and has served on several not-for-profit boards of directors. (He) is also an

independent director of Tahoe. He holds a Bachelor of Commerce and an Honorary

Doctorate of Laws from the University of British Columbia. (His) background as an

ambassador and extensive experience with environmental and regulatory issues in

Canada and throughout the world provide to management and the Board valuable insight

into the international regulatory and policy developments affecting the Corporation’s

business. (His) depth of knowledge in matters relating to the environment and public

policy add to the Board’s breadth of experience and further enhance Goldcorp’s ability to

100 Goldcorp. http://www.goldcorp.com/English/About-Us/Board/default.aspx (Accessed December 1, 2015).

234

improve and build upon the Corporation’s environmental and corporate social

responsibility policies and activities. (He) is a member of the National Association of

Corporate Directors and the Institute of Corporate Directors.

This resume would appear to make the Chair particularly well qualified for the BHSC,

particularly in light of Goldcorp having mining operations in Latin America.

The Chair indicated that the BHSC pre-dated the time of his appointment to the board, but he

was not aware of the date of its inception. BHSCs of many companies, Goldcorp’s initial focus

was on environmental issues, then expanded to include health and safety, and most recently other

social responsibility issues. When the current Chair joined the BHSC in 2004 its health and

safety focus was oriented toward “wellness”, but the occurrence of a fatality in 2005 caused the

BHSC to re-orient its focus onto operational health and safety issues that could cause serious

harm or death; which has been the BHSCs primary focus since that time. Following that fatality

the BHSC started its practice of making periodic visits to mine sites.

The Chair noted that the company called “Goldcorp” grew primarily through mergers and

acquisitions. The company's predecessor was incorporated in Ontario as Goldcorp Investments

Limited on November 29, 1954, and its name was changed to Goldcorp Inc. on August 30, 1991.

For most of the period until the early 2000s, the company had an undistinguished history in the

gold mining industry. In 2006, Goldcorp completed a $21 billion merger with a company known

as Glamis Gold, which was the first of series of divestitures and acquisitions that created the

company as it exists in 2015. It continued with a series of acquisitions from that time to date101

with the result being that in 2015 the company had mining operations in Canada, United States,

Mexico, Guatemala, Dominican Republic, and Argentina.102 A significant milestone in tackling

this challenge and driving the development and evolution of Goldcorp’s approach to managing

101 New Gold. http://www.rem-mag.com/business/goldcorp-enters-into-agreement-with-new-gold-inc (Accessed

December 7, 2015).

102 Goldcorp. http://www.goldcorp.com/English/Investor-Resources/Reserves-and-Resources/default.aspx.

Accessed December 7, 2015.

http://www.goldcorp.com/English/Investor-Resources/Reserves-and-Resources/default.aspx

235

work place health and safety was the hiring of an individual in 2007 to fill a new role as the first-

ever “Corporate Director of Safety” (“CDS”) for Goldcorp. The first CDS came to Goldcorp

from a consulting firm specialising in environment, health and safety management and auditing

that Goldcorp had utilized for various support services.

This pattern of company growth presented challenges to the company and BHSC in the

implementation of health and safety programs. The Chair noted that each of acquired companies

had its own safety culture, procedures and organizational resources, and there were significant

differences between the various operations at the time they were acquired. The company and

BHSC recognized by 2006 that it was necessary for Goldcorp to develop and implement a health

and safety management approach that was uniform in all of its operations, and that could be

made to work in the various jurisdictions and cultural and social milieus of Goldcorp’s

operations 103, The Chair viewed the newly hired CDS as a “thought leader” who was

instrumental in bringing to Goldcorp a variety of ideas and recommendations that led to the

implementation of many of the programs and initiatives that occurred after 2007. In the opinion

of the Chair, the CDS introduced and pushed the company to adopt practices that were known to

produce positive impacts elsewhere in the mining and other sectors. For Goldcorp, the new CDS

played a “boundary spanning” role104, which the Chair viewed as critical to the development and

evolution of Goldcorp’s health and safety program from 2007 onward.

It is noteworthy that following the addition of the CDS, a variety of new health and safety

program initiatives were implemented, as indicated in Figure 8:

103 Goldcorp. http://www.goldcorp.com/English/Investor-Resources/News/News-Details/2015/-Goldcorp-acquires-

New-Golds-30-interest-in-the-El-Morro-project-in-Chile-Creates-50-50-joint-venture-with-Tecks-Relincho-

project/default.aspx (Accessed December 7, 2015).

104 Relevant literature summarized in Greenhalgh, T., Robert, G., Macfarlane, F., Bate, P., Kyriakidou, O.(2004).

236

In the Chair’s view, one of the most important ideas developed following the addition of the

CDS was the “Safe Enough for Our Families” vision, which the company has aggressively

promoted to its employees over the past 9 years. The basic idea is that everyone at Goldcorp is

expected to “do their part” to create operating work places to which a worker could safely bring

his family for a tour, and that a worker would not hesitate in having one of his adult children

work at. The Chair indicated that Goldcorp sees this vision and the promotional activities and

media surrounding it as a way of creating an emotional component to health and safety

awareness, which they believe supports a safe conscious mindset that leads to safe behaviour.

It is also noteworthy that while AIFR and LTIFR dropped between 2004 and 2007, both showed

consistent declines from 2007 onward (Figure 7), with a steep decline in LTIFR between 2007

and 2008 being evident.

With respect to the specific role and instrumentality of the BHSC as a driver of the adoption of

health and safety programs and initiatives, the Chair’s comments and opinions are discussed

below.

According to the Chair, the BHSC has made a practice of performing in-depth reviews of

fatalities and incidents that could have caused a fatality. When these occur the BHSC “calls up”

the mine manager at the relevant site to appear before the BHSC to deliver a briefing on the

incident. The fact that this sort of scrutiny occurs is widely understood by senior management

across the organization, and the Chair believes that this plays a role in raising the level of

management attention and concern to health and safety issues in their operations. The BHSC

(and often entire board) visits mine sites to tour operations, meet with management, and speak to

employees. He believes this BHSC visibility strongly signals the importance of health and

safety, and positively shapes employee and management perceptions and behaviour. In terms of

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the conceptual framework, these are governance practices (D) aimed at influencing management

(E) and holding individual managers accountable, as well as promotional practices intended to

encourage safe individual behaviour by workers (H).

The “Golden Rules” was a prevention initiative proposed by the CDS. These are basically rules

that, if not followed, could result in a fatal accident (for example, never work on a live electrical

system unless it is shut down; always wear a fall protection device when working at an elevated

height; etc.). Initially there were 7 Golden Rules when introduced in 2007, and 3 more were

added in 2013 based on learning experience from fatalities. All employees and contractors are

required to keep on their person a “Golden Book” of rules that they receive at the time of initial

orientation to the site. Each person’s individual copy is expected to include a photo of his / her

family at the front, as a reminder of why compliance with the rules is personally important. The

Rules are, in essence, instruments of G, H and I in the conceptual framework.

An important factor in shaping a safety-conscious culture at Goldcorp has been the urging of the

BHSC board to hold personnel accountability for safety performance. This has resulted in mid-

and senior level managers being fired for poor management of safety, and “hits” to bonus

compensation. As of 2014, the actual safety performance of a manager’s operation versus targets

affects 20% to 30% of his or her annual bonus entitlement. These are elements E and F in the

conceptual framework.

The Chair noted that he has never experienced disagreements between management and the

board with respect to health and safety related matters. There is, however, an underlying “tug of

war” between production imperatives and safety, and the BHSC and senior management are

conscious of the need to continually “realign” priorities to prevent personnel from taking

unnecessary risk.

The BHSC has been able to practice good governance in part because of the long service from

2005 of several key BHSC members, identified in Table 5 as BEJ, BEL, REI, and BRI, and good

information flow from the company to the BHSC. Both senior management and the BHSC were

said to have a keen interest in health and safety performance metrics, targets, and results.

238

While the addition of the CDS to the head office management team played an important role in

constructing Goldcorp’s health and safety programs over the past nine years, the Chair believes

that board's involvement through the BHSC in setting expectations for senior management has

been an essential facilitating factor, and that the combination of good programs and creation of a

culture of accountability has been critical to the improvements in Goldcorp’s AIFR and LTIRF.

In the Chair’s words,

“The BHSC and board provide a barometer (for the company) on the importance of

safety… Management knows it’s being watched, and knows the board is expecting the

company to manage its risks very well. We are not telling them what to do, but we’re

signaling acceptability and unacceptability.”

6.8.2 Vice-President, Safety

In 2012 the original CDS was promoted to the position of Senior Vice-President – Safety and

People, and was given additional responsibility for human resources105. To support him with the

health and safety portion of the portfolio, Goldcorp hired a new employee in 2014 into the

position of Vice-President – Safety (“VPS”). The new VPS holds a Doctor of Philosophy in

Physical Oceanography, and worked at DuPont for several years in several progressive

environment, health and safety positions prior to joining Goldcorp. Her career experience prior

to DuPoint included positions with Environment Canada, the United States Environmental

Protection Agency, and an environmental health and safety consulting firm106. Her role is part

of element F of the conceptual framework.

The VPS was interviewed two weeks after the final interview with the BHSC Chair. She

described her role as one that is focused on “system aspects” of the health and safety program,

105 Morningstar. http://quote.morningstar.ca/Quicktakes/Insiders/ExecutiveProfile.aspx?sub=&PersonId=

PS00004P3A&flag=Executive&insider=Paul_Farrow&t=XTSE:G&region=can&culture=en-

CA&productcode=CAN&ops=clear&cur= (Accessed December 1, 2015).

106 The Oceanography Society.

239

and stated that the company is moving more strongly in the direction of integrating its various

programs and initiatives into a comprehensive health and safety management system modelled

on the concepts described in British Institution for Standardization Standard 18001, and

Canadian Standards Association Standard Z1000.

As she has only been with Goldcorp for one year she didn’t have significant experience with the

BHSC or have much knowledge of its history and role in advancing Goldcorp’s health and safety

approaches. She indicated that in her time with Goldcorp she has found the BHSC to be very

supportive of health and safety initiatives, and noted that its members have increasing interest in

comparing and benchmarking Goldcorp against its peers.

In conversation with the VPS, the principal researcher noted to the VPS that many of the major

Canadian gold miners have showed similar progressive declines in their accident rates over the

past decade similar to Goldcorp, and appeared to be plateauing. Concurrently with this trend,

many of those same companies have introduced prevention programs, similar to “STOP”107 that

appeared to be modelled on programs popularized by DuPont, which arguably implemented

those programs in an effort to achieve continuing rate reductions when its own rates had reached

a low plateau. The VPS agreed that Goldcorp was pursing “STOP-like” programming, and that

she believed her experience at DuPont was one of the reasons for Goldcorp hiring her. She

indicated that the specific variant that Goldcorp was implementing was aimed at greater levels of

employee engagement and self-management of safe behaviours, supported by positive

reinforcement, and was essentially the “Neil George” system108. The impetus for this

programming came from the management ranks, but the BHSC has been very supportive.

107 STOP stands for “Safety Training Observation Program”. Developed by DuPont, it is a series of training

programs designed to teach workplace safety auditing skills for observing people while they work, reinforcing safe

work practices, and correcting unsafe acts. In essence, it is based on reinforcement theory. (Byrd, 2007).

108 The “Neal George” system was first described and introduced in 1942 by Neil George, a safety engineer who

held positions with the International Nickel Company and the Western Quebec Mines Accident Prevention

Association. It is a simple five step approach to eliminating hazards and fostering a commitment to safety: 1. Check

the entrance to the place of work. 2.Are working place and equipment in good order? 3.Are people working

240

6.9 Conclusions: Goldcorp

The experience of Goldcorp over the period 2004-2014 is consistent with, and lends support to,

the hypothesis that the existence of a BHSC can drive improvements in company health and

safety performance outcomes. Also, as with Barrick, the conceptual framework provides a

useful way of identifying and understanding the structures and processes that plausibly drive

these outcomes.

Goldcorp`s BHSCs over the period were comprised of individuals likely to be knowledgeable

about the company’s health and safety issues, performance, and needs, and positioned to

influence their board colleagues and senior executives. In addition to providing for monitoring

and intervention where warranted, the BHSC mandate included a variety of functions that

enabled a significant degree of BHSC involvement in company operations, and direct

motivational contact with mine site managers and employees. Communications with the BHSC

Chair and Vice-President of Safety indicated that the degree of such contact is, in fact, quite

extensive in comparison with typical industry sector practice; and in that respect, the BHSC

members have “coal face” contact with the operations that only managers would typically have

in other companies. The BHSC was very active, and to a degree consistent with its expansive

mandate. There was evidence that the BHSC made decisions or gave direction with a goal to

promoting improvements in the company’s accident performance, and that the company’s senior

leadership was incentivized and held accountable for the achievement of specific targets. As

with the Barrick case, we see the use of financial incentives as an agency tool, and no indication

that board allegiance to the CEO was an impediment to BHSC function. To the contrary,

individuals interviewed, and corporate reports tell a common story of shared interest in, and

commitment to, continuing improvements for the protection of worker health and safety, and an

aspiration to achieve industry leading performance outcomes. In this respect, the strategic

properly? 4. Do an act of safety. 5.Can, and will, people continue to work properly? (Source: Canadian Mining

Journal).

241

advisory and support function of the BHSC seems to be of greater importance, at least in the

mind of the BHSC Chair and the Vice-President of Safety, than the BHSC’s agency role. As

with Barrick, the relative wealth of the company in relation to the comparatively small costs of

health and safety prevention programs may foster a climate in which BHSC recommendations to

the CEO are viewed as constructive rather than threatening, enabling the BHSC to perform its

oversight and control role; and, in the case of Goldcorp, also perform an active strategic advisory

and reputational support function.

With the Goldcorp BHSC we also see evidence of normative governance structures and

processes, including a charter of operations, internal and external reporting processes, and self-

evaluation of committee effectiveness. In short, like Barrick, the Goldcorp BHSC has the

structural and mechanical components that are theoretically necessary for effective governance.

As with Barrick, there is considerable evidence that the company`s health and safety program

evolved in ways that plausibly could lead to reductions in risks, risk exposures, and accident

rates in the work force, and cumulative program implementation is associated with a clear

pattern of accident rate reduction. An interesting feature of many of Goldcorp’s program

initiatives is that they seek to evoke emotional responses in workers, by associating their

personal protection at work with the welfare of their families, and by prompting workers to

envision their own families working at Goldcorp facilities, in order to support mindfulness of the

importance of keeping the workplaces safe. According to the Goldcorp representatives

interviewed, many of these initiatives were launched by company management in response to

fatal accidents, and many were inspired by programs implemented in other companies that

Goldcorp wished to emulate (including Barrick).

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7 Case Analysis: New Gold


Reuters109 provides the following summary description of NewGold:

New Gold Inc. is a Canada-based intermediate gold mining company engaged in the development and

operation of mineral properties. The Company's assets include New Afton Mine in Canada, which is an

underground gold‐copper deposit; the Mesquite Mine in the United States, which is an open pit mine; the

Peak Mines in Australia, which is an underground gold‐copper deposit, and the Cerro San Pedro Mine in

Mexico, which is a gold‐silver, open pit mine. The Company projects include the Rainy River and

Blackwater projects, both in Canada, and a 30% interest in the El Morro copper‐gold project in Chile.

Approximately 28% of the Company's gold revenue is generated from Canada, 28% from the United States,

26% from Australia and 18% from Mexico, and over 70% of its gold reserves are located in Canada.

As of the date of this paper it had a market capitalization of approximately $1.8 billion USD,

being about 1/5th that of Barrick and Goldcorp110. Data on the size of the company’s workforce

could not be located.


In contrast to Barrick and Goldcorp, which have produced annual reports describing BHSC

activities starting in 2002 and 2004 respectively, New Gold did not start reporting until 2008.

The following table provides information on selected characteristics of the BHSC members from

2008 to 2011.

New Gold’s BHSC cohorts had 2 to 3 members, and were thus smaller than Barrick’s and

Goldcorp’s, which had 3 to 5 members. New Gold’s BHSC had 6 different members over the 4

year period, as opposed to 10 over a 10 year period at Barrick, and 9 over an 8 year period at

Goldcorp. As such, the New Gold BHSC membership was less stable. This would be expected

109 Reuters (2015).

110 Ibid.

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to reduce the effectiveness of the BHSC, as members would not be in their roles long enough to

develop understanding of the subject area, and the company’s situation and needs, and frequent

turnover of members inhibits the development of group cohesion that is recognized as being

important for effective collective deliberation and decision-making (Maharaj, 2009).

The New Gold BHSC was composed of two independent directors and one non-independent

director in each year except 2010, when there were one each. The New Gold BHSC was entirely

male over the period.

Table 9 - Characteristics of New Gold BHSC Members, 2008-2011

Member

ID Sex

Highest

Formal

Education

Primary Non-Board Role

Goldcorp

Director

Since


20

08

20

09

20

10

20

11

DAV M Bachelor Mining Engineer; New Gold

Executive Chairman,

President, CEO

2008 N

NEL M Master Geologist; Sr. Mining

Executive and Board Member

2008 I I I

TEL M Master Chairman - Goldcorp 2008 I I

SWE M Bachelor Chartered Accountant; Sr.

Mining Executive and

Corporate Director

2006 I

THR M Bachelor New Gold Sr. Executive 2009 N N N

KOL M Bachelor Mining Industry Investment

Firm Executive

2009 I


The evidence for BHSC members possessing a degree of knowledge and influence that would

reasonably be necessary to garner full board support and motivate necessary action by the


7.2.1 Academic Achievement and Industry Experience

All members of the various BHSC cohorts held bachelor’s degrees, and two held master’s

degrees, and all BHSC members were gold mining industry executives.

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All the members were individuals with progressive experience in the mining industry, with roles

in operations, project development, executive management, or finance. Over the entire period

most of the members held multiple concurrent roles as executives and / or board members in

several public companies. Interestingly, one of the BHSC members (TEL) was the Chairman of

the Board of Goldcorp during his service on the New Gold BHSC. However, the information

reviewed reveals no indications of BHSC knowledge or practice transfer from Goldcorp to New

Gold.

7.2.3 Board Tenure

The average board tenures for the Goldcorp BHSC cohorts ranged from 0.7 to 2.3 years (as

compared to 1 to 7 years for Goldcorp, and 7.5 to 14 years for Barrick), with an grand mean of

1.3 years. As such, the years of in-company board experience of the New Gold BHSCs was

considerably less than for Goldcorp and Barrick. The turnover in BHSC membership appeared

to be reflective of turnover in the board, which in turn appeared to be a consequence of several

changes in major ownership interests during the period.


The evidence indicates that all of the BHSC cohorts would likely had high levels of industry

knowledge, awareness of industry health and safety issues generally, but perhaps not particularly

in-depth knowledge of New Gold’s mine level operations or site specific health and safety

issues. The high turnover rate of the BHSC members also raises the question of whether they

had sufficient opportunities to develop understanding of the company’s needs, its approach to

managing health and safety, and assessing the adequacy of the latter. A poorly informed BHSC

lacking a clear vision for what the company should do would not be expected to have had

significant influence on the board or senior executive team, nor be effective in performing

oversigh and control, nor strategic advisory functons relating to health and safety. As such, for

New Gold, conceptual framework element C (Member Characteristics) may have been weak,

which in turn may have resulted in weakness in element D (Governance Practices).

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7.3 BHSC Mandate

From 2008-2011, the New Gold BHSC mandate consisted of two functions, quoted as follows:

“Review and monitor the environmental, safety and health and sustainable development

policies of New Gold on behalf of the Board.”

“(The committee) may investigate any activity of New Gold that relates to sustainable

development and community development, environment, health and safety.”

The first statement describes a passive function and pertains only to “policies”, as opposed to

actual operations, activities, or performance outcomes. The second statement describes a

discretionary function that the committee may, or may not, elect to carry out. There was no

evolution of the mandate during the period. The mandate does not reflect any obligation on the

part of management to provide appropriate intelligence for analysis and decision-making, nor

empower the BHSC to intervene in company affairs, nor confer authority to hold executives

accountable for performance outcomes. In effect, the mandate articulates none of the typical

rational economic functions for a board of its committees. It is unclear what, substantively, the

BHSC was to expected to do.


The New Gold BHSC mandate does not provide a foundation for normative good governance

practices. As such, it reflects weakness in elements A and D of the conceptual framework.


The company did not disclose the frequency of BHSC meetings. This information, if disclosed,

would typically be described in annual information circulars, or by the BHSC’s charter or terms

of reference (element B in the conceptual framework), which also appears to have never been

published. However, as noted above, the mandate as written appears to place very little demand

on the BHSC, and hence data on meeting frequency has less relevance than in the case of

Goldcorp and Barrick, where their larger mandates would reasonably require a high level of

BHSC activity.

246


The company provided no information with respect to any of the governance practices identified

in the conceptual framework for the period 2008 onward. This may be a reflection of the BHSC

not engaging in those practices to any significant degree over the period, or simply a privacy

preference of the company. Consequently it is not possible to assess the instrumentality of

BHSC governance in promoting the development of the company’s health and safety programs.


New Gold’s sustainability / social responsibility annual reports for 2008-2014 were reviewed,

extracted, and summarized in the same manner as described above for Goldcorp and Barrick.

The health and safety information described in the New Gold reports was qualitatively different

than that reported by Goldcorp or Barrick. The latter two companies’ reports focused on

enterprise-wide program developments and initiatives, with a minor amount of anecdotal

information about specific mine locations. In contrast, New Gold’s annual reports mostly

provided anecdotal information on mine-specific programs and initiatives, which varied from

mine to mine and year to year. There was comparatively little information about enterprise-wide

program developments and initiatives. This is illustrated in Table 10 (following pages), which

was produced by extracting and summarizing the contents of the 2008-2013 annual reports. No

substantive information was provided in the 2012 or 2013 reports, for reasons not explained. To

permit comparison of enterprise-wide program evolution with Goldcorp and Barrick, Figure 9

was prepared (after Table 10).


The evidence indicates that over the period 2008-2013, New Gold introduced at least 8 new

health and safety program components or initiatives on an enterprise-wide, and a variety of

activities were carried out on a site-specific basis. These activities were logically intended to

reduce risks and hazards inherent in work operations, improve risk and hazard control practices,

and reduce worker exposures to residual risks and hazards. The manner by which New Gold’s

247

health and safety program evolved over this period could plausibly lead to reductions in accident

rates.

248

Table 10 - Summary of New Gold Corporate and Mine Site Health and Safety Information Contained in Annual Sustainability / Social Responsibility Reports

Business Unit

2009 2010 2011 2013

Corporate We’re improving our training and strengthening our reporting systems to ensure that safety training is delivered, and documented, consistently.

Established the Guiding Principles of Health and Safety, Environment and Community will provide guidance in these 15 key areas: 1. Leadership and accountability 2. Legal requirements, commitments and document control 3. Risk and change management 4. Planning, goals and targets 5. Awareness, competence and behaviour 6. Health and hygiene 7. Communication, consultation and participation 8. Business conduct, human rights and community 9. Design, construction and commissioning 10. Operations and maintenance 11. Suppliers, contractors and partners 12. Stewardship 13. Incident reporting and investigation 14. Crisis management and emergency response plans 15. Monitoring, audit and review

Major safety objective for is standardizing our safety practices and procedures across all operations.

HSEC Governance: The Board of Directors (“Board”) has the responsibility for the overall stewardship of the conduct of the business of New Gold and the activities of management. The Board’s fundamental objectives are to enhance and preserve long-term shareholder value, to ensure that the Company meets its obligations on an ongoing basis and that the Company operates in a reliable and safe manner.

Companywide safety audit and gap analysis in progress.

Purpose of the Health, Safety, Environment and Corporate Social Responsibility Committee is to review and monitor the health, safety, environmental policies and sustainable development of the Company on behalf of the Board.

At the corporate level, the HSEC Department has, to date, had the responsibility for Health, Safety, Environment and Community impacts and initiatives, targets, and performance management.

Mesquite Mine Has health and wellness programs

Wellness checks were introduced in the employees’ work area

Health and Wellness programs continue to grow in participation. Introduction of metabolic testing and personal training, and sit/stand height adjustable ergonomic workstations.

Injury and incident prevention activities focused on Education / Training, Workplace Behavioural Observations and Risk Assessment / Management & Mitigation.

Observation, inspection and auditing systems to ensure compliance and continuing improvement.

An Employee Awards Program was instituted to recognize excellence in regulatory compliance, health and wellness, injury prevention and attendance

Observation, inspection and auditing systems continue to ensure compliance and continuing improvement allows us to maintain an enviable safety record.

Achieved Certification of Recognition from WorkSafe BC.

Site health and safety requirements are embodied in the mine’s Integrated Management Policy.

We continue to maintain a specially-trained Mine Emergency Rescue Team

Reporting has continued to improve and increase.

Training provided in site access inductions, hazard identification and risk assessment, industrial and occupational first aid, confined space entry, basic firefighting, computer skills and various equipment operation certifications, underground safety, mine emergency response rescue, OHS committee training.

Incident investigation and remediation has become a key focus.

Entire workforce has been trained in cardiopulmonary resuscitation (CPR), automatic external defibrillation and first aid.

Commenced Safety Management Systems certification under OHSAS 18001.

Implemented an enhanced regulatory compliance program for contractors.

We also implemented higher standards for reporting all health and safety key performance indicators.

Peak Mine Focus on hazard reporting, safe act observations, corrective action completions, and training audits.

Continue to develop and improve our systems, promoting a culture of safety through team and individual behaviours, supported by formal training in investigation and analysis and safety and risk perception coaching programs

Focus on hazard reporting, safe act observations, corrective action completions, and training audits.

Maintains a dedicated Health, Safety & Training Department that provides advice, services and support across the operation.

Maintains a dedicated Health, Safety & Training Department that provides advice, services and support across the operation.

Provided education on occupational injury prevention, such as workstation setup and exercise programs.

Bench marking audit was completed against the health and safety systems at other New Gold sites and OHSAS 18001.

New Afton Mine

Continued to build Health, Safety & Training Team to provide advice, services and support across the operation.

Formal site risk assessment was completed, high-level risks were recognized and actions to reduce risk were identified.

Began formulating safe operating procedures, safe work instructions, hazard assessments and the site Health and Safety Manual.

Proactive “near-miss” reporting increased and more emphasis was placed on hazard reporting.

Training in site safety and departmental orientations, fall arrest, fire extinguishers, lock out, equipment-specific training, as well as annual refresher training in the Workplace Hazardous Materials Information System (WHMIS) and mine survival. The Joint Occupational Health and Safety Committee also provides training for its

Training programs included fall prevention, awareness, firefighting, ergonomics and body positioning as well as rigging training.

Health and Safety procedures, regulations and requirements are embodied in our Integrated Management Policy. The Health and Safety program sets guidelines for Zero Tolerance, Safety Training, Adherence to Standards, Regulations and Safety, and Teamwork. The guidelines are equally enforceable for contractors and employees.

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Table 10 - Summary of New Gold Corporate and Mine Site Health and Safety Information Contained in Annual Sustainability / Social Responsibility Reports

Business Unit

2009 2010 2011 2013

members.

Amapari Mine Daily talks on occupational health and safety

In-house accident and disease

prevention campaigns

Occupational medical exams

Cerro San Pedro Mine

Training in: personnel induction, driver training, protective equipment use, industrial safety, hazardous material handling, fire extinguisher use, emergency response teams, and waste handling,

Took action to improve safety standards. Formal training in investigation and analysis and safety and risk perception coaching programs. In 2011.

Inadequate health and safety procedures

and reporting came to light. Senior personnel were immediately relieved of their duties. New safety professionals and equipment trainers were brought in. We instituted new, more rigorous policies and procedures.

Improved the “Lock Out Tag Out” procedure that adds a level of safety during inspection or maintenance.

Records of injury frequencies were reviewed and corrections made to historic information.

Completed its pre-audit towards ICMC certification, which will further protect the health and safety of workers.

The Safety Committee was established with a mandate that includes integrated participation at all levels of the company.

Commissioned a physiotherapist to be available on site three days per week, which means that employees can be treated without a three-hour drive to the office of the nearest practitioner.

Five internal safety inspections were made and 80% of their findings resulted in corrective actions.

Blackwater (Not a New Gold asset)

(Not a New Gold asset)

Four Lost Time Injuries among contractors were recorded in the first two months of activity after we acquired the project.

All operations had safety systems audits conducted by third parties and/or regulators to ensure effectiveness and compliance with health and safety legislation and other standards such as Occupational Health and Safety Advisory Services (OHSAS) and Occupational Safety and Health Administration (OSHA).

Implementation of the New Gold health and safety system.

All operations completed alignment of their safety systems with corporate standards and commenced use of a centralized and fully integrated health, safety and environmental reporting and data management system.

Developed and implemented a Medical Conditions and Medications tracking system for all onsite employees, and an onsite fitness and wellness program at the exploration camp.

Operations conducted 13,760 crew safety talks, 10,120 behavioural safety observations, and 17,993 safety inspections/audits; completed 4,170 corrective and preventative actions, and provided over 83,130 hours of safety training to workers and contractors.

All employees and contractors participate in a health, safety, and environmental induction program.

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i. New Gold`s AIFR progressively increased from 3.7 in 2008 to approximately 5 for the

period 2010-2012, followed by a sharp decline to 2.4 in 2013.

ii. The LTIFR showed a similar parabolic pattern, rising from 0.37 in 2008 to 1.2 in 2009,

and progressively declining in the following years. When tested, the declining trend from

2009 to 2013 was found to be statistically significant (t = 3.39, t-crit = 2.77, p = 0.03, =

0.05).

iii. Absolute numbers of annual fatalities fluctuated between 0 and 1 per year, with no

evident trend over the time period.

The incremental improvements in LTIFR occurred alongside the implementation of new

programs and initiatives, making it possible that an intervention started in year 1 began having

effect in year 2 and continued on in subsequent years, with successive initiatives exerting their

own effects in subsequent years. In other words, there is temporal plausibility to support a

possible cause and effect relationship. The increase in AIFR over most of the period may reflect

changes in risk exposures, or could be the consequence of a drive to encourage personnel to

report minor non-lost time accidents to enable targeting of prevention efforts.

As noted in the Barrick and Goldcorp case analyses, Figures 5 and 6 suggests a secular decline

from 2002 to 2014 in the average All Injury Frequency Rate (“AIFR”) and Lost Time Injury

Frequency Rate (“LTIFR”) amongst Canadian companies with BHSCs. The pattern of New

Gold’s AIFR did not track the pattern of the average for the group, and New Gold’s rate was

among the highest. The pattern of New Gold’s LTIFR did track the pattern of the average, and

was also among the highest. There was no information to explain the reasons why New Gold’s

rates were among the highest in the group over the period.

Based on the above, the magnitude and pattern of LTIFR performance improvement over time

could be to attributable to chance, or simply consistent with a secular trend relating to extrinsic

factors, but it is also plausibly the result of the suite of preventive interventions implemented by

the company over the period.

252

7.8 Conclusions: New Gold

New Gold’s BHSCs over the period were comprised of individuals likely to be somewhat

knowledgeable about the company and key industry health and safety issues, though this is less

evident than with Barrick and Goldcorp. However, based on the very limited BHSC mandate

and the rate of member turnover, it is less certain the BHSC cohorts would have had significant

understanding of mine-specific health and safety activities, conditions and performance results,

nor that they would have been in a position to recommend site-specific or enterprise

interventions to drive performance improvements. There is also no information available as to

the level of BHSC activity, nor evidence that the BHSC exercised any significant degree of

scrutiny over the management of health and safety by the company, nor that it acted to motivate

or hold accountable executive or mine management accountable for performance outcomes.

Overall, there is no evidence that the BHSC made decisions or gave direction to executives with

a goal to promoting improvements in the company’s accident performance. New Gold’s

performance was amongst the poorest in the group of major Canadian corporations having

BHSCs over the timeframe examined.

In terms of the conceptual framework, there is positive evidence suggesting that elements A, C

and D were lacking or very weak, and an absence of evidence to suggest that element E was

present. There were indications of efforts to alter H and I, but company reports indicate that this

was largely due to the efforts of the corporate occupational health and safety director who was

hired in 2011. Most of the company’s enterprise-wide improvement efforts came in 2011 and

thereafter, and improvements in performance (J) followed.

The experience of New Gold over the period 2008-2013 suggests that the company’s BHSC

played little or no role in driving improvements in company health and safety performance

outcomes; and in fact, during the initial years of BHSC existence (2008-2010) performance

worsened.

7.9 Overall Conclusions from the Three Case Analyses

The business case analysis was undertaken to identify commonalities and differences among the

BHSCs of the subjects, and explore the potential instrumentality of each BHSC in the health and

253

safety performance outcomes of their respective companies. More specifically, it sought to

determine whether there appeared to be plausible relationships between BHSC operations over

time, company health and safety program evolution over time, and health and safety performance

outcomes.

The experience of Barrick and Goldcorp appears to support the notion that a BHSC can be

instrumental in driving health and safety program improvements, which in turn can translate into

accident rate performance improvements. These companies’ and their BHSCs were similar in

many respects: their apparent importance to each organization, level of activity, oversight and

control mandates, individuals’ potential influence, and power to hold accountable the executive

team. The evolutionary trajectories of both companies’ enterprise-wide health and safety

programs, initiatives and approaches were also very similar. Likewise, both experienced similar

decade-long patterns of declines in AIFR and LTIFR, the shapes of those patterns were similar,

and their magnitudes in relation to one another were also similar. Their experience, in

combination with evidence adduced in the review of administrative data, and survey responses,

also supports the view that in organizations where it happens, the phenomenon may operate in

the manner described by the conceptual framework. Conditions that appeared to predispose

Barrick and Goldcorp for adoption of the structures and processes depicted in the conceptual

framework include their significant economic scale and wealth, a reasonably lengthy corporate

operating history, operational complexity, a broader context of formalized corporate governance

and disclosure, stable participation of long tenured directors on their BHSCs, and one or more

staff in senior management roles with corporate responsibility for health and safety programs

(which logically could compensate for subject area knowledge deficiencies of BHSC members).

The experience of New Gold is also consistent with the predictions of the conceptual framework,

in that deficiencies in components lead to deficiencies in performance outcomes. Specifically,

with New Gold there appeared to be deficiencies in many of the “front end” elements (A, B, C

and D), which were associated with deficiencies in the “midstream” elements (E, F, G, H, I),

which in turn was associated with AIFRs and LTIFRs that were at the high end of major

Canadian corporations with BHSCs, and in the case of AIFR showed no clear pattern of

improvement. These deficiencies in turn were associated with a broader climate of ownership

change during the period of study, a comparatively shorter corporate lifespan as compared to

Barrick and Goldcorp, comparatively smaller scale of economic operations than Barrick or

254

Goldcorp (though still large by global standards), and relatively late acquisition of a senior

manager with health and safety program responsibility.

The case studies provide additional information with respect to several of the 12 questions asked

at the outset of the research program.


The Barrick and Goldcorp case studies present examples of companies where BHSCs have a

long history of functioning in accordance with good governance practices, particularly those

which are itemized in element D of the conceptual framework. When consideration is given to

the elevated profile of corporate governance issues over the past decade, the many regulatory

changes aimed to enhance the board oversight and control functions, and the proliferation of

normative best practice advice, this is not a surprising finding. However, juxtaposed against

some of the opinions found in the corporate governance literature with respect to the challenges

of implementing these practices, and the comparatively lower stature of health and safety issues

in relation to other matters of concern to boards and their committees, it is unexpected.


of their companies?

The Barrick and Goldcorp case studies present examples of BHSC “hard power”. In both cases,

the BHSC mandates evolved to confer power to recommend, and ultimately for the board to

impose, systems of reward and punishment on corporate executives and managers, with a view to

motivating desired performance and holding individuals accountable for unsatisfactory

performance. Both companies provide examples of these systems operating to financially

penalize and terminate the employment of management officials who fail to comply with

requirements and expectations. In addition, the Barrick and Goldcorp case studies illustrate the

potential for BHSCs to exercise “soft power” in their relations with the board and executive

team, through the collective knowledge, reputations, and economic status of the BHSC members.



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The Barrick and Goldcorp case studies reveal a plausible relationship between BHSC formation

and operation and subsequent improvements in health and safety performance, and for both

companies the evidence suggests the BHSCs were instrumental as drivers of organizational

changes and new practices that plausibly reduced risk exposures and led to the observed accident

rate improvements. However, the study methodology and degree of data granularity was not

sufficient to test this through examination of the relationships between interventions

implemented at specific locations and operations and their effects on local accident rate

outcomes.

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Chapter 8 Synthesis: Answers to the 12 Research Questions, and Utility of the Conceptual Framework in Explaining BHSC Instrumentality

1 Introduction

This final Chapter presents the following:

a. A synthesis of answers to the research questions, using findings of the individual

studies.

b. A discussion of the evidence for the conceptual framework affording a reasonable

representation of the requisite structure and processes needed for BHSC

instrumentality in achieving improvements in company HS performance outcomes.

c. A brief summary of what this research program contributes to the existing body of

knowledge relating to board committees and corporate OHS governance.

d. Brief comments on certain incidental findings.

e. A discussion of some of the potential policy implications for governmental

occupational health and safety regulatory agencies.

2 Findings of the Descriptive Research

i. What factors have driven the emergence of BHSCs amongst large public corporations in

Canada? and the related question: viii. Why do boards of directors of companies establish

BHSCs?

From the contextual discussion in Chapter 1, data provided in Chapter 3, the results of the survey

described in Chapter 5, and analysis provided in Chapter 6, we can conclude that several factors

have driven the emergence of, and explain why boards of large Canadian public companies

establish BHSCs:

257

Increased business attention to environmental and occupational health and safety issues,

which started in 1980s and accelerated thereafter as a result of the evolution of the

environmental protection and occupational health and safety regulatory frameworks

across the country (Chapter 1), and the general increase in public awareness and concern

over these issues. This can be viewed as an expansion in the agency functions of boards,

and / or an action to mitigate potential director liability.

The specific introduction in the Occupational Health and Safety Act of Ontario (where

the majority of corporate head offices are located), of director duties and liabilities

relating to corporate compliance with health and safety laws (Chapter 1). This also can

be viewed in the manner described above.

A variety of motivations that can be seen as part and parcel of a drive toward greater

corporate social responsibility, such as “protecting… employees and stakeholders”,

meeting “community and public expectations”, and demonstrating “good governance”

(Chapter 6). From a theoretical perspective, this would be a reputational support

function.

A desire by companies to achieve tangible benefits, such as “improv(ed) HS

performance…”, “reduce(d) risk”, and “reduce(d)… liability” exposure. These benefits

appear to be most important for companies in sectors where there business operations

present inherently high exposure to hazards, such as mining and oil & gas production (see

answer to question iv.). To achieve these ends, BHSCs would be expected to perform

oversight and control, and potentially strategic advisory functions.

The influence of peer behaviour (i.e. company “A” establishes a BHSC, and company

“B” in the same sector emulates it), which is suggested by the pattern of BHSC formation

illustrated in Chapter 4.

The influence of voluntary standards and guidelines established by specific industry

associations and multi-lateral organizations (e.g. health and safety management and

governance guidelines established by the Mining Association of Canada, Responsible

Care®, the Global Reporting Initiative, and the International Finance Corporation). As

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noted herein, boards commonly understand the adoption of normative practices in their

industries to be important for demonstration of due diligence.


In Chapter 3 it was established that as of 2010, 40% of Canadian public companies with market

capitalizations of $1.5B+ had BHSCs (58/146 companies). We noted previously that studies

canvassing over 1000 companies in the United States, Canada, United Kingdom, Australia and

Asia in the first decade of the 21st century found that one-quarter to one-third of public

companies had BHSCs. We suspect that the large cap Canadian companies identified in this

study could likely be, or closely approximates, the complete population of Canadian companies

having BHSCs. If that is the case, then only approximately 1.5% of Canadian public companies

have BHSCs.111


In Chapter 3 it was established that approximately 40% of the companies having BHSCs as of

2010 had those committees dating back to 2001. The 60% that did not have BHSCs in 2001

established them at some point in time from 2001-2010.

iv. Are BHSCs more common in some types of businesses (or business sectors) than others?

If so, why?

In Chapter 3 it was determined that approximately 2/3rds of TMX large cap companies with

BHSCs are mining or oil and gas companies, and amongst companies with BHSCs, the

weightings of mining and oil and gas companies exceeds those sectors’ weightings amongst their

respective TMX large cap groups. As to “why”, mining and oil and gas operations involve

significantly higher levels of inherent hazards and risks to health and safety than in many other

sectors. Hence it is reasonable to assume that greater board level attention is paid to these risks

in mining and oil and gas than other less hazardous sectors. In addition, as noted in the answer

111 There were approximately 3,900 companies listed on the TMX or TMXV as of September 2011. (Source:

Canadian Living Magazine).

259

to question i., there are sector-specific standards in mining and oil and gas promoting board

governance of HS.


Chapter 3 inventoried an extensive array of mandate statements, and observed an overall trend

toward mandate enlargement over time. Mandates generally include a mix of passive

(monitoring, reviewing) and activist (developing, establishing, recommending) functions. These

can be alternatively viewed as agency and strategic advisory functions. Survey results from

Chapter 6 largely confirmed overall patterns described in Chapter 4. Chapter 7 observed, in the

case of one company, what appeared to be a positive association of mandate activism to HS

program evolution and HS performance improvement.

i. Is there evidence that BHSCs function in accordance with good governance practices?

and the related question

ii. Do BHSCs operate in accordance with their stated mandates?

In Chapter 4 it was noted that the BHSC governance practices described in the annual

disclosures of the companies examined closely corresponded with those that are recommended

by a number of generally accepted sources and authorities on good HS governance.

The results of the survey reported in Chapter 6 indicated that it is commonplace for BHSCs to

receive status reports on HS regulatory compliance and accident rates, though it was less

common for reports to explain reasons for the observed performance patterns and trends, provide

accident-related costs information, or to compare company performance against peers.

Standardization of reporting formats was not common practice, and BHSC members assume

quality control measures are in place112. BHSCs generally considered the reports they received

to be sufficient for evaluation and decision-making purposes. However, there are indications

that BHSCs are not receiving sufficient intelligence in light of their mandates, and that BHSC

112 Anecdotally, we noted four instances in different companies’ annual reports of retroactive revisions to accident

rate figures, which in some instances were not explained, and in at least two instances were reportedly necessitated

by the discovery of fraudulent reporting practices by managers.

260

members may lack sufficient subject matter knowledge to recognize the informational

deficiencies, and their implications for role performance.

Survey results of Chapter 6, as well interviews described in Chapter 7, suggest that most BHSCs

typically do not actively formulate company HS objectives, but instead review and comment on

objectives proposed by management, which is generally consistent with agency function.

However, some BHSCs do seem to dabble in formulating strategies to achieve approved

objectives.

Survey results indicated that most BHSCs 3 times per year or more frequently, carry out 3 to 4

visits to company workplaces annually, and their members spend 5 to 9 days per year on BHSC

work. As a general pattern, for most companies’ BHSCs this level of activity seems low in

relation to the mandates these committees are supposed to discharge, and the scales of the

enterprises they are supposed to oversee and advise.

Virtually all BHSCs supposedly perform some manner of reflective self-evaluation of their own

performance against their mandate. If BHSC members in general are not particularly

knowledgeable about the health and safety management operations of their company, nor

positioned to evaluate the sufficiency of those operations in relation to regulatory obligations or

normative best practices, the value of self-evaluation is uncertain.

The case analyses in Chapter 7 provide illustrations of two companies where there is credible

evidence for BHSCs having a long history of functioning in accordance with normative good

governance practices, and specifically those which are itemized in element D of the conceptual

framework. Both companies also show a history of continuous HS program evolution, which is

associated with progressive improvements in HS performance outcomes.


members?

Chapter 3 documented that fact that BHSCs are comprised of individuals who tend to

professional corporate directors, older (age 60+), mostly male, and sit as independent directors

(which is consistent with observations made with respect to corporate boards generally from the

1980s to date). Most BHSC members had 10 years or less experience on their companies’

boards, a not surprising fact given their ages and the frequency with which directors turn over in

261

public companies. In the large cap companies examined, the BHSC members could not be said

to be “token directors” selected specifically to convey certain impressions to external

stakeholders: they were generally well educated, experienced, received high levels of

compensation for their company board work, and often acquired high value shareholdings.

The survey results of Chapter 6 indicate that many companies require BHSC members believe

themselves to have some degree of subject matter expertise or qualification in HS, or prior career

experience with operational responsibility for HS. However, the results of the study in Chapter 4

suggest this is not the case, and as such, it appears that the BHSC survey respondents may

overestimate their HS knowledge level and its sufficiency for their role. Most companies

reportedly provide some type of on-boarding HS training for new BHSC members. Survey

respondents (most commonly BHSC chairpersons) also considered themselves to be reasonably

knowledgeable about key subjects, including company-specific hazards and hazard control

practices, industry-specific HS issues and driving forces. This may also reflect subjective over-

appraisal of competencies.

The case analyses in Chapter 7 appear to suggest a relationship between the tenure of members

on their BHSC, the amount of time that members spend together as a BHSC “cohort”, and the

pace of evolution of their company HS programs. Specifically, program evolution and

performance improvement appears to be associated with longer term member service plus long

serving BHSC cohorts, and the opposite also appears to be true. This makes sense - a stable

BHSC would be expected to become more knowledgeable, more invested in HS, and capable of

providing better guidance than a very unstable BHSC.



The survey results of Chapter 6 indicate that BHSCs communicate formally and informally to

their boards and executive teams. Common law due diligence considerations would compel

boards and executives to consider and act appropriately in response to same, and hence

communication itself is a means of exerting influence. More interestingly however, three-

quarters of BHSC respondents indicated that their BHSC makes recommendations for executive

performance compensation (which we’ve called “hard power”) giving consideration to the

achievement of company HS objectives.

262

The case analyses in Chapter 7 further illustrate the specific use of “hard power”. At two of the

companies profiled, the BHSCs’ mandates evolved to confer power to recommend, and

ultimately for the board to impose, systems of reward and punishment (including termination) on

corporate executives and managers, with a view to motivating desired performance and holding

individuals accountable for unsatisfactory HS performance. In addition, the third company, in

one of the annual reports, describes termination of managers at a mine location for unsatisfactory

HS management behavior.

The overall patterns of findings in the survey and case analysis were not consistent with social

embedding perspective prediction that board member and CEO mutual affinity is a barrier to the

exercise of agency functions.



The study of accident rate trends presented in Chapter 5 did not adduce evidence to suggest that

the formation and operation of BHSCs leads to performance that is superior to the peer secular

trend. However, there were several inherent limitations to this study that preclude any firm

conclusions.

While the comparative trends illustrated in Chapter 5 were not compelling, the survey responses

in Chapter 6 offered a different perspective. All respondents indicated that their companies had

experienced a 10 year historical trend of improving (i.e. declining) accident rates (which is

consistent with what we found for the companies that disclose this information), and 80% of

respondents believed that the work of their BHSCs was important reason for progressive

improvements in injury / illness rates experienced by their companies. Interestingly, rate

magnitudes and patterns of improvement were extremely similar for all of the BHSC companies

(respondent or non-respondent) reporting this information. However, at the macro level we could

not acquire evidence showing a trend of supra-secular performance improvements for companies

with BHSCs in relation to reasonably peer comparator groups.

BHSC instrumentality in the achievement of performance improvements asserted by survey

respondents was explored for three companies through the case analyses in Chapter 7. Two of

the three cases depict an association between BHSC formation and operation and improvements

263

in health and safety performance, and both suggests BHSCs were instrumental as drivers of

organizational changes and new practices that plausibly reduced risk exposures, and led to the

observed improvements. The third case is evidence of the opposite – i.e. an extant BHSC

comprised of transient members and changing cohorts was not associated with program or

performance improvements, and instead, improvements appeared to take hold following (and in

company annual reports were attributed to) the hiring of a corporate safety senior manager.



This study found that the Donabedian-inspired conceptual framework shown in Figure 1 (next

page) offers a useful explanation of the mechanisms whereby BHSCs can, and in some

companies plausibly do, drive improvements in company HS performance outcomes.

Specifically,

The profiles in Chapter 4 demonstrated that most BHSCs had credible mandates (A),

terms of reference (B), and member characteristics to plausibly enable performance of the

indicated governance practices (D).

There was evidence of the performance of the indicated governance practices (D). In

Chapter 6, BHSCs members reported receiving quality-controlled information on

company performance sufficient for evaluation and decision-making, are involved in

objective setting and strategy formulation, communicate with and take steps to ensure

executive accountability, and engage in performance self-evaluation. The contents of

Chapters 3 and 4 reflect extensive information disclosure by companies with BHSCs.

Member profiles in Chapter 3, survey findings in Chapter 5, and case analyses in Chapter

6 indicate that BHSC members are capable of applying “soft power” and “hard power” to

influence their boards and company executives (E), in order to drive actions necessary to

achieve objectives (F). In particular, BHSC chairs considered executive awareness that

“they were being watched” as a key motivator (F).

264

Figure 1 - Conceptual Framework: Board HS Committee Influence on

Workplace Health and Safety Performance Outcomes

The case analyses in Chapter 7 provided evidence from two companies with long-

standing BHSCs of deliberate management actions (F) to reduce risks inherent in the

business (G), improve HS management practices (H), and reduce workforce exposures to

hazardous conditions (I). In turn, where this happened, continuous improvements were

observed in workforce occupational injury outcomes (J) that were peer-sector superior

(K). In the company with a more recently established and less stable BHSC, there was

less evidence for BHSC influence (E) leading to (F), (G), (H) and (I), and improvements

in (J) (which were not peer-sector superior) did not appear to be a result of BHSC

actions.

265

3 Contribution to the Existing Body of Knowledge

3.1 Board Committees

As indicated in Chapters 2 and 3, the scholarly literature in corporate governance has explored

certain features, functions, and member characteristics of various types of corporate boards and

committees (e.g. finance, audit, social responsibility), across various common law jurisdictions,

but prior to this thesis there were no known studies of BHSCs, in any jurisdiction. This study

provides extensive information on BHSCs of large Canadian corporations, and this jurisdictional

context is now the only one for which such information exists.

In addition, the study is unique amongst board committee research generally, in that it examines

the evolution of a particular type of committee over comparatively long time periods (many

studies are “point in time” descriptive snapshots, whereas this study covers 14 years), and sought

to evaluate the long-term impacts of committee activity in a group of large organizations.

The case analysis portion of the study also developed and applied a unique decision-logic

methodology for drawing reasonability conclusions concerning the relationship of committee

activity to corporate behaviour and corporate performance outcomes. This methodology can, in

principle, be applied to a variety of organizational units and problems.

While the study focused on large Canadian public corporations, large public corporations in

other major industrialized English law jurisdictions operate under similar occupational health

and safety regulatory frameworks, similar securities regulatory frameworks, and face scrutiny

from similar groups of internal and external stakeholders. As such, one might reasonably expect

that the findings herein may be replicated by studies of large public corporations in the United

States, England and Australia.

The study also formulated a conceptual framework, based on consideration of much of the

current theoretical foundations, and a reasonable corpus of empirical literature from the

corporate governance field, that may be useful for future studies of BHSCs, and could potentially

be subjected to suitable component-specific variations for similar descriptive or program

evaluative studies of other types of governance bodies.

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3.2 Corporate Occupational Health and Safety Governance

As indicated in Chapter 1 and 2, the body of research-based knowledge relating to occupational

health and safety corporate governance is very small. Prior to this thesis, the only previous

research specifically undertaken to develop understanding of corporate OHS governance

practices was the United Kingdom Health and Safety Executive’s survey of 250+ large

employers in the United Kingdom, carried out in 2001/02, 2003 and 2005 (Greenstreet Berman

Limited, 2003).

4 Comments on Incidental Findings

4.1 The Relationship of Health and Safety Program Initiatives to

Performance Improvements

An interesting observation of the case analyses in Chapter 7 is that of the relationship between

the increase in the simple number of new and active health and safety program initiatives

described in each year by the companies, and the decline in the accident rate. This pattern was

observed over time for all three companies studied, and raises the question as to “why?”.

In theory, for injury rate reductions to occur, health and safety program initiatives and

interventions should be specifically targeted at the risk exposures that cause the accidents leading

to the injuries. For example, if at a mine site there are injuries due to vehicle accidents, and the

vehicle accidents are due to drivers falling asleep, the prevention intervention should be one that

prevents drivers from falling asleep. Some evidence of this degree of specificity was evident for

certain years in the Barrick and Goldcorp cases, but those particular initiatives were time limited

and do not appear to account for the overall decade-long trend. Similarly, with New Gold, there

did not appear to be clear relationships between specific initiatives and outcomes.

A hypothesis is offered here to explain the observed relationship between non-targeted

“initiatives” and improving accident rates. Risk exposures that lead to accidents and injuries can

be conceptualized as being of two types: “systemic”, and “behavioural”. By “systemic” risks,

we mean conditions of the workplace that are largely beyond the power of the employee to

control, and against which the company must provide protection. By “behavioural” risks, we

267

mean those that the employee his/herself creates by his/her actions, and which can be prevented

or averted via his/her actions. In theory, where systemic risk levels are high, accident and injury

rates should be high, as the rates would be the sum of systemic plus behavioural risk exposures.

In settings where systemic risks are well controlled by the employer, accident and injury rates

should be comparatively lower (as was the case with Barrick and Goldcorp, where rates were

much lower than peer sectors for most of the period examined), as the residual risks are mainly

behavioural. Based on the definitions of these risk types, systemic risk reduction could only

come about through specific targeted initiatives implemented by the employer. In organizations

where systemic risk accounted for the bulk of injuries, marked reductions in injuries could only

be achieved by targeted interventions. Behavioural risk reduction could, in theory, be brought

about by any non-specific initiative that caused an employee to behave in a safer manner, or

simply caused a change in behavior that had the effect of risk avoidance. However, injury rate

reductions resulting from non-specific initiatives would only be evident in organizations during

times when behavioural risk accounted for the bulk of injuries (i.e. after systemic risks were

largely eliminated).

A non-specific initiative could potentially produce behavioural risk reduction simply by creating

elevated levels of employee hazard awareness, increased interest in hazard recognition and safety

practices, and increased desire to avoid risks, leading on the whole to safer behavior (action) in

the course of performing a myriad range of tasks. In the discipline of marketing, this is

commonly called the “A.I.D.A.” (Awareness, Interest, Desire, Action) process, and is proposed

as the series of steps by which individuals’ exposure to advertising leads sequentially to sensory,

perceptual, and cognitive changes that produce consumption behaviour; and in organizational

theory a similar process is conceptualized as operating in the adoption of innovation by groups in

organizations. This may explain why, in the case of the three companies examined in the case

analyses, what appeared to be non-specific interventions generated progressive reductions in

injury rates.

A second hypothesis, that has not appeared in the literature in relation to health and safety

program interventions, is that injury rate reductions associated with non-specific interventions

are examples of the Hawthorne Effect. This phenomenon is described by The Economist

Magazine as follows:

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…experiments took place at Western Electric's factory at Hawthorne, a suburb of Chicago, in the late 1920s

and early 1930s. They were conducted for the most part under the supervision of Elton Mayo, an

Australian-born sociologist who eventually became a professor of industrial research at Harvard.

The original purpose of the experiments was to study the effects of physical conditions on productivity.

Two groups of workers in the Hawthorne factory were used as guinea pigs. One day the lighting in the

work area for one group was improved dramatically while the other group's lighting remained unchanged.

The researchers were surprised to find that the productivity of the more highly illuminated workers

increased much more than that of the control group.

The employees' working conditions were changed in other ways too (their working hours, rest breaks and

so on), and in all cases their productivity improved when a change was made. Indeed, their productivity

even improved when the lights were dimmed again. By the time everything had been returned to the way it

was before the changes had begun, productivity at the factory was at its highest level. Absenteeism had

plummeted.

The experimenters concluded that it was not the changes in physical conditions that were affecting the

workers' productivity. Rather, it was the fact that someone was actually concerned about their

workplace...113

A translation of this effect in the context of health and safety management in organizations

would be as follows: The introduction of new health and safety programs and initiatives signals

to workers that the company is concerned for their welfare, this creates elevated awareness, that

ultimately shapes habits in task performance that reduce behavioural risks, resulting in

reductions in injury rates, despite the non-targeted character of those programs and initiatives.

This is consistent with the research finding that corporate wellness programs (e.g. diet, exercise,

stress reduction, smoking cessation, etc.), while not focused on specific occupational hazard

avoidance or other self-protective workplace behaviours, are nonetheless commonly found to be

associated with improvements in workplace safety behaviours, and reductions in occupational

injury rates114.

113 The Economist Magazine.

114 United States Centers for Disease Control.

http://www.cdc.gov/workplacehealthpromotion/businesscase/benefits/. Accessed May 12, 2016.

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4.2 Instrumentality of the Corporate Senior Safety Manager

A second interesting finding was the apparent instrumentality of a single management official as

a driver of performance improvements.

In the case of Goldcorp, the BHSC chair and vice-president both considered the hiring of the

company’s first ever corporate safety director in 2007 (a management function and not a board

member, despite the title “director”) as being instrumental to OHS program evolution and

resultant accident rate reductions. Both noted that this individual didn’t “invent” the OHS

program ideas that the company adopted, but simply “brought them to the company” from other

organizations where he had observed them in practice – or what social scientist would call a

“boundary spanner”.

In the case of New Gold, the company’s annual 2011 report advised on the hiring of their first

ever corporate occupational health and safety director (again, a manager, not a board member) in

that year, and attributed the decline in injury rates from the prior year to program initiatives

introduced by that individual. Notably, the number of new and sustained initiatives did rise in

2011 and 2012 (and were less ad hoc than in the preceding period), and injury rates declined over

the three year period after the corporate safety director was hired.

It stands to reason that retaining the services of personnel with appropriate knowledge and

expertise in accident prevention within an organizational context can result in the development

and implementation of programs and initiatives that could reduce risk exposures and lead to

declining injury rates. What is interesting in the case of both companies is the possibility that a

single individual could exert an instrumental role in such large multinational organizations over

such a short time frame.

5 Policy Implications for Occupational Health and Safety

Regulatory Agencies

As discussed in Chapter 1, occupational health and safety regulatory agencies in Ontario, and

indeed all Canadian jurisdictions, and the United States, have largely taken a “hazard control

approach” to policy and lawmaking from the 1970s to date. However, in 1990 Ontario

270

introduced a specific corporate director legal obligation and liability (Section 32, Occupational

Health and Safety Act) relating to company compliance with occupational health and safety laws.

Yet, 26 years later, there has never been a prosecution or conviction under this provision115. The

Ministry of Labour (nor any of its funded sub-agencies) have ever performed any subsequent

evaluation of the impacts of this law, nor any study of corporate occupational health and safety

governance practices in Ontario following the amendment. Also, unlike the United Kingdom

Health and Safety Executive, which in 2006 produced two documents to guide and encourage

good corporate governance of occupational health and safety116, nothing similar has happened in

Ontario, or indeed, any other English language common law jurisdiction.

Our study indicates that for large complex organizations with established general corporate

governance frameworks, it will likely be beneficial for boards of directors to exercise appropriate

oversight over corporate management of occupational health and safety, and performance

outcomes. One structural format for doing so is through the establishment of a BHSC, but this

particular format would not necessarily be warranted if the governance practices can be carried

out by the board itself. Assuming a suitable format is in place, the theoretical and empirical

scholarship from the corporate governance field, and now the findings of the current research

program, suggest that elements A, B, C, D and E of the conceptual framework must be extant

and functional, in order to realize elements F, G, H, I and J.

For any organization, including those with less formal board operations, elements A, B and C

may not and in principle need not exist, so long as the practices in element D are carried out,

leading to E, and in turn, F, G, H, I and J. The case analyses in Chapter 7 suggests that key

senior corporate safety managers can play instrumental roles in influencing the executive team,

and bringing about F, G, H, I and J. Whether centered at the board, a BHSC, or in a senior

executive portfolio, attention to health and safety management processes and outcomes at or near

the apex of the organization appears to important to the achievement of desirable outcomes.

115Ontario Ministry of Labour.

116 Acona Ltd. (2006).

271

The implications of this study for occupational health and safety regulatory agencies may

therefore be articulated as follows:

a. Creation of a director legal duty and liability for occupational health and safety

compliance may be a motivator for the establishment of appropriate governance

processes and structures, but the evidence from this study (and the prosecution history in

Ontario) suggests that creation of the duty in and of itself has had weak effects on the

formation of specific board-level structures for monitoring health and safety compliance.

b. Pursuit of policy approaches that are effective in encouraging organizations (of any size)

to engage in the governance practices (whether via a board structure or the management

team) identified in element D of the conceptual framework could plausibly lead to the

implementation of elements F, G, H and I, resulting in improvements in J.

272

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