Thursday, November 15, 2012

A good idea

Pike River saw a careless company ignore safety in the push for profit. The cost was 29 lives. Now Labour has drafted a member's bill introducing an offence of corporate manslaughter to prevent it from happening again:

The penalties in the Bill include:

A fine on a company or organisation up to $10 million

Imprisonment up to 10 years for any director or senior manager shown to be responsible for the corporate failure

A publicity order requiring the offending company or organisation to publicise the conviction, including in any annual report.

One of the key insights of economists is that incentives matter. At present directors and managers can ignore safety, because any cost will be paid by workers and shareholders. This gives them a direct and strong incentive to take an interest and correct any failings - because if they kill someone, they could be going to jail.

Though I can also think of another penalty that could usefully be added. At present, the Companies Office can bar someone from managing a company for up to five years in certain circumstances. Putting the jobs and future livelihoods of directors directly on the line over safety would also provide a strong incentive for them to take their responsibilities seriously.