Measuring safety

Companies that have a higher proportion of remuneration weighted towards safety measures and provide better disclosure on their safety performance tend to have lower injury frequencies, according to Credit Suisse.

These are the findings from an equity research note in which the investment bank examined the relationship between leadership focus on safety and injury frequency for ASX-listed companies exposed to safety risks. It also considered the extent to which safety forms part of chief executive officer (CEO) remuneration and the quality of disclosure on safety performance.

It found that managing safety is a key issue with all companies sampled explicitly acknowledging safety as a risk. It also found that somewhat unsurprisingly, the CEO and/or the chairman have made explicit commitments to avoiding injuries and fatalities in various forms in all of the annual reports of companies in the sample in each of the past three years.

In total, 82 per cent of companies have either created board committees that have explicit oversight of safety management and performance or explicitly included oversight of safety in the board charter of one of the traditional board committees (primarily the risk committee).

Due to the large proportion of companies which have included safety within the formal remit of one of the board committees, and the strong public commitment from CEOs and/or chairmen to strong safety performance, there is very little differentiation between the extent to which companies aspire to "zero harm" and actual safety performance, the report noted.

The research notes that Woodside Petroleum, infrastructure management company Downer EDI and BHP Billiton all have a strong leadership focus on safety, based on Credit Suisse’s safety focus composite score. In contrast, Treasury Wine Estates, building materials company Boral and manufacturer Adelaide Brighton have a below-average leadership safety focus, as measured by the same composite score.