Company Directors (Health and Safety) (Hansard, 25 March 2003)

§ Ross Cranston (Dudley, North)

I beg to move, That leave be given to bring in a Bill to require companies to appoint a director as the health and safety director; and to impose duties on this director and on other directors of companies in relation to health and safety; and for connected purposes. We still have a good way to go in this country in relation to health and safety. People know about the big disasters such as the Clapham and Paddington rail accidents, but smaller-scale accidents occur continually. In 2001–02, some 225 fatal injuries to employees—42 of them in the midlands—were reported to the Health and Safety Commission. Many companies have high standards, but we need to raise everyone's standard to their level. This important social problem must be tackled along various dimensions. My Bill approaches one of them by seeking to make a step change in what directors of a company must do to ensure a safer environment for employees and members of the public affected by its activities.

Directors are responsible for how companies operate. It is directors who set a company's policy on health and safety, and it is they who decide how high health and safety is on the agenda in comparison with other matters. It is they who determine the resources, including management resources, which a company allocates to health and safety. It is they who decide how health and safety is monitored in the company, whether accidents are properly investigated and what preventive action is taken for the future. The British Standards Institution summarises the position thus: Ultimately responsibility for occupational health and safety rests with top management. My Bill recognises that reality and codifies within the Companies Act 1989 the responsibilities that directors already have in broad terms as a result of the Health and Safety at Work, etc. Act 1974 and under guidance entitled "Directors' responsibilities for health and safety", which was issued by the Health and Safety Commission in 2001.

The 1974 Act adopted the Robens philosophy that health and safety is the responsibility of top management. It imposes duties on employers, but section 37 also imposes criminal responsibility on directors when an offence under the Act has been committed—in the rather old-fashioned language used—with their consent or connivance, or if it is attributable to neglect on their part. In theory, if a death occurs, directors could also be prosecuted under the general criminal law, although in practice that is exceptional and the Law Commission has recommended, and the Government have in principle accepted, the need to introduce an offence of corporate killing.

The Health and Safety Commission's guidance grew out of the Government's strategy—launched in their 1999 document "Revitalising Health and Safety"—of putting a new impetus into health and safety management. The guidance does not constitute legal obligations, but sets out best practice in five action points. It is aimed not only at companies but at public bodies and voluntary organisations.

158 My right hon. Friend the Minister for Work told me on 13 February about research into the effectiveness of the guidance in promoting greater responsibility for health and safety. Preliminary findings were encouraging, and he will report in the summer on the success of the voluntary approach and the need for legislation.

The first aspect of my Bill is to impose some general duties on directors regarding health and safety. Hon. Members will know that the Companies Act 1989 already imposes duties on directors in relation, for example, to financial matters. The general law also imposes additional duties on directors; for example, there is a duty not to appropriate opportunities that really belong to the company. The company law review recommended that those general law duties be given legislative form, and the Government have accepted that recommendation in their White Paper. However, neither the Companies Act nor the general law imposes any duty on directors relating to health and safety. This Bill does that.

First, the Bill contains a very general duty for directors to act in the interests of the health and safety of a company's employees and others affected by the company's activities. Secondly, it imposes on directors duties to take effective steps to ensure that the company acts in accordance with the obligations imposed on it by, for example, the Health and Safety at Work, etc. Act 1974. Effective steps will have been taken under the Bill if, for example, the directors have reasonably informed themselves of what; the company's health and safety duties mean for it, and if they have taken into account what the health and safety director has said.

No express penalties are set out in the Bill for directors in breach of those duties; as I have said, directors already face penalties under the 1974 Act for breach of health and safety duties. Rather, the duties in this Bill are owed to the company, and it is the company that enforces them. In that respect, the Bill accords with the excellent report of the Centre for Corporate Accountability on the general subject of corporate responsibility for health and safety. The whole issue of penalties underpinning the enforcement of the Companies Act 1989 was discussed by the companies law review. It may be, in the future, that those health and safety duties will need to be enforceable by the criminal law, but that is not the case under the Bill.

The Bill applies only to company directors. If it is accepted, I would hope that the principle could be extended to apply to those at the top of public sector bodies, such as Government Departments, local government and hospital trusts.

The second aspect of the Bill is the obligation that it imposes on public companies to appoint a health and safety director from among its directors. That is already a requirement under Health and Safety Commission guidance. According to the HSC, some leading companies have designated their chief executive as the health and safety director, sending a clear signal that the issue is serious. However, the Bill does not demand that, but leaves it to the company to choose which director should undertake the role. The Bill requires that the director chosen should be identified as such in the company's annual report.

159 The Bill then imposes on the health and safety director obligations to monitor the health and safety position within the company and to report on it to the board. Basically, the detail of those obligations is taken from existing HSC guidance. I emphasise that they are limited duties and that the health and safety director cannot be scapegoated for failures by the board as a whole. In practice, of course, the health and safety director may well find it worth while to undertake training, and to arrange for training for the other directors as well.

The monitoring and other activities of the health and safety director will gather much useful information. Already, many companies provide health and safety information to the outside world in their annual reports. Stimulated in particular by the challenge thrown down by my right hon. Friend the Deputy Prime Minister in the report "Revitalising Health and Safety", the HSC published guidance in 2001, entitled "Health and Safety in Annual Reports", on what in its judgment is the minimum information to be included in an annual report. Publishing health and safety information in a company's annual report demonstrates that company's commitment to the issue, and acts as a spur to further action.

Ultimately, I hope that the directors will report on health and safety matters in the operating and financial review proposed by the company law review for companies of significant economic size. The OFR will parallel the well-developed system of financial reporting, already provided under company law, and include information on performance and other aspects that the directors judge necessary to an understanding of the business, such as environmental and social impacts. That is how, as a matter of law, directors will have to have regard to the environmental and other social impacts of their company's operations. The company law review eschewed a mandatory approach to what OFRs should contain, but if directors are to make a bona fide judgment of the information necessary 160 to understand a company's performance and prosperity, health and safety issues should be included as well as environmental impacts.

My Bill is only part of the jigsaw necessary to ratchet up what companies do to protect the health and safety of their employees and others affected by their activities. My hon. Friend the Member for Scarborough and Whitby (Lawrie Quinn) has introduced a Bill to enhance penalties under the Health and Safety Act at Work, etc. Act 1974. There is also the separate issue of a new offence of corporate killing, which the Government made a manifesto commitment to introduce. My Bill is supported by the TUC and the Centre for Corporate Accountability. Mike Holder, the chairman of the Black Country chamber of commerce, has told me that he supports the Bill and any measures to improve health and safety at work. I am also grateful for the support that the Bill has so far gathered from both sides of the House. If leave is obtained today, I will seek to obtain even wider support for its aims.

The health and safety of employees and the public requires that company directors have a clear vested interest in health and safety matters. Obliging a company to appoint one of its directors as the health and safety director, and imposing duties on that director and others regarding health and safety will do that.