Sunday, July 25, 2010

Sutherland and Crowley: Irish chairmen decisive on sex but weak on risk and safety management

The following is a contribution to a thread on the Irish Economy Blog.

FT columnist Prof. John Kay recently commented in the context of the BP disaster in the Gulf of Mexico, that “it is not just easy, but obligatory, to say that safety and the environment must be overriding priorities. But this is just a reassuring platitude. If safety and the environment always did come first, economic activity would be paralysed.”

He recounted “an illuminating conversation with a senior executive of a recently privatised water company. I was puzzled that so many companies seemed to be able to issue peremptory edicts to their managers to reduce costs, or headcount, and see these edicts fulfilled. Could it really be that there was so much inefficiency and, to get rid of it, little more was necessary than to tell people to sort it out?

The system could always operate with fewer people. In fact, if you sacked the whole workforce, except for the billing staff, profits would soar and everything would be fine – for a bit.

My informant predicted that his company, in common with its rivals, would engage in successive rounds of efficiency savings, and be congratulated by analysts and regulators. Eventually, he predicted, there would be a big problem – or several. Then politicians would compete in the vigour of their denunciations. Money would be thrown at the problems. He hoped he would have retired before this.”

Peter Sutherland had retired after 12 years as BP chairman, months before the Mocondo blowout but the same concerns that were raised about safety issues after the 2005 Texas City oil refinery explosion when 15 worker were killed are now being raised again.

We have classic cases where two Irish chairmen of large companies, Sutherland and Laurence Crowley, took decisive action by sacking their CEOs over sex issues but risk and safety management issues brought both Bank of Ireland and BP to the brink of ruin.

Would a public utility where the ethos is to put staff interests first, be any better than a private run company?

Maybe the best course is to privatise Bord Gáis which can provide significant competition for the ESB, without having the same stranglehold the unions have in the latter, on public energy policy.

As for CIÉ and its offshoots, maybe it doesn’t deserve its reputation as a Soviet style bureaucracy and public transport cannot be totally left as a private sector service but how can an organisation like it, attract bright motivated people?

There’s a story told that Parliamentary Sec. Brendan Corish was heading back after lunch to the Custom House one day when he went to help a person who was lying face down on the steps. A plastered Myles Na Gopaleen looked up and said: “Corish Iompair Éireann!”