Four principles saw mining deaths in the U.S. halved per hour worked between 1990 and 2011
By Swaha Pattanaik
LONDON (Reuters Breakingviews) — Imagine an industry where bad practices cause huge harm, whose reputation is in the mud, and which desperately wants to change its culture. In the late 1990s that was mining. Today it's banking. Finance can learn a thing or two from the likes of Rio Tinto and BHP Billiton.
Mining deaths in the United States halved per hour worked between 1990 and 2011, according to the Department of Labor. Four principles made this possible. First, aim for higher standards than the law requires. Some of the biggest miners applied tough rules globally, even when local norms were less stringent. A similar approach in finance would make a welcome change from bankers exploiting legal loopholes, herding to less onerous regulatory regimes, or skirting as close to the wind as possible.
Second, make protecting the company from reputational damage a priority for everyone. Mining chief executives and senior managers are accountable when disaster strikes, and often meet families of those killed in mining accidents. Those lower down the pay scale are encouraged to blow the whistle and own up to mistakes. The latter will require banks to discriminate between genuine errors and deliberate violations of policy.
Third, pick the right metrics to measure progress, and don't leave out near-misses. That's a tougher lesson to transpose to banking since the number of regulatory infringements never tell the whole story. Yet this is vital, since linking remuneration from the highest level down to such measures, as miners do, is a necessary, though not sufficient, condition for changing culture.
Finally, show shareholders there need not be a huge trade-off between profitability and higher standards. Investors already hate unexpected fines. Miners can plausibly argue that reducing fatalities shows good management, which ought to translate into enticing profit margins. At least at the top, the message is starting to get through and efforts are being made. Take Standard Chartered Chief Executive Bill Winters' recent scathing attack on misconduct and the new clampdown by the bank.
Deaths and injuries were stark levers that helped change mining culture. Reforming bankers is harder because they can argue that their misdemeanours create no victims — or at least, they don't kill anyone. But mining demonstrates that the key is to be better than the least one can get away with.