Risky Rewards: How Company Bonuses Affect Safety

186 Pages·2015·1 MB·English

by  Andrew Hopkins

Risky RewaRds
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Risky Rewards
How Company Bonuses Affect Safety
andRew Hopkins and sa RaH Maslen
The Australian National University, Australia
© andrew Hopkins and sarah Maslen 2015
All rights reserved. No part of this publication may be reproduced, stored
in a retrieval system or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise without the prior permission
of the publisher.
Andrew Hopkins and Sarah Maslen have asserted their right under the Copyright,
Designs and Patents Act, 1988, to be identified as the authors of this work.
Published by
Ashgate Publishing Limited Ashgate Publishing Company
Wey Court East 110 Cherry Street
Union Road Suite 3-1
Farnham Burlington, VT 05401-3818
Surrey, GU9 7PT USA
england
www.ashgate.com
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
The Library of Congress has cataloged the printed edition as follows:
Hopkins, Andrew, 1945- author.
Risky rewards : how company bonuses affect safety / by Andrew Hopkins and
Sarah Maslen.
pages cm
Includes bibliographical references and index.
ISBN 978-1-4724-4984-9 (hardback : alk. paper) -- ISBN 978-1-4724-4985-6
(ebook) -- ISBN 978-1-4724-4986-3 (epub)
1. Industrial safety--Economic aspects. 2. Bonuses (Employee fringe benefits)
3. Incentives in industry. 4. Risk management. I. Maslen, Sarah, author. II. Title.
HD7262.H67 2015
658.4’08--dc23
2014029240
ISBN 9781472449849 (hbk)
ISBN 9781472449856 (ebk – PDF)
ISBN 9781472449863 (ebk – ePUB)
II
Printed in the United Kingdon by Henry Ling Limited,
at the Dorset Press, Dorchester, DT1 1HD
Contents
List of Figures   vii
List of Tables   ix
1 Introduction   1
2 Questioning the Value of Financial Incentives   13
3 The Problem of Rare but Catastrophic Events   35
4 Long-Term Incentives   61
5 Annual Bonuses   77
6 The Impact of Incentive Arrangements   105
7 Indicators of Major Hazard Risk   131
8 Summary, Reflections, Suggestions   145
Appendix 1: The Research Process   163
Appendix 2: A Sample Performance Agreement   165
Bibliography   169
Index   171
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List of Figures
1.1 Bonus structure for top BP executives, 2012 5
2.1 Maslow’s hierarchy of needs 16
3.1 BP share price before and after Gulf of Mexico blowout,
20 April 2010 37
3.2 The Swiss cheese model 42
3.3 Schematic version of API process safety triangle 43
3.4 The UK HSE barrier performance indicator model 48
4.1 LTIP vesting – paradigm case 65
4.2 LTIP vesting – alternative framework 66
4.3 Limiting cases for LTIP vesting 66
4.4 LTIP vesting – before and after fine tuning 68
5.1 Three types of risk 100
7.1 A process safety scorecard – indicators by asset or business 133
7.2 Precursor events used in the Norwegian petroleum industry 141
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List of Tables
5.1 BP’s annual bonus scorecard results for 2012 80
5.2 Multipliers used for bonus determination –
a multiplicative scheme 85
5.3 Critical controls at one Company A site 97
5.4 Safety scorecard for annual bonus in Company A 98