MMA: Transparency, the first line of defense against managers’ laxity
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Transparency is one of the six fundamental Sound Management principles. This principle is related to other five Sound Management principles: Continuity, Efficiency, Balance, Fairness and Abnegation as defined by the OAAQ and the ISM. The international organization Transparency Internationale also believes that transparency is a first line tool to fight against the managerial obscurantism and corruption. (see footnote 1)
America, freedom of trade
Maine Montréal Atlantic’s roadmap was already far from being perfect: various violations, outdated equipment, and incomplete customs declarations. Like many other companies, MMA, a small railway company, has to survive in an extremely competitive market, in the context of the federal budget cuts and of the rationalized business processes. Therefore, its managers tinkered with the administrative system like many other trading companies. They have to meet an absolute need of priority in order to survive and obtain contracts, satisfy the shareholders and the bankers. Oddly, construction and engineering companies delivered the same speech to Ville de Laval. Does the end justify the means?
Gambling other people’s lives!
Nevertheless, MMA was carrying bombs day after day. A catastrophe had to happen so that they considered taking action. Fifty persons lost their lives without having anything to do with MMA. They were just people, like all of us, who were supposed to live safely in their town. From now on, Lac Mégantic will always rhyme with managerial laxity, economic obscurantism, and wilful blindness, a chronic attitude adopted by the governance.
A twofold problem
Hypocrisy and Omerta. The bomb was oil, this infamous liquid carried to satisfy drivers’ insatiable thirst. They almost made us believe that we are all, collectively responsible for not using our bikes to go to work. The great challenges of the energetic resources are part of a code of silence. Global economic issues are huge; modern countries’ sovereignty and people’s quality of life are directly related to the energy. Do managers gamble by making decisions that put in danger our ordinary lives?
Regarding the safety braking system, the newspaper Le Devoir from July 20, said that, The industry association and Transports Canada had been notified but, according to the TSB (Transportation Safety Board of Canada) rules were too vague. For instance, the Canadian Rail Operating rules stipulate that there must be “a sufficient number of brakes (…).”
The TSB had already officially asked Transport Canada (TC) to apply tighter regulations regarding the braking system. Again, according to Le Devoir, “(…) in 1996-1997, we gave them some suggestions,” explained Ed Belkaloul. The organization had intervened following a train crash in the north of Sept- Iles. In his report, Mr. Belkaloul had emphasized the idea that the trains’ braking force was neglected.
The guilty must pay!
Too little has been done and it was too late. People died. Now that we realize the impact of such collusion, of the corruption present in the public administration and in the large companies based on market capitalization, a question comes to our mind whether the management really wants to change things.
Anyway! They will toughen the laws and the regulations for the oil transportation and they will set up even more procedures, but I bet they will avoid the real rule of accountability for the administrative actions taken. There will just be more work for the lawyers who will specialize in getting around the new rules in the name of their clients’ freedom to do business.
The critics of the principle of Transparency are many, efficient and subtle
Consequently, all these laws will fail to impose greater transparency. The critics of Transparency, as it is described by the GAPSM, are many, efficient and subtle. We have heard several kinds of arguments, sometimes coming from well-trusted organizations and venerable companies. There are some examples of critical observations:
- Transparency wouldn’t be recommended because it acts against the fundamental rights of business competition, of protection of the private life. A more selective and voluntary transparency would be more appropriate.
Nevertheless, in the case of the MMA, the mandatory disclosure by the company’s management regarding the condition of the railways and of the rolling stock, the number of employees forming the working teams, the in-house safety rules including the use of trains, or the goods carried may have saved the 50 lives.
- Regarding the in-house transparency and the wilful blindness, a top manager told me one day that “during his career, it had happened to him, several times, to be forced to protect his president by not disclosing to him all the information required, in order to prevent making him vulnerable in the media, or even in front of the Board of directors. In other words, a trustworthy manager was telling me that the top management was supposed to be protected from the dirty job by the middle management.
According to this vision of management, the Board of directors will never feel responsible for such an accident as that from Lac Mégantic. They will certainly be touched by the so many deaths and they will sympathize with the victims by offering compensations to them and their families. But they will never feel personally responsible because it’s not part of their duties and that the subordinate managers hadn’t informed them of any risks.
In this example, since nobody from the Board of directors had mentioned, before this tragedy, their concern with the company’s continuity or the risk related to carrying dangerous goods, the Board will be more worried about the company’s survival than about rebuilding this town.
The Board of directors and the management’s responsibility
The principle of Transparency as defined by the GAPSM:
2.2 (2) Essentially, it can be said that a manager must render account of his administration; whether to his principal, to a person, or to a group designated by this principal, for example: to a board of directors, to a supervisory committee, or to an auditor.
2.2 (3) Within the confines permitted by the principal and who does not suffer as a result of bias, the manager must also act in a transparent way with third parties or with subordinates who may be affected by his actions.
According to the GAPMS, disclosing information to any third party within the organization is one of the Board’s (principal) duties. It’s certain that the subordinate managers wouldn’t disclose any information that could bring prejudice to the company without the Board’s approval. If they do, they’ll risk losing their jobs. Comparing them to the subordinate engineers from the companies that had done business with Ville of Laval explains this Omerta.
The scapegoat: the employees
How can one object to their boss’ bad management? Even professionals who guide their acts according to a code of ethics find themselves facing a dilemma. Accountants, lawyers who facilitate or get around rules to their client’s advantage, should they also be considered responsible? Should they resign, denounce themselves and accept the consequences, or turn a blind eye? It’s difficult to bite the hand that feeds you.
The Board’s duty to be transparent
They’ll get angry with me because the Board’s managers were trained based on the legal premise of the old and dusty precedent.
According to the ISM, the sound management is a transparent and efficient management that ensures the company’s continuity beyond its managers’ short-term opportunistic decisions. The definition of sound management will contrast more or less actively with that of governance. This principle fights against the conflict of interest and the immunity. (Abnegation principle)
But it seems we are not the only ones to believe that transparency is a good solution to fight against obscurantism that takes even more advantage of the governance less inclined towards a sound management.
The well-known international organization Transparency International also believes that the first line of defense is a transparent management allowing access to information. Their perspective is concentrated on the fight against corruption. Corruption derives from a bad management, as it’s the case with all tragedies along the history, to which Lac Mégantic has just been added.
Footnote (1)
(…) Transparency International works around the world to (ref : promote revenue transparency ) in the extractive industries because we believe this is an important way to hold companies and governments to account,(…) benefit from the wealth that comes from exploiting natural resources.
Revenue transparency, particularly in natural resource extraction, is essential so governments, citizens and shareholders know what companies are paying to whom, where these payments are going – and how they are being spent. Citizens need to be able to monitor the revenues received from companies to ensure that governments put them to good use to upgrade public services, such as healthcare and education, and alleviate poverty.
A lack of transparency is a corruption risk. (…)
Source: July 4, 2013: Transparency is the first line of defense against corruption, Transparency International.
