A corporate dilemma: to be a learning organisation or to minimise liability

Abstract

Companies are faced with a dilemma when it comes to information about safety problems. Should they seek out such information and learn from it, so as to reduce the risk of accidents, or should they suppress it, so that when an accident occurs they can not be held liable for failing to act on information in their possession? The disadvantage of suppressing such information is that it creates organisational learning disabilities. It also promotes public outrage that may turn out to be very costly. Many companies in the US view information about safety failures more as a legal liability than as a learning opportunity. This paper argues that in Australia concerns about legal liability are misplaced. The paper takes the explosion at Esso’s Longford gas plant in 1998 as a case study and shows that so called “guilty knowledge" played no part in the record fine imposed on Esso. Furthermore, guilty knowledge was irrelevant in the subsequent compensation cases brought by both the workers and their families and by businesses affected by the loss of gas supply. Show more