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A Dangerous Business Revisited
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Hank Habicht, John Henshaw and Pat Tyson

Habicht, Henshaw, and Tyson are former top officials at EPA and OSHA who now work as environmental, health and safety consultants. They were hired by McWane, Inc. to help with the company's turnaround. This is an edited transcript of an interview conducted Dec. 10, 2007.

photo of habichtHank Habicht was deputy administrator at the EPA from 1989 to 1993 and assistant attorney general for environment and natural resources at the Justice Department from 1983 to 1987. He is now primarily involved in investing in and deploying clean energy and water technologies.

photo of henshawJohn Henshaw was assistant secretary of labor for the Occupational Safety and Health Administration (OSHA) from 2001 to 2004. Prior to that, he worked with companies such as Monsanto in safety, health and environmental compliance. Henshaw is currently a safety and health consultant.

photo of tysonPat Tyson was OSHA's chief administrator from 1973 to 1986. Today he is a lawyer representing companies on safety and health issues.

Mr. Habicht, how did you become aware of McWane? And what was your evaluation of the company when you got to know the company? And maybe you can tell me how they've changed.

Hank Habicht: Well, shortly after the [FRONTLINE] story aired, I was contacted by a colleague who was a lawyer who said that the president and the general counsel of the company wanted to meet with me to talk about their situation and their plans for the future. And I looked at the broadcast, and I read the New York Times story. And I thought, well, this'll be a short meeting.

But I did meet with the president, Ruffner Page, and the general counsel, Jim Proctor, and spent a couple of hours with them. And they talked about how traumatic the publicity had been, how much they want to work on going from the most-criticized company to being seen as a leader, and wanted help to do that, both on the environment and health-and-safety side, and wanted to talk to me about that.

And after spending a couple of hours with them, I realized that they had been through a lot, that sometimes that's a cauldron of commitment and change, and that I was interested in helping them, as long as they were committed to [being] a leader. As long as that was the case, I would stay involved and try to help them in any way I could. And I'm still involved, so they have stayed committed; they've made significant changes. And the process moves forward.

How do you explain the situation they were in five years ago and their decision to change? How did they get there?

Habicht: Well, I have not spent a lot of time delving into specific facts that occurred before 2003. But obviously, when I started to work with the company, I, as well as others who were working with me, looked at the management systems, looked at the situation in the company to figure out where the company was and where it needed to go.

My conclusions were -- I didn't find malice in the leadership of the company. These weren't people who wanted to pollute or wanted to hurt people, but there was a gap, you could say, in management systems in the company. It was a very decentralized company. Another key point that I found was that the company basically quadrupled in size, I think, since the 1970s through acquisition.

So it grew very fast, it had a decentralized management system and simply didn't have the environment, health, and safety-management elements in place to be able to track information. And, as anybody in business knows, what gets measured gets managed. And they weren't measuring; they weren't tracking; they weren't inculcating in people the ethic and the importance and the performance standards related to environment, health and safety. So that gap was there. That gap needed to be filled.

Mr. Henshaw, when we first met, you were the assistant secretary [of] the Department of Labor.

John Henshaw: That's correct.

And you were familiar with McWane.

Henshaw: I was familiar based on the information that the agency had in regard to their compliance situation.

So what was your assessment when they called you up, of the company and what needed to be done?

Henshaw: Well, in a similar fashion that Hank spoke about, certainly I knew they had a considerable amount of issues to be addressed. And that came out of your piece, as well as what OSHA was doing at the time, as well as the Department of Justice. And I was skeptical. I was not sure: Are they really serious about it? Are they really moving forward like they want to be or like I heard they want to be?

And I thought my conversation was going to be short, but it wasn't. ... To be convinced, senior management had to tell me that, not other people. It had to be Ruffner Page and his direct-reports: Are they really serious about making these improvements? And our initial conversation was: "Here's what we're doing. We've hired some really good people, and it takes good people to do this who are committed. And we want to move forward."

And they had done an awful lot, but they had more to [do]. And I wanted to be a part of that. I'm not going to risk my reputation or get involved in any organization unless we show significant progress. And they convinced me that's what they intended to do.

And they've done it?

Henshaw: They have. They [have] done an awful lot, and I'm really impressed with what they have done over the last five years. However, as you heard today, when you heard some of their professionals talk, we're not satisfied. We want to continue to move forward. We want to prevent every injury, and that's got to be the goal. And, frankly, I wouldn't be involved unless they had that attitude that every injury could be prevented, and they can put in systems to manage it so no one gets hurt in their workplace.

And, Mr. Tyson, I have to, in full disclosure, say we quoted you in the third article about OSHA policy and enforcement. But how did you get involved? And what's your assessment of what's going on?

Pat Tyson: My first real knowledge of McWane came from your broadcast; I watched that with my family. And two days later I got a call from the general counsel saying, "Can you help us with this problem?" And that's one of the things that we do; I'm a safety and health lawyer, and so we get involved with companies that need help in making their program better.

And I met with [Jim Proctor]; I met with Ruffner Page, the president. I was convinced that they were committed to [doing] the right thing. And that was key because, if they didn't want to do the right thing, my job wasn't going to work. But they were committed, and I was happy to work with them. And I think the results speak for themselves. There's been a dramatic turnaround in this company, and I'm proud to have been part of it.

When I interview people at the Department of Justice, they also talk about the culture of the company, which a lot of people here talk about. But they talk about the culture of the company in the context of -- this company was out of control, from their perspective. Is that what you saw?

Henshaw: I would say not out of control. They weren't in control, and there's a difference. Being part of the right culture ... or the establishment or enterprise [that] focuses on doing the right thing, which is doing it right from an environmental standpoint, doing it right from a safety and health standpoint, and doing it right from a business standpoint. ...

They did not have control of their safety and health and environmental issues. They weren't focused on it enough. And what we brought to their attention --[through] OSHA and your piece -- is that they need to put [a] significant amount of effort on focusing on what they need to do to run a proper business. And that includes good, sound safety and health and environmental [precautions].

Tyson: I think a lot of it had to do with decentralization. They grew very quickly, the operations tended to go on their own, and as a result I don't think the folks at headquarters really fully understood what was going on at the plant level. The systems weren't in place to give that information to them. And one of the things that we've recommended as we've gone through this process is to develop those systems so that the folks at corporate who are making the decisions really have a good picture of what's going on at the plant level.

Habicht: In my experience, sustainability, having a sustainable management system, means that, if you're good at managing the business, you're good at managing environment, health and safety. And if you're not good at managing environment, health and safety, you're not good at managing the business. The company did have issues of decentralization. It also had a management culture, in some cases, that was very top-down, very command-and-control.

And an effective organization is one that certainly has top-level direction but has empowerment of everybody in the organization, and I think you saw that in some parts of McWane and not in other parts of McWane. So I think what you saw was a work-in-progress when we got involved. There was progress being made, there were the beginnings of the commitments going forward, but the process needed to be accelerated.

You say that the beginnings of a commitment were happening when you got involved with them.

Habicht: Yeah, they were. They had the makings of a solid environment, health and safety system. They were making some significant investments in capital equipment that you need for water and air management, from the standpoint of the environment. But because of the decentralization, because the systems hadn't been put in place that really measure right from the shop floor all the way up through the whole organization, it wasn't coming into place as fast as it would if you had a true corporate-wide management system.

I ran that idea by David Uhlmann, who was the head of the [Environmental Crimes Section] of the Justice Department until relatively recently and supervised the McWane prosecutions. ... To him, this was a systemic thing, where the -- as he describes it -- company, in a sense, didn't want to know. Any reaction?

Habicht: Part of my engagement was to focus on the future, and so I didn't delve into the facts of the past. I was involved as an environmental prosecutor for a number of years, including environmental crimes, and it is often the case that if its employees are engaged in criminal activity, a corporation is held responsible.

So that doesn't necessarily mean that there was a systemic, deliberate effort going on. My conclusion was that that was not the case; that there were individuals and there were gaps in the system that allowed things to happen that shouldn't have happened. But that's as much detail as I've gotten into because I was focusing on the systems going forward.

Tyson: Our focus, as Hank said, was on the cure. It really didn't matter too much to us how they got where they were. The important thing was to get them where they needed to go and where they were committed to go. And if we didn't agree or believe in that commitment, we wouldn't be here today.

I understand. But I'm trying to understand -- and I guess you know it first-hand. You dealt with McWane when you were in the government, so looking back, how would you explain what was going on?

Henshaw: As you might know, I'm barred really from talking about any detail of any enforcement action that was taken during my tenure with the agency, so I really can't talk about that detail. But from 2005 on [I've] focused on, how can we get them [from] where they [were] then? ... My focus in 2005 was to get the controls in place, get the systems in place, get the right people. And their attitudes changed.

We're dealing with a company that had some old habits, some old practices and old beliefs, and we had to change that. That's the culture piece. We had to change that, and that takes time to make those changes. And it's a constant activity in respect to the senior management. If people don't get the message, if they don't understand where this company is going, then they ought to have a look for an opportunity somewhere else.

Maybe you could help explain something that I don't think most people understand. I didn't know this until I got a letter from Ruffner Page, but [the company] had been debarred, or some of the plants had been debarred. What [does] debarment mean? And how does [it] work? Because you were in the EPA, right?

Habicht: Right, I was. It's been a while since I've been at the EPA, but I recall that debarment basically means that an organization that has met some threshold of enforcement responsibility, like a criminal conviction, is normally -- presumptively -- is for some period of time prevented from selling directly or doing business directly with the government. That's part of an additional penalty.

But it's primarily less of a penalty than it is a sense that this is an organization that raises questions about its integrity and its ability to do business effectively with the government. And so there is a process by which EPA evaluates companies that fall under this category to see whether, in fact, they meet standards of responsibility for dealing with the government.

And, in this case, the EPA department office went through a very thorough examination -- one of the most thorough I'd ever seen in my experience -- of the organization, its practices, its management systems. It received reports from third parties that talked to hundreds of employees to determine, in fact, are these changes that we've talked about really in place? And is this company a responsible company that "gets it" now, as opposed to what was implied by the convictions? And, as I understand it, EPA concluded that the company did have these changes in place and was a presently responsible company. ...

So all of you believe that there's been a big turnaround here.

Tyson: There is no doubt in my mind, no doubt.

Henshaw: There has been a big turnaround, and they've put in place a number of best practices, which you heard about today in more detail. And I'm impressed by that, but again, the proof is in the pudding in the sense that we've got to be able to measure those successes down the road, and they are beginning to measure those. They've been measuring [them] for a few years, and I suspect it'll be more of those kinds of reductions in the very near future.

Habicht: I've been involved in defining what it really means for a company to be a [sustainably managed company]. ... Some of the things that I look at, and that the environmental community looks at, [are] how deeply rooted the changes are. You look for facts that relate to that. Spending money is important, but more deeply rooted, ... you look at the people, how the people are managed and how people are treated at the company.

And some of the objective evidence: I think 90 percent of the senior leadership in the company changed over during this change process; over 125 new environment, health, and safety and human resource professionals were brought in. And these are people who have had careers of professionalism in environment, health and safety, and whose reputations mean a lot to them.

Other things related to people: ... training. The company in one year -- I think it was 2005 -- conducted over 240,000 hours of environment, health and safety training for its employees. That's the equivalent of 35 hours for each employee in the whole company of just environment, health and safety training. So every single employee was touched by that. And they also had leadership training [on] how to deal with people, which is important as well.

And one other fact that's particularly important -- and it's more impressive than I've seen in virtually any other major company -- is the way in which managers' compensation is pegged to environment, health and safety performance. Every manager has literally thousands of dollars at risk if they don't meet environment, health and safety standards, and they have the opportunity to earn more if, in fact, their environment, health and safety performance is above the plan. Those are very important earmarks.

Henshaw: I think that's very key. If senior management sets the expectation -- here is what we want, we want to achieve this kind of status of world-class -- and second, hold the managers accountable to that, And measure the progress on a daily, weekly, monthly, yearly basis, and reward those who are meeting that expectation and not reward those who are not. And, in some cases, discipline or eventually let people go because they're not meeting those expectations.

Tyson: And if I could add one point to that, something that they're doing right, something else they're doing right: ... They are measuring the performance of their managers, but they are not just looking at injury rates. Instead, they're looking at leading indicators, and primarily looking at leading indicators, which means: What kind of audits have you had? What kind of audit scores have you had? All the indications of the things you're doing to make good things happen, as opposed to what the outcome might be, which in many cases is a matter of [luck].

So you mean they're bringing in people from the outside like yourself or your organization --

Tyson: Correct.

-- to monitor what they're doing on their own?

Tyson: They're looking at outside experts, third-party independent experts to come in, audit the plans, audit the record-keeping practices to make sure that what is being done to make things better is real, not just look at the outcome to see what the injury rate did or didn't do. It's the input measures that matter, and every safety and health professional will tell you that's the right thing to measure: Look at the leading indicators, not trailing indicators.

Well, let me ... be the skeptical Justice Department prosecutor here and summarize for a second. What they say is, if they hadn't gone after McWane -- one described it as the worst situation they had seen in the 20 years of the [Environmental Crime Section] in terms of the multiple prosecutions of different plants and what they found around the country -- then we wouldn't have had these changes.

Tyson: I'm not sure that's true. I can speak for my own experience. When I got there, change had already started, and I think the key is the commitment of top management to continue that change. And I was fortunate that they asked me to help them, and, as I said to you earlier, I'm proud of the result. ...

The man who supervised the prosecutions of McWane said that in his experience -- in the 20-year experience of the Environmental Crime Section -- this company was unique and that we wouldn't see the changes that we're talking about today unless they had done that; that is, prosecuted them in multiple jurisdictions.

Habicht: I've been involved in prosecutions with the Justice Department and EPA, and one of the things that we often undertook were multi-facility investigations, where we would investigate multiple facilities, multiple operations of a particular company. That's both an efficient and effective use of resources. It's also a way, even better, to draw attention to problems, both for the public and for the company, because what the government does is identify and prosecute violations of the law, but also deter behavior, change behavior and that sort of thing.

Whether or not the company would have changed or would not have changed but for the prosecutions or the publicity is something people can speculate about. I can only rely on my own judgment. Having talked to the people at the company, the process of change was underway at the company, in my opinion. Was it accelerated by the prosecutions and by the publicity? I think it was accelerated by that.

But was the commitment non-existent until that happened? No, I don't believe that, because I've gotten to know the people in the company, and I know some of the gaps, which I say were primarily management gaps based on rapid growth and not the result of malice. So I think, ... having been a prosecutor and having a lot of respect for the people in government who do it there, they did have an impact.

But I think the judgments beyond the scope of the case just really depend on how much you know about what was going on inside the company before, during, and after the prosecutions. And I think the commitment was there, but it was accelerated as a result of these events.

I wanted to ask you about recordkeeping. When we first looked at the McWane corporation, we simply went to the public record; we added up how many OSHA violations there were and how many EPA violations there were. This is as of 2003. It came to more than the rest of their major competitors combined. We go now and do the same thing, and we still see the same relationship. There's 220 or so OSHA violations, more than the rest of their competitors. But it would seem to me that now that might be understandable because they're keeping better records.

Tyson: I don't think there's quite the relationship there. There is no question that the McWane company has been subject to many more inspections, and because they've been inspected a lot more you would anticipate they're going to have more citations. And that's what you found. But the recordkeeping issue deals with their injury and [illness laws] and their [injury rate], and that's really a different issue altogether.

Mr. Tyson, you help companies keep records, but records can be a double-edged sword, right?

Tyson: Absolutely true. Unfortunately, if you keep your OSHA law correctly, you're more likely than not to record more cases, and as a result your injury rate will go up. And when OSHA does its targeting, it often looks to the injury rates of companies, and as a result of keeping your records correctly, you are more likely to be inspected by OSHA. Now, smart companies do it anyway because they want to know where their injuries are occurring, because how can you prevent something if you don't know what's happening?

Are you telling me that American industry doesn't tell OSHA everything?

Tyson: What I'm telling you is that American industry frequently does not report correctly on its OSHA laws.

And as I understand it, the estimates are very -- is it 20 percent to 60 percent that are not reported?

Tyson: There is one study -- I believe it was conducted by the University of Michigan -- that found, I believe, 20 percent to 40 percent of underreporting. In other words, there really were 20 percent to 40 percent more injuries occurring to American workers than in fact were being reported.

So when Ruffner Page writes to me and says that he's confident that McWane is reporting a lot better than its competition --

Tyson: He's correct, and the reason I know he's correct is that either me or one of my people has gone out and personally audited every one of those records. And we look at injury rates; we look at accident reports; we look at the medical records; we look at first-aid reports; we interview the nurses; and we interview employees. We look at every possible document that might indicate that a work-related injury has taken place and to find out whether it has been properly analyzed and recorded, if appropriate.

Habicht: Well, one of the hardest lessons to learn, certainly [in] health and safety management, is that ignorance is not bliss and that, when you do dig and when you really are thorough in checking things out, you're going to find things, and you have to decide what to do about it.

And I think another sign of how much McWane has changed and how it moved into a leading role is the fact that it has found, in a number of instances, that when it's done third-party audits -- and it's had every facility audited every year for the last three or four years by third parties -- it finds things; it goes to the government and reports to the government about those. It discloses those findings.

In one case, it found that its [Clow plant] in Iowa had carbon monoxide emissions that were significant, and yet there had never been a carbon monoxide limit written into its permit. So McWane actually went to the air regulators in the government and said, "We think there needs to be a carbon monoxide limit in our permit," which would apply not only to them but to the whole industry. And I think that surprised a lot of people, that they would come forward and actually ask for a limit in their permit that didn't exist before.

And just not too long ago in their [Tyler, Texas, plant] they were doing a [stack test] on a new operation there and found volatile organic-compound emissions that were higher than what they expected. So they shut down the plant for 30 days and went to the Texas regulators and said, "We found this problem. We've shut down the plant. We'd like to work with you to figure out how we get to the bottom of it and fix it." Those are real developments, and those are significant. And that's part of what comes from being a leading company: You have to be willing to find things and do something about it.

We've interviewed people working in McWane plants who say that some of their supervisors try to get them to -- if they're injured -- come to work the next day so they don't have to log that someone has lost a day at work. [Let] them watch videos, whatever it is, so they don't have to report that there was an injury or a lost day.

Tyson: That would still be a recordable case and, under OSHA's guidelines, would also be considered, in their parlance, a day away from work, in the sense that, as far as OSHA is concerned, [if] they have restricted work activity or a day away from work, [it's] the same thing. If the person is not doing all of the essential functions of their regular job, OSHA looks at that as lost time in their view.

But the DART [Days Away and Restricted Time] rate that you hear about is the combination of those two things. So if a person was injured at work, came to work the next day and was not able to do all the essential functions of their job -- had them doing something else that day -- that still is a recordable case as a restricted duty case, and it's got to be recorded.

So the McWane way that was described to us five years ago has changed?

Habicht: I think it's changed, certainly in the sense that there is more systematic examination, literally every day, of the impacts that their operations are having on their people and on the environment. And they have a system that allows them to identify issues and act on them [in a] way they never have before.

Henshaw: It has changed, and I think a significant piece is that they're more transparent now. They're more willing to open up and say, "Here's who we are." And the reason why they do that -- and good companies do it -- is because they're on a path of improvement. They're not trying to cover up anything that may not be good. What they're trying to do is identify it, correct it. And so they're better and better and better.

And I want to add one piece to what Pat talked about. When you begin to focus on your records, yeah, you get a surge in the increase in injuries and illnesses, but that's temporary. Most companies who have done that [have seen] a [blip] in their injury and illness statistics, which means more reporting. But if they carry through with their objective of finding out what caused it and putting [in] the systems to prevent [it], they'll eventually get down. And then they'll be stellar companies, but they'll be solid, stellar companies.

But you have to go through that pain and suffering first to get the blip, and recognize you're going to get attention to yourself. But once they do that, then they begin to put the systems in place to correct those issues.

Let me make sure I understand now. As consultants, let's say something happens at McWane, like a serious accident. Were you called?

Tyson: Frequently. Frequently I'll be called.

And what do they tell you?

Tyson: In some cases they'll ask me to do an investigation. In some cases they just are informing [me] that something is going on.

In the last five years there have been two deaths at your plants. Were you called when these took place?

Tyson: Yes, yes.

And what happened? Do you remember?

Tyson: An investigation was done. They were tragic incidents. The ultimate result, though, was that OSHA also investigated, and at the end of all the investigations, OSHA issued citations. But the citations were not issued for the causes of the deaths; they were related to totally different things. So OSHA found no wrongdoing on the part of the company that led to those accidents.

And that explains why the fines were relatively low.

Tyson: That would explain it. And we're not saying the company is perfect, but I don't think that's an indication of the overall performance of the company. They're far better than that would seem to indicate.

Because when we looked at other companies in the industry ... and we looked up their OSHA citation rate, I believe I'm correct in saying that we couldn't find any.

Henshaw: Well, it's probably because they weren't inspected. If you're not inspected, you're not going to get cited. And there's no question that McWane got a lot of inspections by OSHA, and all of us in the safety and health business know, if OSHA looks far enough and long enough, they're going to find violations.

And when [we] read, for instance, from a report [by an] inspector in Elmira, N.Y., that the conditions there "expose employees to the dangers of fire, lacerations, amputation, chemical burns, crushing, falls, eye and face and hand injuries," and that results in a $68,000 fine, which for OSHA is a pretty significant fine --

Tyson: I don't know what case you're referring to. I can't respond.

They're not perfect, but you're saying that's not the way things are in general at these plants.

Tyson: Maybe the better way of thinking about it is, no, they're not perfect and they're going to make mistakes. But they're committed to doing the right thing, and they're on the path to being the industry leader. And I think many people would say they're already well on their way to being there.

Habicht: The ultimate test is not, are they free of mistakes -- because nobody is free of mistakes -- but, did they find them before somebody else found them? Did they find them as early as possible in the process? And what did they do with the information when they found out about it? Do they have systems that allow them to identify things and act quickly to correct them and go to the government or the public, wherever that's appropriate? And those changes are very significant.

So, in looking at the systemic changes that have been made, even though they're going to be in the environment -- they're going to have a spill here or there, they're going to have issues, and nobody is saying that their environmental record is pristine -- their environmental record has improved dramatically. ... And their record has improved dramatically from the standpoint of their ability and their commitment to find things, and they actually encourage and reward people to find things early and take action to correct them before they become significant issues.

So they've changed.

Tyson: Absolutely.

Henshaw: They have changed. But as you know, cultural changes take time to occur. And I think when mistakes occur, it's usually because it's an old habit, an old practice or an old belief, possibly. And it takes time to get people to realize this is not a fad; this is not just a temporary program that McWane is putting in. This is a lifetime commitment. This is the way McWane will be in the future.

Some people, it takes a while for them to realize that, and that's the culture. And that's why, to make it sustainable, [you've] got to keep the pressure up. Got to put the systems in place to identify them and then put immediate correction in place and reward people for identifying the problems. And if people aren't following the right kinds of practices and behaviors, again, I'm a strong proponent of giving them an opportunity to look for [an opportunity] someplace else.

Habicht: Can I talk about change from more like a 10,000-foot level for a minute? Because I think an important context to understand here with regard to McWane is that -- and this is one of the things that I saw when I had my first conversation with them that made me interested in working with them, assuming that they were committed -- here you have, really, one of the oldest companies, one of the oldest, basic smokestack industries, if you will, in America -- ...

Iron foundries.

Habicht: An iron foundry, right, but one of the old-line manufacturing businesses that are becoming more and more [scarce] in this country. And when faced with the news reports, the prosecutions and so forth, a company in this kind of an industry and situation is faced with a choice of either making a major commitment to accelerate change and become a leader or go out of business. There really is no middle ground. And what I saw was a pretty quick decision by the company that it needed to become a leader. It needed to accelerate the change process.

By that I'm saying there was change that occurred here. But there was fundamentally a sense that this is a family business; it's an important, basic industry in this country, and it does important services, particularly the water infrastructure in the country. It basically provides the pipe for the water infrastructure. And this may sound like this an advertisement, but it really is a sense that you have a number of basic industries in this country that are either moving offshore or closing down.

And to see a company that's willing to prove that it can continue to operate in this country and do it by the book and be on the book just as good as any other manufacturing company, that's an important development. And it's a chance to work with a company to make that kind of change in a way that will influence a whole industry, and I think that's really the story that we have here.

When we were doing this five years ago, one of the reasons we got involved in the story was because of ... the lack of teeth in OSHA penalties. That's how we first heard about [Tyler pipe]. And today -- and it's been true for a number of years -- there's something called the [Protecting America's Workers Act] that's been introduced in [Congress]. Do you endorse stiffer penalties, for instance, turning the misdemeanor penalty under OSHA law for contributing to the death of a worker into a felony?

Henshaw: Well, as a consultant in safety and health, I know what motivates businesses, and to some extent, I know what motivates those who choose to abuse their workers. And in that sense I think it's appropriate to increase the criminal sanctions of the [OSHA act]. It requires an act of Congress to do that, but I'm in favor of improving those penalty sanctions.

Tyson: I've been on the record endorsing an increase in the penalties for criminal sanctions for years and years. It should be a felony. But I don't want the overall enforcement structure to change. It's worked pretty well having the dominant enforcement mechanism be civil penalties. And they should be significant, and now they can be significant. But there needs to be a better provision for those rare cases where the conduct of a company or an individual is, in fact, criminal. And when that behavior leads to the death of an employee, I think it should be a felony.

Habicht: Not being an expert in the area -- although when I was involved in environmental prosecutions, there were often related health and safety violations -- there does seem to be an imbalance between the authorities that the environmental agencies have and that the health and safety agencies have, and that should be looked at.

Well, the Justice Department's position is that they, in order to effectively deal [with companies] ... they have to use environmental law in order to have an effective sanction. It's being done, but through the back door.

Tyson: I'm not sure that's always true. The OSHA sanctions can be pretty significant. Look at some of the fines the agency has issued recently, some of the fines that were issued under John's term or my term. We're talking many millions of dollars; that is usually pretty effective in getting the attention of a company. ...

This is [David Uhlmann] saying, concluding: "I'm an agnostic on the subject [of] whether McWane has changed. I hope they've changed. I hope they've learned their lessons. I'm concerned though when I see that the same people who have run McWane all these years are still running McWane." Now, you're saying that's not true, right?

Tyson: Oh, no. There's been a tremendous turnover in people. Lots of the old guard is gone; it's something like 90 percent of the old guard is gone. New positions and new people. ...

Okay, but he says in the end he's still a skeptic. ... In a sense, what he says is it's up to history to see what happens here.

Henshaw: Well, and he probably hasn't seen the data we've seen, and he hasn't seen the information you've seen. So, yeah, he's a skeptic, and we all are. We all should be a skeptic until we see the objective evidence that's been verified that they have made successful changes and great performance in safety and health and environmental.

Tyson: Look, I've seen more than just the data. I've been on the plant floor. I've talked to the employees. I've talked to the managers, the first-line supervisors. I know there's been a change. There's no question there's been a change.

Habicht: One of the things that happens when you have a prosecution and people get into their positions, there should be -- there isn't enough follow-up after the prosecution to really see what has happened, at least in my own experience. And I think it would be a good thing to have the people involved in the prosecution get briefed on what the company is doing and challenged and asked questions and that sort of thing. We've tried to do that with OSHA; we've tried to do that with EPA leaders because we want to get some feedback. We want to say, "Are we on the right track? Are we missing something?"

For example, when McWane put together its [environmental management system], it put together an environmental management system that is the equivalent of the [Performance Track program], which is EPA's gold-label performance program. Because of its criminal convictions, McWane is not eligible for the Performance Track program for a number of years; it's been disqualified. Nonetheless, they wanted to meet the [standards of Performance Track] to show the agency and others they were that committed to change. ... Even without getting the plaque, they would do this.

And part of that process has been to have a give-and-take with the agency, with other environmental experts, to say, "What are we missing? Are we on the right track?" Because they really want to lead an industry. And I think there has been interest. Without speaking for the agency, there has been interest in what McWane is doing because they see it as inspiring change in an entire industry. And that's an important development.

[What is] VPP?

Tyson: VPP is OSHA's [Voluntary Protection Program]. And it is the only way that the agency has to recognize a company that has truly shown excellence in safety and health. This company is committed to getting all of its locations in the VPP and already has two there. If you need outside evidence of a change in excellence in safety and health, you're not going to find a better indication than VPP.

So what you're saying is that their corporate aim is to get into the most trusted category of companies in America when it comes to safety and health.

Tyson: There's no higher honor.

Now, I could see somebody sitting out there saying, "Well, you guys are just paid consultants. That's why you're saying all this."

Tyson: We're paid consultants to help companies get to the place they want to go. They wanted to have an excellent program, and they turned to us to help them get there. That's what we do, and I think we do it pretty well.

Habicht: I've never consulted with a company in this capacity before. I certainly have worked with a lot of different companies in many capacities, but this is the first of this kind of assignment I've taken on. And the only way I would take on an assignment like this ... [is] if I really believed that change was happening and if the commitment was real, and that, at the end of the process, significant change and significant improvement would be achieved. And that's the reason that I got involved. I think it's true of all of us.

Henshaw: Yeah. I'm a safety-and-health professional first and foremost. And I wouldn't be engaged in this if I didn't feel like we could measure success and we could improve the situation. And that's why I'm here. I'm not here to get paid. I'm here to produce success.

Well, we know that the housing market is down and that's affected the market for their products, but has making all these changes -- have they said anything to you about how this affects their bottom line?

Tyson: Good safety is good business. Those of us that have been in the game for a long time know that's true. And so, if anything, their bottom line has probably improved.

Henshaw: And you can probably talk to a number of CEOs that have stellar programs, and they'll tell you that safety and health and monitoring and maintaining environmental stewardship is good for business. Now, it may hurt to start with because there's initial investments, but once you're there, and you maintain that and sustain that, it is the only way business should operate. And it's good for business. Boards of directors know that; CEOs know that; and Ruffner Page knows that.

I'm reminded of a letter that he sent us about six years ago in which he said one of the big problems for the company was competition, particularly from China and overseas. Now we hear that they have layoffs, the production [is down here], but they've invested in China themselves. Are we to take any lesson from that, that these jobs are moving offshore or that they need to be more competitive by now cooperating with the Chinese, if you will, getting [to do] business with them?

Tyson: I don't pretend to understand the business, but I know they're committed to keeping jobs in this country.

Habicht: I agree with that. I think the China experience has a couple of different important dimensions to it. As we know, everything we read is about the growth of China and India and the competitiveness of America and everything. And in the area of pipe, as well as other products, there are concerns about unfair competition. The reality though, I think, is that McWane sees water infrastructure as a huge growth business, that it is investing for the long term.

And having a presence in China is important, certainly from an economic-growth standpoint. ... There are rapidly growing markets, as we know, in Asia and the developing world that need water infrastructure, need the products that McWane produces. So I think there's a combination of legitimate concern about competitiveness and ambition to grow to be an international supplier. The competitiveness front is very important because, in the long run, we believe that people will buy products from responsible producers. ...

My colleagues [and I] have worked with the Chinese government. The Chinese government is very committed to improving the performance of its own foundry industry; right now there are pipes produced in other countries that aren't produced with the same level of care for people and for the environment as McWane is doing. We think that'll change, long term. That's part of the investment that the company is making.

The company is making an investment in China to produce in a more environmentally sensitive and health-conscious way, is what you're saying?

Habicht: Yeah. ... It's setting the bar in China. I won't say that there are no Chinese producers that are responsible, but the Chinese operation is one that McWane is operating to the same standards, high standards, of performance that it operates here in the United States. And it does aspire to be a global leader in producing pipes, fittings -- the products that move water through cities from water sources to people.

So if I understand what all three of you are saying, is that this is, as we reported before, a dangerous business; that is, the foundry business. There are going to be injuries. There are going to be deaths --

Tyson: It can be a dangerous business.

But in McWane's case it's become a much less dangerous business?

Tyson: Absolutely.

Henshaw: Yeah. The business inherently has a number of hazards, and they have to [be] properly controlled. McWane is in the business of trying to prevent and reduce those risks so that is not dangerous for their employees. And I think you'll find, as you talk to employees, they feel it's a safer place.

Habicht: When you set up the systems and take the precautions to improve your performance, from the standpoint of injuries as well as environmental impacts, in the long run you're a better-run business, and you'll be more profitable. ...

One question would be what the company is doing beyond just making sure they're in compliance with the law. And one of the things that's been a recent development -- which to me is an important sign that the company has gone just beyond fixing problems to actually saying, "Okay, how do we become a true leader in the world?" -- part of it is international expansion, but a big part of it is being a leader in their industry from the standpoint of [green standards]. And I think a lot of people are aware that the [green-building movement] is very significant.

There was the [National Green Building Conference] in Chicago just a few weeks ago; 25,000 people addressed by Bill Clinton talking about, how do we improve the environmental impact of our buildings and the infrastructure around our buildings. And McWane has become the leader in the [U.S. Green Building Council] in determining how pipe and water conveyances can be seen as a part of a green building, working on lifecycle analysis and other things and just being a participant in this forward-looking initiative.

So to me, that's a sign of coming a long way from being the brunt of so much criticism, so much public concern, to being out there with these systems in place and now being a leader on sort of the leading edge of environmental building. That's one good sign.

Another example is in New Jersey. One of the big concerns the public has from a pollution standpoint is mercury. And the company actually went to Germany and found a leading mercury control system and installed [a bag house], which is [an air pollution control system]. And it's a New Jersey/Atlantic States plan to control mercury well below even the New Jersey standards, which are quite stringent. They're the first in the industry to do that.

So those are just some examples of how the company is not just saying, "How do we keep out of trouble?" But, "How do we go beyond and really be seen as leaders?"

The publicity, the regulatory, if you will, attention, and the prosecutions, has that been good for this industry, for the iron foundry industry or for American industry in general?

Tyson: Well, there's probably no question that it caused everybody to pay more attention to worker-safety [analysis], ... so that's a good thing.

Henshaw: From that standpoint, it brought attention to the American public that these issues are out there, and they need to be addressed. And businesses need to take the responsibility and control their industry to the point where they don't hurt people, and they can [be profitable] at the same time.

Habicht: I think this kind of attention is good for change. I think it has helped to accelerate change in an entire industry and prove that even an old industry, like the iron foundry industry, can operate to 21st-century environmental standards and do it right and continue to provide product.

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posted february 5, 2008

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