Managers are unavoidably charged to balance the benefit of innovation with the risks of new processes, and to do this well. But the disastrous effects of asbestos manufacture and BSE indicate that markets and regulation are not helping.
Asbestos has exceptional strength and resilience and retains these properties even when it is woven into fine strands. These properties made it an invaluable industrial material. They also made its dust dangerous – we know now calamitous – when inhaled.
Turner and Newall was Britain’s leading manufacturer of asbestos products. Even from its first industrial usage before the first world war, everyone knew that asbestos was nasty stuff, although no-one knew quite how nasty it was. The managers of Turner and Newall did not behave particularly well, but they did not behave particularly badly either. They made ex gratia payments to sick employees. Although not generous, these went well beyond the company’s legal liabilities. Turner and Newall commissioned research Sir Richard Doll, Britain’s leading epidemiologist, and the discoverer of the link between smoking and lung cancer, to research the effects of asbestos. It tried to suppress his results, but they did not try very energetically and without success. Doll continued to work with Turner and Newall, and helped the company to dispel some of the more exaggerated public reactions.
Turner and Newall managers always inclined to more optimistic interpretations of the evidence rather than more gloomy ones. They argued that proposed regulation was more than was needed, and that it would be better if they were left to improve their practices themselves. The people in charge at Turner and Newall were ordinary human beings, neither villains nor saints. Any thoughtful manager who reads their story in Geoffrey Tweedale’s well documented account will think that “there, but for the grace of God, go I”.
The trouble was that even the gloomy interpretations of the evidence always understated the true extent of the problem. There were more, worse, and more prevalent, asbestos related diseases than anyone had imagined. It became apparent in the 1960’s that asbestos was the main cause of mesothelioma, a particularly unpleasant, virulent and invariably fatal form of cancer. This disease could be caused by tiny particles inhaled decades before.
At this point, the behaviour of some Turner and Newall executives ceases to be defensible. They tried to cover up what the company had done, and commissioned advertising and public relations campaigns asserting the excellence of their product. Even then you can understand why they did it. It requires great strength of character to conclude that the only future for your profitable business is to start the process of closing it down. And you would not necessarily have escaped either legal liability or popular calumny if you had made that correct decision.
Still, closure had to happen. Popular opinion, regulation, and the market forced it. In 1982 Johns-Manville, the leading American asbestos company, went into Chapter 11 bankruptcy protection. City institutions insisted on new management in Turner and Newall and gave the new board clear instructions to try to draw a line under its history. Today, asbestos manufacture in the developed world is at an end, although people continue to develop mesothelioma.
The important question is not who was to blame. It is how to help managers, who are unavoidably charged with balancing the benefits of innovation and the risks of new processes, to make these decisions well – and how to ensure that knowledge of these benefits and risks is collected and disseminated as fully and quickly as possible.
Our standard mechanisms of litigation and regulation worked badly for asbestos, and work badly in general. Huge sums are being paid in asbestos related insurance claims – asbestos proved damaging not only to the lungs of asbestos workers but to the wealth of Lloyd’s Names. But little of the misery of the latter is helping to relieve the agony of the former. Since victims of mesothelioma will typically be dead within a year of diagnosis, no financial compensation can really be relevant. Compensation as slips through the hands of lawyers mostly goes to pay corporations for refitting and demolition of buildings. Nor could insurers be commended for their work to minimise asbestos damage. At Lloyd’s, most did not even know they were assuming the risk.
If the market did not serve asbestos victims well, nor did the regulatory system. Regulators are, necessarily, dependent on the information they get from those they regulate. The inclination to believe what it is most convenient to believe, and to conceal evidence that things are otherwise, is not confined to capitalist businesses. Anyone who has confidence in the ability of government to manage trade-offs between economic advantage and risks to health need only look at MAFF’s handling of mad cow disease.
If society is to manage the inevitable risks of technology well, the overriding need is for a culture of openness which was not found in Turner and Newall, or the ministry of agriculture. Or at Johns-Manville. Bill Sells, a former executive, has described how an ethos of denial and secrecy there ultimately damaged the company itself, as well as its workers and customers. We live in a political and legal environment whose primary objective is to assign blame, and we know from our personal lives that a culture of blame inhibits honesty about our problems. The tragedy of asbestos was not, fundamentally, anyone’s fault. It was a cruel trick that nature played on us. And if we respond by searching for scapegoats, we will have more disasters to find scapegoats for.
Geoffrey Tweedale, Magic Mineral to Killer Dust, Oxford University Press, 2000
Bill Sells, What Asbestos Taught Me about Managing Risk , Harvard Business Review, March-April 1994.