Thursday, July 11, 2013

On The Lac Megantic Disaster

I have refrained from commenting on the Lac Megantic disaster in part because I do not want to tread on the very real grieving of those who lost friends and family as a result of what happened there.  On a human level the entire situation is tragic.

However, after reading The Toronto Star's Exposé, I wanted to address it in the context of my previous posts (here, and here)  on the structure of our economy.

When he [Burkhardt] took over the Montreal, Maine & Atlantic Railway in 2003, he cut employee wages by 40 per cent according to a company history in the Bangor Daily News.
There were more layoffs and cuts in expenditures in 2006 and again in 2008.
The company also announced plans “to improve safety and efficiency” by cutting its locomotive crews in half, replacing two workers with a single employee.
That prompted at least one veteran engineer to quit the company in part over his fears for safety.
Jarod Briggs, who had worked on railways since 1998, told the Star he left MMA in 2007 because he thought leaving only one engineer in charge of a train — as happened in Lac-Mégantic — was too risky.
This is hardly the first time that I have seen and/or heard about this kind of blind cost-cutting in corporations.  I've said it before, and I'll repeat it again - Money has no moral or ethical framework.  Those who allow their business activities to be driven solely by money inevitably fall into the trap of forgetting that their businesses affect people, and are far more than just balance sheet numbers.

Burkhardt's whole approach to business seems to be very similar to the corporate vultures of the 1980s - sweep in, make massive changes and sell the company while the cash flow looks positive (and before the costs of the cuts made start to make themselves felt in other ways).

When restructuring a second tier banking organization, you can get away with this, and not really affect anyone except the staff you are firing.  Burkhardt's mistake is to apply that same kind of logic to a business where people die if something goes awry.

But, while Burkhardt might be the villain of the hour simply because his company just killed dozens of people in Lac Megantic, it is far more clear that we should look upon his practices as an example of the kind of corporate malfeasance that goes on every day in boardrooms around the world.  Burkhardt got caught out - although not for the first time.

It seems more and more clear that there is an enormous gap between corporate governance and the interests and needs of the people whose lives are directly or indirectly associated with them.  Lac Megantic is the unfortunate victim of that - and the fact that their scheme for only one engineer to oversee a train required Transport Canada approval merely underscores the problems that have developed as corporations have gained more influence over the governments.

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