Constructing safety: investigating senior executive long-term incentive plans and safety objectives in the construction sector

Abstract

In the private sector, incentive plans are one of the major means used by Boards of Directors to align the interests of senior management with organizational interests. However, research conducted in the energy and resources sector revealed a poor alignment between incentive plans and the need to have senior management focus on safety. The research discussed here examined long-term incentive plans (LTIPs) for senior executives in the construction sector to investigate whether these direct senior managers attention to long-term safety objectives and if they include any long-term safety indicators. Annual Reports of publicly listed companies in the Australian non-domestic construction sector were used as the major information source and subjected to content analysis. Despite a strong safety commitment expressed by all the companies, LTIPs were exclusively associated with financial indicators. Although safety indicators are included in Annual Reports, these only appear in short-term incentive plans, indicating that senior executives are not incentivized to align their long-term decision-making with long-term safety objectives. Findings from the research demonstrate that valid and meaningful safety indicators should be developed and included in LTIPs in order to better align the focus of senior management to include safety performance in the construction industry.

Keywords:

• Governance
• incentive plans
• management
• safety
• senior executives