5 Lessons Tesla’s Embattled Safety Program Can Teach Us All

Claims about Tesla factory workers being put at risk are deeply troubling. Details that have come to light offer a useful guide to avoiding the hot seat the carmaker now sits in.
By: | November 13, 2018 • 7 min read

2018 has been a painfully rocky year for Tesla. The company weathered missed production goals, Autopilot crashes, bankruptcy speculation and executive shakeups. CEO Elon Musk was forced to step down as chairman following a Department of Justice investigation into a tweet that Musk made about taking the company public.

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Tesla is also in the crosshairs between the media and regulators over safety and compliance issues at its Fremont, Calif. plant. Reveal, the digital and podcast arm of The Center for Investigative Reporting, published an exposé in April alleging egregiously unsafe factory conditions and blatant under-reporting of injuries. Reveal followed up with a podcast on Nov. 3 that adds negligent medical treatment of injured workers to the list of accusations. Cal-OSHA opened three new investigations into the Fremont plant in September alone, bringing the current total of open investigations to six.

All of these accusations are at odds with public statements made by Tesla’ VP for environmental, health, and safety, Laurie Shelby, who says the company’s goal is to have “the safest car factory in the world.”

What’s the real truth about safety and workers’ comp at Tesla? It remains to be seen. But the company’s predicament offers insight into how Tesla missed key opportunities to better manage its safety and workers’ comp programs and communicate them internally and externally.

1) The tone from the top can be an asset … or a liability.

Despite a poster at the plant that says “EHS will not be compromised for production or profit,” multiple reports include allegations from current and former Tesla employees that company leaders put production first and pressure managers to enforce that priority.

Laurie Shelby, VP for environment, health and safety at Tesla, points to the principles of her department listed on a placard at Tesla’s Fremont, Calif. plant. Image: Paul Kuroda/Reveal

Several sources also specifically pointed to the influence of Musk, alluding to personal quirks that compromised plant safety — like disapproving of the color yellow and disliking the loud warning beeps made by vehicles reversing. Whether or not those claims are valid, it’s pretty obvious that mixed and conflicting messages are an issue at the Fremont plant.

Leadership’s open and consistent commitment to health and safety is paramount. Leaders must hold themselves accountable for worker safety and communicate that message company-wide. It also can’t be just talk. Policies and procedures should be in alignment. Empowering workers to halt an assembly line if unsafe conditions arise, for instance, tells workers, “Your safety comes first, no exceptions.”

2) Don’t skip the due diligence during vendor selection.

Following the first Tesla exposé, the company hired Access Omnicare to run its on-site medical clinic. In short order, allegations against the clinic began to arise, including failure to treat, failure to record injuries, a blanket ban on calling 911 or using an ambulance even for serious injuries.

Some believe these practices stem from pressure put on the clinic owner by Tesla. Both Tesla and Access Omnicare deny any claim of wrongdoing and insist all decisions are made based on clinical judgment.

Many risk managers and workers’ comp directors say that when deliberating between vendor proposals, don’t ignore your gut. It shouldn’t take more than one meeting to pick up a sense of whether the vendor’s goals, values and priorities are aligned with your organization. Back up your gut reaction with research. Ask for client references. Talk to peers who may have worked with or interacted with the vendor in the past. Search online for any public comments that might raise red flags.

After you’ve made your selection, dedicate time to ensuring every person who might interact with your account understands your mission, your goals and your expectations. Some companies take the step of formally educating vendors with seminars or certification programs.American Airlines, a 2015 Teddy Award winner, organized a two-day summit for its internal workers’ comp team, its broker, its TPA and all of its vendors, to ensure that every person understood and was able to act upon the company’s goals. Likewise, Starbucks Coffee Company did something similar, training its TPA Genex Services in the ‘Starbucks way,’ earning the coffee giant a 2018 Teddy Award.

If any external team member fails to meet expectations or works counter to the company’s values, ask that they be replaced promptly.

3) Be absolutely transparent.

Tesla and its on-site clinic are taking heat for practices that appear negligent, whether or not the intent of the practice is grounded in sound reasoning.

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The clinic owner has stated that, in his clinical judgment, emergency responders are not required unless an injury is genuinely life-threatening. (Workers who don’t’ need life support are typically sent to the hospital via Lyft).

Good policy or bad, it was never explained to employees, leaving its reasoning open to interpretation. Most assume the motivation is money or part of a strategy to avoid recordable injuries. Consider that 911 logs become public records, and first responders, unlike Lyft drivers, are legally required to report severe work injuries to Cal-OSHA. Whether or not it’s a valid practice, it certainly does look sketchy on the surface.

When deliberating between vendor proposals, don’t ignore your gut. It shouldn’t take more than one meeting to pick up a sense of whether the vendor’s goals, values and priorities are aligned with your organization.

Make sure workers know what to expect if they’re injured. Some employers issue an informational workers’ comp packet at the time of hire or time of injury, or both.

Include the “whys” in your documentation where appropriate. For example, if you’re operating in a state that allows you to direct medical care, explain you’ve chosen your preferred providers, because they have a solid track record of getting injured workers back to their lives and back to work as quickly and safely as possible. Without that information, you run the risk employees will assume — as some of Tesla’s employees did — that the company prioritizes cost-cutting over quality of care.

4) Prioritize return-to-work.

In a Feb. 4 blog post, Tesla’s Shelby touted the company’s new return-to-work program, where injured workers in light-duty positions would receive their regular wages during recovery.

Shelby added, “If Tesla is unable to accommodate an injured employee within the company, we’re now temporarily placing them with nonprofits and local organizations like YMCA, libraries or food pantries where they can help the community and receive their regular compensation.”

Those are best practices that companies across a variety of industries are employing. But Tesla’s critics paint a very different picture — of seriously ill or injured workers sent right back to work, of an on-site clinic that denies work restrictions and other problematic conditions.

If the latter were true, it wouldn’t just be ethically questionable, it would be fiscally questionable. Decades of examples bear out how a well-crafted return-to-work program can produce significant cost savings and reduce lost time while improving both recovery outcomes and employee morale. It’s a win from every angle, especially for high-risk sectors like manufacturing.

In spite of the advantages, half of employers surveyed for a 2017 Prudential report offered no return-to-work program. It’s unclear what passes for a return-to-work program inside Tesla’s doors, but if they haven’t launched a formal program, no time like the present.

5) Manage your message.

Hopefully your safety and workers’ comp programs will never be under the kind of scrutiny that Tesla is facing right now, but these days, you never know. One disgruntled, injured employee is all it takes to set off a social media circus.

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As with any other type of risk your company faces, a crisis communication plan is vital. It’s important to respond quickly, calmly and appropriately. Faced with a report that’s credible and thoroughly researched, from a source as well respected as The Center for Investigative Reporting, a proactive response might have been to reiterate Tesla’s commitment to health and safety, assure the public that the allegations were being taken seriously and pledge to launch an immediate investigation into the claims.

But that’s not what happened. On the day that the first exposé was published, Tesla posted on its blog that the report was “an ideologically motivated attack by an extremist organization working directly with union supporters to create a calculated disinformation campaign against Tesla,” a defensive posture likely to fan the flames even further in addition to sounding a little bit like a zealous conspiracy theorist. A month later, Musk replied to a question about the report by dismissing the investigative journalists as “just some rich kids in Berkeley who took their political science prof too seriously.”

Both actions were missed opportunities to take control of the conversation and re-cast the story as that of a company taking responsibility for the situation and committed to getting to the bottom of it. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]