balance

Workplace Mental Health and Safety
Australian Council of Superannuation Investors, July 2015

Creating a mentally healthy workplace: Return on investment analysis
PricewaterhouseCoopers, March 2014

A recent study from the Australian Council of Superannuation Investors (ACSI) titled “Workplace mental health and safety” recommends that boards and senior executives of Australian companies raise awareness and improve their disclosure practices in relation to mental health issues.

The report examined the workplace mental health of S&P/ASX200 financial, mining and utilities companies (48 companies in total) based on publically available information over the year from March 2014 to March 2015.

The report suggested that there was limited disclosure of qualitative and quantitative information across the sectors on issues such as staff turnover rates, absenteeism, and overtime worked. For example, less than one third of financial, mining and utilities companies disclosed work turnover rates and only 4% of mining and utilities companies disclosed absenteeism rates.

The report argues that the discrepancy between the high levels of disclosure of workplace mental health initiatives (what it terms “lead indicators”) and the low levels of disclosure of information and data that could be thought to measure such initiatives (what it terms “lag indicators”) makes it difficult for investors to not only gauge the success of such workplace mental health initiatives, but also any corporate risks that may arise out of mental ill health.

It should be noted that similar research has recently been carried out in the UK which similarly found that a “culture of silence” exists around the issue of mental health. The UK report suggests that only 11% of the FTSE100 provide information about the support they provide to employees with mental health issues in their annual reports.

The cost of mental health to Australian business

Several studies in Australia over the past few years have attempted to quantify and measure the financial costs of mental health to Australian businesses and their shareholders and stakeholders.

One study estimated that Australian businesses lose over $6.5 billion each year in failing to provide early intervention and treatment for employees with mental health conditions (Chartered Secretaries Australia). In terms of indirect costs, the National Mental Health Commission has estimated the cost of mental ill-health due to lost productivity and job turnover to be approximately $40 billion a year.

Is mental health an issue for Australian boards and directors?

Workplace cultures which make it difficult to disclose [mental health issues] are cultures that contain within them a degree of governance dysfunction, and potentially expose the organisation to serious risk”, says Lyn Goodear, CEO and Managing Director of the Australian Human Resources Institute.

Studies have shown that half of Australian employees with a mental health condition withhold this information from their employers because of concerns it will put their job at risk. Less than 50% of directors view mental health as a risk within their organisations (Chartered Secretaries Australia) and more than half of the 520 employees surveyed by SANE Australia believed their manager had little or no understanding of mental illness and its impact in the workplace.

These statistics reveal a disconnect occurring between employees’ needs and employers’ understanding of mental health in the workplace, reinforcing the need for leadership at the board level on this issue. A corporate culture that does not adequately support mental health may discourage employee disclosure. This therefore makes it difficult for management to know the extent of any issues and also address these in a timely way. Unaddressed mental health issues within workplaces are likely to magnify over time, resulting in more serious consequences to businesses and the individuals they employ.

“Senior executive teams…need to develop reporting to the board that can bring discussions on health issues, including mental disorders, inside the boardroom in the same way that physical safety risks are discussed.”, suggests Dr Kirstin Ferguson, a leading expert, consultant and executive in the field of safety governance and safety leadership.

PwC’s Report titled “Creating a mentally healthy workplace: Return on investment analysis” suggests that companies can expect a positive return on investment of $2.30 for every dollar spent on successfully implemented mental health initiatives. It would appear that promoting mental health in the workplace may not only add value within businesses, but may improve perceptions within the investor community.