labels: industry - general, tata group, writers & columnists, governance , trade
Setting a global benchmarknews
T Damu
12 March 2003

Colombo: When we discuss about the implementation of and monitoring compliance with international labour standards (ILS), certain questions naturally arise in our minds.

They are:

  • Does setting up of ILS and the stipulation to implement them take into account the vast differences between the north and south blocks in their socio-economic, demographic and political systems?
  • Do these systems have any relevance in formulating and recommending ILS? Or vice versa, do the standards lend themselves relevant in a world of varying economic, political and social diversities?
  • If so, what are the basic changes that are to be brought to ILS to make the nations compatible to ratifying them?

There is a valid reason for bringing such critical questions to the fore at the outset itself. Unfortunately, some of the industries in the developed nations, including the US, which are to be a model for the developing nations in regard to compliance with ILS, are themselves often found flouting the standards.

These corporations, while adhering to ILS in their own countries, follow double standards dishonestly and surreptitiously in their environmental, labour and human rights practices abroad, especially in the third world countries, where they put up their factories and industries.

For example, in regard to the issue of equal remuneration, these corporations do not pay their employees of the third world countries, who are engaged in their factories set up in these countries, an equal amount that would be payable in their own countries. Worse, the employees are compelled to work for more than eight hours.

This forum should examine why this unethical exploitation of labour by the developed nations in the developing countries is happening. And this leads to another question: Is it ever possible to enforce a uniform ILS in a world of multiplicity and economic pluralism?

Unlike developed nations, where technological advancement is an advantage over labour, which is limited or unavailable and costly as well, one of the biggest strengths of the developing countries is the abundant availability of cheap labour. However, there are some issues such as surplus, unskilled and low-productive labour, unbridled employment guarantees, minimum wages not linked to productivity, the onus of providing health, welfare and social-security, too much freedom of association and collective bargaining, which have come to stay like the legendary holy cow in a Hindu society.

Neither has any government had the resolve to amend the anachronistic labour laws — the ‘vestiges’ of the colonial rule — for fear of losing the vote banks, nor has any trade union ever attempted to discuss the demerits of these issues for fear of their power-base being eroded. This has been going on for long and the time has come to change all this.

Issues like injustice, hardship, privation, denial of other human and civil rights, forced labour and child labour are almost things of the past as far as organised labour is concerned. And the labour reforms over the years based on ILS have had a spectacular impact on the global and Indian industry and economy.

But in a changing world, where a predominantly agrarian organic economy like that of India is becoming an increasingly modern industrial economy with privatisation of the public sector and the increased entry of private business houses and multinationals in many areas, there is a demand for a different approach to several labour issues.

While talking about labour reforms in tune with international labour standards, everybody agrees that changes in the national labour laws are essential. But which are the labour laws in a country that require change and what are the changes proposed? How are we going to effect the changes without biases? There are a whole lot of other posers to the matter in focus.

The impact of compliance with ILS on industry
Stiff competition in the market place calls for renovation of traditional industrial relations and labour legislation and related subjects with innovative concepts that are business-friendly. In today’s world, capital investment and business development is seen more important than the employment of the labour force, thanks to the rapid technological advancement and global competition.

But it is needless to state that the complex interface between globalisation, trade liberalisation and social development should be fully understood; only then will any industry or nation be better equipped to harness globalisation and maximise the economic and social benefits of globalisation and trade.

Whether for good or bad, globalisation has become inevitable. And for a country that strives to become the workshop of the world, new thinking in the labour market has to dawn, dispelling the darkness of ‘protectionism’ and bringing to light the goods as well as the evils of liberalisation, privatisation and global competition. The good aspects are to be amplified and the evil ones are to be corrected, only then will any reform process have the desired impact on industry.

The impact of ILS on industry could be positive or negative depending on the nature and scope of ILS to be complied with, the nature and extent of the industry and how labour intensive it is, the perception of the parties concerned (the employers, the employees and the trade union), and the effectiveness of government regulations and the monitoring mechanism.

Rationalisation of wage levels and other labour costs, optimisation of employee strength, increase in labour productivity and competency, curbing of unwanted and destructive labour unionisation, proliferation of industries and more investments leading to employment generation, enhanced health and safety standards and more foreign direct investment will be some of the positive impact on the industry when compliance with ILS is strictly followed.

Some of the negative impact would be inequality and lack of solidarity, increase in autocratic management, high rate of labour retrenchment, increase in labour unrest, strikes, lockouts and other industrial disputes, overall decline in the informal sectors (for example, agriculture, which is a very vital sector), social problems leading to industrial downturn, sickness, and closure of indigenous national industry.

Whatever be the impact due to compliance with ILS, we should first see why compliance is often found missing in most of the cases. It is most unfortunate that the trade unions and even the governments, of late, see a hidden agenda or a red alert in any effort by the global body to implement ILS across the world. It is seen by a majority of the trade unions that labour standards are compulsorily imposed on developing countries.

Thus, instead of becoming alert on best-altering their labour issues to be in tune with globalisation and liberalisation, the developing nations are getting alarmed about the stipulations embedded in and the situation arising out of conventions, recommendations and subsequent ratification.

This perception of the governments and the trade unions that ILS are designed to be fetters on and, not as liberators of the labour force, affects the implementation of the process and makes compliance difficult. Given this situation, the industrial sector in countries like India also feels helpless and hopeless that these lopsided views on one side and the urgency with which the global industry calls for compliance of ILS on the other side are a real threat to their growth and competitiveness. A majority of problems faced by the industry in implementing ILS arise from this complex situation. This is the foremost issue to be studied and addressed.

Adding fuel to fire is the national governments’ half-baked admixture of economic policies. Take for example, in India, what we have today is a conglomeration of economic policies taken from the days of British raj punched with philosophies propounded by Gandhiji down to Vajpayee. This national economic policy conundrum is yet another hurdle that makes compliance to any ILS difficult in its true letter and spirit. Hence consistency, tenacity, veracity and transparency in economic and legal policies and practices are a prerequisite to make the compliance effective.

There is no dispute about the issue of trade union militancy and labour redundancy that despoil the industry of its growth and competency. These are problems to be tackled sternly. But at the same time there are issues, which are to be handled with velvet gloves. These are the issues that mainly concern employees’ social-safety net.

Though a lot is bragged about the merits of HRD and corporate social responsibility, in practical business development programmes the subjects are not given much of importance. That is a major flaw, which leads to problems in implementing any meaningful labour reforms, that is labour reforms without consideration for a social safety net.

We should always remember that the emergence of the trade union movement and later union militancy leading to the worsening of the employer-employee divide had happened due to the misadventure in the early era of overexploitation of and the inhuman treatment meted out to labour.

The concept and practices changed over the years due to evolution of social theories and professional management practices like personnel management, social welfare administration and human resource development. Ironically today, in the context of globalisation and trade liberalisation in the WTO regime, the employer-employee dichotomy is again strained and stained. This needs real-time attention.

In the post-WTO era, one more issue that has a direct impact on the industry requires immediate attention, especially in the third world countries. At one end, the virtues of corporate social responsibility are eulogised and at the other end the industry is asking the government to take over from the employers the responsibility of providing health and welfare measures to the employee community.

It should be noted that it is not only the globalisation pressures but also the failure of the governments to provide welfare measures and basic infrastructure to the employees and the industry respectively and also its inefficiency and indifference in implementing certain essential labour reforms that have led to such a demand from the industry.

The governments should at least be willing to share its responsibility with the corporate to provide these welfare measures to the employees. After all, by industrial development the ultimate beneficiary is the government, which can pride itself of its industrial growth and development and its ability to integrate with global economy.

Hence for bringing about the necessary, desired and positive impacts of ILS on industries and nations, the global body should first of all help remove the snags in these areas. Thus we have some issues to tackle at the government level. They are the host of anachronistic legislations affecting trade, finance and industrial policy, confused mixture of economic policies and philosophies of the nations, shenaniganism and pluralistic game-plays by political parties and legislators, unstable government and bureaucratic pressures, corrupt and inefficient monitoring mechanism in the member states.

At the industry and corporate level, issues like corporate misgovernance, non-professionalism, lapses in corporate culture and industrial relations, lack of corporate social responsibility and diversity of sick and informal industry pose as hurdles. Coming to the workers’ and union level, ignorance and arrogance leading to misunderstanding, breaches of agreements, strikes and lockouts, socio-economic problems and lack of other supporting systems, lack of alternative employment opportunities, vast majority of unorganised labour and so on and so forth make compliance to ILS difficult. So, it is very important to address these issues first and attempt to solve the inherent problems, lest any effort to bring about labour reforms in the context of ILS would be in vain.

The case of plantation industry
The plantation industry, like some exceptional organised industries in India, has done away with some of the worst forms of labour practices long ago. For example, child labour, forced labour, inequality in remuneration and discriminatory labour practices were rampant in the plantation industry.

But at a time when the Indian tea industry is facing a lot of problems, some of the plantation companies and small private holdings have resorted to paying labour wages lower than minimum wages, defaulting even the statutory payments like provident funds and gratuity to workers, working hand in glove with trade union leaders for carrying out discriminatory labour practices, not adequately taking care of the health and safety of the workers.

But there are reputed corporates in the field, which still continue with their fair and square labour practices. Ironically, they are the ones that suffer the brunt and the plantation companies that flout the rules and regulations of the land and the ILS on the whole, in the context or pretext of the crisis situation, go scot-free. Here again one can see the power lobbies in the government corridors conveniently keep mum over the issues.

The plantation companies that adhere to legal stipulations and social obligations, face some constraints in the form of lack of autonomy and strangulating complex legislation, which make the industry suffer the onslaught of globalisation. For example, on retirement of a worker, an eligible member from the worker’s family fills the resultant vacancy. This tradition has developed as a result of the demands of workers themselves years ago.

But today this provision, this freedom to “bargain,” denies the employer the right to make a recruitment choice in filling up of vacancies arising out of superannuation or medical termination. Even though such a filling up of vacancy may be superfluous, the employer is bound to take on a member from the family of such a worker. This is one example, where the tea industry is at a receiving end, unjustifiably.

Yet another constraint is the Plantation Labour Committee, a tripartite settlement forum, which was started with good reason to provide justice to the employee as well as employers, has now turned out to be a hurdle. In the sense that the industry is unable to have any bilateral settlement with the trade unions however reasonable or logical or temporary it is in tune with the present crisis situation. For example in the case of wages and bonus, which are to be reworked, the industry is unable to do so by having consultation only with the unions on an honest and transparent manner. This complex and rigid structure should be made fluid.

Lack of political will also poses problems for the tea industry. The biased pro-labour and anti-industry stand of political parties and governments in dispute settlements, wage settlements, and other issues relating to industrial relations also affects the industry. Lack of a WTO Compatible National Plantations Policy by the government also denies the tea industry the fullest benefit of globalisation.

For example, the high discrepancy seen among the plantation labour of India and other competing nations like Sri Lanka, Kenya and Bangladesh works against the progress of the industry, which in turn leads to closure of a number of tea plantations resulting in unemployment for a large workforce.

There are other complex legal frameworks like the Plantation Labour Act, 1951, which stipulates the mandatory social overheads like providing accommodation, crèche facilities, medical facilities and education are a real drain on the part of the industry. It should be amended to relieve the plantations of the onus; instead the governments should take up this responsibility as it is done in the case of other industries.

The Trade Union Act, 1926, which saw amendments in 1964, has remained untouched. Proposals like minimum 10 per cent of the workforce as a prerequisite for union recognition, only one third of outsiders as office bearers instead of 50 per cent and strict annual auditing of union funds could not be effected. Thus we see multiplicity of trade unions, outsiders with vested interest not working for the progress of the industry, fraudulence in fund raising and other activities.

Though it is a fundamental right of the employees to have freedom of association, there should be some logic in their functioning. The world has seen a number of reformations taking place in the case of laws governing the companies and their boards of directors. Stringent laws on corporate governance are refining the conduct of industries. But laws in relation to trade union governance and labour reforms are treated so “sacrosanct” and no one dares to fine-tune them. Thus uncontrolled liberty to trade unions and untouched labour legislation do affect the industry’s progress directly and indirectly.

This also prompts us to take a re-look at one of the ILS regarding, ‘Freedom of Association and Collective Bargaining.’ Even though it is a fundamental right of any individual or organisation to get associated with any political or social set-up, unreasonable freedom of association has become an antithesis to industrial development.

Take for example, the union activities in the plantation sector in India. There is an umpteen number of trade unions in some sectors that make the collective bargaining a nightmare. At the end of almost every collective bargaining or negotiation, with so many trade unions in the fray, either there is a stalemate that leads to industrial unrest or a settlement that is illogical and lopsided with the industry suffering the outcome of such a settlement.

In some cases, the real beneficiaries are the trade union leaders and not the working community! Though in these cases, the shady dealings with the trade unions do help certain industrial houses in the short term, in the long run such dealings again lead to industrial unrest. Hence the only way to have a meaningful collective bargaining that is neither anti-labour nor anti-industry is to have an industry-wide trade unionisation rather than political party-based trade unionisation.

It is high time the issues pertaining to labour and trade union in case of the plantation industry were studied carefully by the concerned authorities and reasonable amendments and reforms were implemented for the benefit of the industry, lest it is going to affect about three million labour directly employed by the plantation industry in India.

Surveys and conventions are to be held on this issue to sort out differences and discrepancies. Such measures at one end would help monitor the defaulters in the plantation industry who don’t comply with ILS and at the other help do away with outdated, unreasonable and unnecessary legal provisions and procedures to liberate the industry for higher growth.

How can monitoring and compliance be improved?
By and large, the organised sector complies with the core and substantive labour standards, since in most of the organised industries we find an established traditional or professional system to implement, monitor, evaluate and improvise the labour standards for the sake of accomplishing the statutory obligation or for actualising the philosophy of good corporate citizen.

It is however in the unorganised industry, compliance and monitoring of compliance is lacking. And wherever there is lapse on the part of any organised industry in complying with the standards, it is due to the failure of the monitoring machinery of the government since it is more a rule than an exception in these cases where there is predictably a secret collusion between the employer and the trade union or/and invariably between the employer and the power corridors of government.

Take for example, one of the core labour standards — abolition of child labour. Most of the organised industries have abolished child labour. In principle, abolition of child labour is very ideal and essential and demands our immediate attention. But child labour is still a harsh reality in a few organised industries and almost in all unorganised informal industries in the developing countries. Why?

Stark poverty is the appalling truth behind this. Hence, from a pragmatic point of view, any attempt to abolish child labour should aim at providing an alternative system of education and subsequent vocational rehabilitation to the vast number of children who are at present employed by these industries. It is not good enough if there is only a stringent law to abolish child labour. What is required is an alternative system to alleviate poverty and educate and rehabilitate the children.

When this is the ground reality, General Surveys under Article 19 by the Committee of Experts and the Conference Committee on the Application of Standards relies on the information contained in governments’ reports and reports submitted to the ILO by employers’ and workers’ organisations. These are mainly documented reports.

Whereas the actual picture may be entirely different. Too much reliance on reports from each member state on the position of its law and practice in regard to matters dealt with in conventions, recommendations and ratification to assess the extent to which effect is given or proposed to be given to any of the stipulated provisions therein is no good. This has to change. There has to be direct supervision and intervention.

A mechanism has to be built in each formal industrial sector for direct monitoring. Commissions or committees consisting of the tripartite representatives, selected or appointed by ILO from each industrial sector and respective national governments under the leadership of an ILO representative, could be formed to study the feasibility of such a proposition.

Another way of making monitoring and compliance effective would be to introduce an ILS certification programme. Some form of substantial incentives or internationally recognised merit points could be introduced through this system of ILS certification programme to motivate industries and individual representatives for outstanding service in implementing and monitoring ILS as the case may be. This recognition would make the qualifying industry more competitive.

As I have already highlighted, it is a bitter fact that all the three parties involved namely the governments, employers’ and workers’ representatives from the developing world are eyeing the standards with suspicion and finding the process of compliance with them difficult.

It is this skepticism about and inability to comply with the ILS that should be studied and addressed, if ILO is keen to help implement the standards for the socio-economic growth and development of the nations concerned and for creating a conducive global industrial climate. This calls for an educational scheme to conscientise the legislators, trade union representatives and industry representatives as well.

For effective compliance of ILS, there are some other issues that are to be addressed. First of all, the north-south divide should be bridged through integration of technology and manpower. There should also be a cohesive international framework for bringing together capitalism and socialism for successful and sustainable industrial growth. As regards the industry and employee representatives are concerned, both the ‘ringmaster” image of the employer and the ‘rogue-like’ nature of the employee should be changed to establish a leadership with trust ensuring mutual respect and cooperative approach to issues resulting in professionally enriched corporate culture.

And finally, what is needed is effective teamwork among the ILO, the governments, and the representatives of industry and employees. They should have free and frank discussions sans pride and prejudices on the various issues concerning ILS to arrive at industry-friendly decisions for national and global economic growth. All these call for micro and macro level strategic corrections, which organisations like the National Academies could take up with the help of the parties concerned.

An exemplary model from India
When we talk about ILS, even before the formation of ILO and at a time when the concept of labour reforms was at its nascent stage even in many of the so-called developed nations, it was the Tata group, industrial pioneers in India, which saw labour welfare and corporate social responsibility as its primary duty as a good corporate citizen.

It was the Tatas who introduced labour welfare benefits long before they were enacted by law in India with a view to improving their industrial relations, growth and development. Tata Iron & Steel Company, for example, pioneered several labour welfare measures, which included an eight-hour working day (1912), free medical aid (1915), establishment of a welfare department (1917), leave with pay (1920), workers’ provident fund scheme (1920), maternity benefits (1928), profit sharing bonus (1934), retiring gratuity (1937) and workmen’s accident compensation scheme (1979).

Social responsibility is inherent in the Tata group, whose philosophy is ‘constructive philanthropy’ as propounded by its founder, late Jamsetji Tata. Tata felt that Indians should excel in education, especially in scientific and technological education, for bringing about industrial development in India. Thus came the first technological institution in India, the Indian Institute of Science, Bangalore, which opened in 1911.

Not only in technical education but also in other fields of education, the Tatas blessed India with necessary infrastructure. For example, the Tata Institute of Social Sciences (1936), the Tata Memorial Centre for Cancer Research and Treatment (1941), the Tata Institute of Fundamental Research (1945), which was to become the cradle of India’s atomic energy programme, and the Tata Management Training Centre (1966) are some of the creative educational initiatives by the group for the betterment of the society.

There are a lot of the model programmes started by the Tata group companies to improve the lot of their own employees and the surrounding communities as well. One such is the programme of link workers implemented by Tata Tea, the world’s largest integrated tea company. It is a proactive scheme of volunteer training for community development and social welfare among its employees.

The link-workers are a select group of volunteers from among the 57,000 permanent employees of Tata Tea, who serve as a bridge between the management and the working community in matters related to health, welfare, socio-economic issues and labour issues. It is an innovative programme, which no other industrial house has tried in India. A worthy model to emulate in implementing ILS in the industries concerned.

The excellent example of implementing such initiatives in regard to labour relations by the Tata group of companies in India shows that if an industrial house with an enlightened management is proactive in industrial relations, responsible in its community initiatives and labour-friendly at the bottom level, anything is possible.

The Tata group companies are governed by a set of codes of conduct, which put in force some stringent stipulations that make regulatory compliance mandatory. One of the conditions is that a Tata company shall provide equal opportunities to all its employees without any discrimination whatsoever. Employees of a Tata company are treated with dignity and in accordance with the Tata policy to maintain a work environment free of any harassment.

Employee policies and practices are administered in a manner that ensures that in all matters equal opportunity is provided to those eligible and the decisions are merit-based. There are other conditions with regards to health, safety and environment and corporate citizenship, which act as guiding lights of the Tata group. All industries should have similar codes of conduct to be followed in letter and spirit to make compliance with and monitoring of ILS easy.

In the pursuit of business interests, many industrial houses forget their social responsibility but here is an exception. One of the founding-principles of corporate social responsibility of the House of Tatas is that what comes from the people should go back to the people in manifold proportions. It is very apt to quote late Jamsetji Tata as a concluding remark:

“We do not claim to be more unselfish, more generous or more philanthropic than other people. But we think we started on sound and straightforward business principles, considering the interests of the shareholders our own, and the health and welfare of the employees the sure foundation of our prosperity.”

This paper, titled ‘Perspectives on International Labour Standards,’ was presented by T Damu, vice-president (corporate affairs - South), Indian Hotels Company, at the Forum on Monitoring International Labour Standards: Asia, organised by the US National Academies in Columbo, Sri Lanka, on 5 and 6 March 2003. The views expressed in this paper are that of the author’s, and in no way reflect the views of the organisations that he is associated with.

 search domain-b
Setting a global benchmark