THINKING ALOUD (BusinessLaw) SOCIAL PARTNERSHIP: Employer-Employee & Other Commercial Relationships
The trade union movement represents the organized economic power of the workers... It is in reality the most potent and the most direct social insurance the workers can establish.— Samuel Gompers First president, American Federation of Labor
Chén Róng’s Little English-Chinese Dictionary
zero-sum game = líng hé yóu xì
‘Damned if they do and Damned if they don’t ’= jìn tuì liǎng nán
Wild cat strike = wèi jīng gōng huì zhèng shì tóng yì de bà gōng
Run-of-the-mill = pǔ tōng de
weak links = bó ruò huán jié
vested with self-interests = jí dé lì yì
The writer makes no warranty of any kind with respect to the subject matter included herein or the completeness or accuracy of this article which is merely an expression of his own opinion. The writer is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. Without limiting the above the writer shall have no responsibility for any act or omission on his part. Readers should take specific advice from qualified professionals when dealing with specific situations.
‘Green’ Social Partners
Writer: Chén Róng
Financial Statements of companies do not provide for environmental profit and loss statements. The reason is: Individual companies do not bear the entire costs of environmental damage. Since costs are to be apportioned to all partners in the entire supply chain of suppliers, at least in theory, the price each party has to pay is minimal and probably not worth mentioning.
That is not the end of the story.
Often multinational companies develop global value chains, investing abroad by establishing affiliates and associates that provided critical support to remaining activities at home. Such outsourcing of their value chain enables multinational firms to stay focused on their core competencies. Therefore, the costs of environmental damage are on the shoulders of an increasing number of ‘social partners’; and that expense item does not appear even as a footnote on Consolidated Financial Statements of individual companies.
In other words, there is a huge network of social partners with individual corporate groups each creating an enormous environment damage expense account – a social cost that corporations do not have to account for in their financial statements. No wonder, multinational companies are increasingly rewarding their shareholders and directors with multi-million dollar pay-outs – all at the expense of the man in the street.
In every developing and emerging economy, there is abundant evidence of environmental and social costs borne by the commoner tax-payers. Rivers and waterways are polluted by dumping of chemical and untreated waste water. Global warming caused increasing severity of storms in many parts of the world. In Asia - Hong Kong, Taiwan, China and Philippines - experienced gigantic typhoons unseen before, but they had it all in the month of September 2013. Typhoon Usagi (Japanese for rabbit) continues to pose severe threats to environmental damage to regions in the Far East.
If we were to count the man in the street as a social partner, this unfortunate guy has to bear the brunt of environment damage costs through his proxy – the government. They say: there is no absolute fairness in this world. But we are now talking about the prevalence of absolute unfairness! Is anyone home?
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Workers on Strike; Bosses on Lockout of sorts
Writer: Chén Róng
A modern day industrial strike may seem like a zero-sum game – one party wins.
A modern economy needs new business models. New ways of doing business are now urgently sought after because of the increasingly competitive landscape, and the worker as the social partner may lose out in this paradigm shift. Corporate re-structuring has increased its pace of change and the challenge now requires companies, workers and trade unions to find ways to work together to manage this seismic shift positively. Establishing and sustaining such mutually beneficial social partnership is never going to be easy; it is also never a lasting panacea in the majority of cases.
Hong Kong Dock Strike
Last month, dock workers in Hong Kong went on strike because their pay has not increased for the past ten years. Decades ago, dock workers were employed by port authorities that run and manage the various berths and terminals. This scenario is fast changing. Major ports are now operated privately by companies as governments prefer to farm out public services and, hence, the multiple problems that go with them, seemingly to keep their focus on governing their countries.
Port Workers Union’s complaint:
"The port company is planning to make our members redundant and contract out their jobs. This casualization exercise is a direct attack on conditions of work and secure, permanent jobs."
Mud keeps on flying.
Private companies take it one step further by sub-contracting employment of workers to specialist contractors who, in turn, employ dock workers under separate companies with each of these legal entities catering for particular contracts with port operators. In other words, as each particular job is contractually completed, the contractor may choose to wind up the entity – theoretically speaking. This is where the dock worker’s problem starts if he and his co-workers decide to strike it out with the contractor-boss. They did just that, and the strike is now a growing concern in Hong Kong.
The Hong Kong dock workers are aware that their strike actions are weak links (in the Chain) with the port operator who has no contractual obligations to them. But these workers use political activists to gain sympathy from a wide spectrum of society – a show of solidarity that threatens the gainful existence of related businesses owned by the same port operator. On the surface, things seem to be moving in the right direction for those dock workers. In reality, their action may just be postponing their own demise. Dock workers are in a fix: ‘Damned if they do and Damned if they don’t ’. Nevertheless, they are still a fortunate lot because they are dealing with a philanthropist; someone who has done much to improve the lives of people in his country. The dock workers are unlikely to be unfairly treated but for the business model of his company that may have put them at a disadvantage. Workers say the port operating company has given extra money to its five major contractors in the past few years, but that this has not filtered through to frontline dock workers.
The Business Model of a seaport network
Let’s take on a different perspective. What if the port operating company does not belong to Mr. Li (the philanthropist) and his associates, but by a foreign corporation strictly aligned with the interests of shareholders?
Let’s suppose, for the sake of discussion, that Hutchinson Port Holdings Trust (HPH Trust), a public-listed business trust, is a disinterested foreign entity in New Jersey, a tax haven. In fact, HPH Trust’s major shareholder (Hutchinson Whampoa) is a major port operator with some 30,000 employees at over 50 ports in 26 countries. HPH Trust itself owns the world’s busiest ports of Hong Kong (5 out of 9 terminals) and Shenzhen (Yantian). Moving forward, there is plenty of room to grow; the trust may expand by owning and/or operating terminals at major transshipment ports in the region such as Shanghai, Singapore, Malaysia (Tanjong Pelepas & Port Klang) and Indonesia (New Priok).
A multi-pronged approach
Should workers go on strike, what options are available to other players?
I. Employers may decide on employing foreign workers as the alternative. Port operators may employ workers from China to work in Hong Kong. This may be against the law. To go round the law, workers may be disguised as trainees.
II. Employers might play the hard ball because the strike would not last without public donation
III. Ship-owners may have their vessels load and discharge cargoes at associate regional transshipment ports. The economics of port operations spread asset and revenue risks over diverse ports within a country and beyond to capture economies of scale; mainland and overseas ports may offer lower rates than Hong Kong.
IV. Ship-owners may have their vessels load and discharge cargoes at associate ports in the hinterland. The strike in Hong Kong will not put a dent on profitability of HPH Trust. Profits will come from contributions of other ports. Some Hong Kong low value cargo may be routed through Hutchinson’s regional ports in Guangdong – the strike may have given the port operator an excuse to move up the value chain as a way to cut cost.
V. Governments want to free valuable land in a crowded city and use it for more lucrative waterfront housing developments for wealthy people. The Hong Kong dock strike highlights the need to move the plan up the agenda. Asian countries (including Singapore and Indonesia) rush to develop bigger ports – deeper harbours away from their city centers; increasing land prices have contributed to speed up this re-positioning process.
VI. The Business Trust model is creating a comfortable distance to cushion against industrial strikes and their attending nuisances through the use of subsidiaries and contractors. The prevalence of part-time and contract works are added problems to workers’ difficulties. Their employers, just like housing developers, often hide behind a web of contractors – each with stand-alone companies to employ 100-200 workers under well-crafted written agreements in local languages. The employers themselves may use subsidiaries in employing a core number of in-house trained supporting dock workers. Such stand-alone companies are separate legal entities which may be voluntarily wounded up (and lay off workers) if the objectives of their incorporation are fulfilled, regardless if they are off-springs of wealthy corporate families. Apart from tax planning, corporations need to grow revenue without apparently taking on a huge amount of asset risks. The corporate web of subsidiaries, cross-holdings, contractors and sub-contractors is an efficient business model for the survival of the fittest in a modern economy.
Collective Bargaining (or negotiation)
Is it a Bane or a Boon?
Assuming that unions succeed in making collective bargaining made law, which makes illegal those non-members who cross the picket line to work, there are still doubts if labour chiefs can succeed in doing their job.
It may be true that for small city-states, a tripartite harmony between workers, employers and the Government may readily be achieved and disruptive ‘wild-cat’ strikes are unthinkable events. Few strikes take place with the sanctions of their labour chiefs unless overly aggressive managements are found using tactics to undermine workers’ welfare or forcing them to resign because of a need to downsize with a slowing economy.
In a big country like China, things can be different. China has a huge labour-class population spreading over 30 or more provinces. Collective agreements may be a less effective tool.
1. Countries with a big population, workers who enter into collective bargaining in large groups know they are shielded from employer retaliation or being let go from the job. The big workforce can put an entire operation at risk and the boss can no longer turn a deaf ear to what workers are saying.
What happens if their number is broken down into small groupings?
With each group placed under a separate company, the employer has only to deal with a handful of individuals; he can afford to lose them. Even though bosses might need to back down a little, this strategic retreat gives them the benefit of being able to deal with just a small group of people at a time
Similarly, port workers who got a raise because of their run-of-the-mill strike action, their gains may be just temporary. The Hong Kong terminals are properties of a company (HK International Terminals or HIT in short)) which in turn comes under listed HPH Trust. HIT and their non-affiliated contractors employ these dock workers in small groups. Working with just a few representatives can make the issues at hand easily manageable. Moreover, such union representatives in some countries have known to be isolated and dismissed by companies for reasons unrelated to their standoff with management. With the world’s businesses now on a highly competitive stage; players standing on it are fighting their own special battle to gain solid economic advantage over their rival.
2. Governments are found fighting their own battles. Putting the spotlight back on our China story: Yangtze River itself holds more than 200 ports and two dozens of which are considered major ports. In China’s Pearl River and Delta region, the Guangzhou port is the leading coastal port in South China. It is true that Hong Kong is a transhipment port because of it great connectivity to Europe and USA; but Shenzhen and Shanghai are not far behind in their quest for more transhipment goods. Competition comes from outside the country as well. If the price is right, cargoes from China may be routed to othe Asia ports, namely: Kaohsiung (Taiwan), Singapore, Bussan (South Korean),Tanjong Pelepas & Port Klang (Malaysia) or New Priok (Indonesia). These places are gaining traction as major transshipment ports for the region.
3. Governments become cozy with company bosses because of corporate donations; policies will simply tip the balance for more pro-business political structures. The government needs to gain support from the commercial sector, so it is reluctant to push forward laws against the wishes of business people. The absence of laws protecting unions could be putting potential members off. The central government is now eager not to make foreign investors wearier with their stay after the global downturn hit China's export industry. Competition comes not only from the outside but within the boundaries of every country; it comes not only from the outside but within the boundaries of every country, as provinces – vested with self-interests – vied for foreign businesses to be stationed within bounds of their own authority.
4. Big countries like China generally do not have labour laws of international standards. In most cases, workers cannot freely choose their collective bargaining representatives and lack laws requiring employers to collectively bargain (or negotiations) with employees. Most workers factories, mines, mills, warehouses, docks and transport hubs still have little or no say in selecting their union representatives, and no means, short of stopping work, to bring recalcitrant employers into direct negotiations over industrial grievances. Sporadic strikes appear to take on a ‘wild-cat’ nature. However, quite recently All-China Federation of Trade Unions reported that nearly three million corporate units have introduced collective wage bargaining system that will benefit over a hundred million Chinese workers. But are these genuine collective bargaining or are they merely formalities to keep workers happy that something is finally done to ameliorate their plight.
What does the future hold for other industrial strikes?
Last month, workers on strike locked up the main gates of a Japanese-Singapore joint venture on Batam Island – a free trade zone – in Indonesia. Some 200 workers have been on strike for over a week outside the plant, but management refused to budge and threatened to fire all of them. Workers will usually get a reprieve; but any gain will not last. Investors have long criticised Indonesia’s labour law as tilting too much in favour of workers – high minimum wages and huge severance pay. Companies may give in to demands to avoid strikes; the underlying strategy may be to wind-down and re-position to business-friendly economies of Vietnam and Myanmar.
Over to the world’s biggest economy – The United States of America: American unions are probably leading the change that may undermine demands for higher wages in other parts of the business world. Fifty years ago, it was difficult to settle differences with unions. Things have changed. Today, they willingly accept a two-tier wage scale. Almost three-quarters of jobs now fall within the lower of the two tiers; wages on this lower tier has fallen some 40% from what the starting wages used to be. American workers are too happy to get back jobs that once shifted half a world away. Their acceptance of lower wages, which coupled with other changes (e.g. an abundant supply of natural gas in USA) have lowered costs of running factories at home.
In the European Union, dock workers and stevedores there may be the last bastion of resistance to the opening up of an economy to competition and investment. Workers feared that trade liberalisation – by allowing ports to be privatised or legislation permitting ships’ crew to handle their own cargoes - would undermine their right to load and unload ships, hence, leading to lost jobs and lower wages. The change may well put an end to a monopoly practice - the loading and unloading of goods done by dock handlers. With EU economies now in tatters, full liberation of European ports seems inevitable if nations want to get back on sound financial ground and workers paid.
May Day and the plight of workers will be a rally story told and re-told for a long time to come.
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PROTECTING JOBS in an age of globalization
A Writer’s Perspective
Writer: Chén Róng
Governments have known to set high tariffs or enacted laws to protect an industry, invariably to ensure that locals get the needed jobs for their livelihood. One such piece of legislation is the Cabotage Law. Cabotage refers to the transportation of goods or passengers between two domestic points in a country by a vessel or an aircraft registered in another country. To put this discussion within the realm of shipping, a country's cabotage law disallows foreign vessels to ply inter-island routes (such as The Philippines). This means that goods entering the country will have to be transferred to a local vessel for domestic transportation and distribution.
Does cabotage law really protect jobs?
Empirical evidence shows that higher freight costs make inter-island shipping one major reason why many products shipped from one local port to another are exorbitantly expensive compared to shipping direct from the country of origin. Similarly, exports originating from a country are not enjoying the competitive freight if transported by local vessels instead of direct shipments. What could be the reasons for the difference in costs? Foreign ships do have a number of advantages in the form of lower taxes on bunker fuel, lower or no income tax from some tax havens and lower manpower cost when employing seamen from emerging countries.
Logistical inadequacy in many local ports is compounding the problem -- the lack of warehouses and silos delay the loading and unloading of bulk cargo. Likewise, the absence of modern equipment such as cranes, conveyor belts, bulldozers are challenges not faced by modern sea-going ships with on-deck equipment for loading and unloading of cargoes.
From the writer's perspective, the challenge facing an industry does not lie with the Cabotag Law itself. It is not enough implementing the law in isolation. In other words, a piece of legislation by itself will not likely bring forth the desired results. It needs the concerted efforts of a government in other areas - a consortium of actions to ‘protect’ an industry -- will produce the fruit of labour.
The writer visited the city of Jingdezhen in China two years. It is not a maritime port. Its business is one of manufacturing. But the city's success story as the country's ceramic capital draws many parallels that can be learned and replicated by other countries wanting to develop their economies to ‘protect’ an industry and, hence, local jobs. It is not an easy task for modern Jingdezhen to keep pace with its glorious past. Industrialization is rapidly outperforming traditional ceramic craftsmen. Their skill in making china by hand is one that country is trying hard to help stay relevant.
Jingdezhen is a city which lies in the north-eastern part of Jiangxi Province. The city got its name during the reign of emperor, Jing De of the Song dynasty (1004-1007). All handmade ceramic pieces produced by the factories in the city carry the "Made in Jingdezhen” red logo to differentiate them from others made elsewhere in China.
Complementary industry: Tourism
After reforming its ceramic industry and opening to the world for more than twenty years, Jingdezhen city's infrastructure kept on improving to cater for both tourism and related commercial activities. There is ample supply of clean water, power and gas to both commercial building and modern hotels in the city. Optical fiber was quickly adopted as the medium for long distance telecommunication and computer networking. Fibers are used widely in illumination applications in industries and, in some buildings, optical fibers route sunlight from roofs to other parts of buildings. Such progress demonstrates the extent of modernity in the city.
The tourism resource is rich with deep cultural connotation -- beautiful landscapes featured by a network of rivers and chains of mountains, one rising higher than the next. Buildings of Ming and Qing dynasty-era conserved to preserve the Chinese culture.They blend well with surrounding modern buildings, ceramic museums and retail premises in the city. Jingdezhen is a focal point which makes travel to major Chinese cities a breeze. There are daily air services from Jingdezhen to Beijing and Shanghai. The Jingdezhen-Jiujiang expressway shortens the distances with other centers of commerce, such as Wuhan and Nanchang.
Tourists can spend their afternoons in one of the many national parks sipping ‘fu hong’ tea - a beverage with a long-standing international reputation. It won a coveted Golden Prize in the Panamanian World Fair in 1915, an indication of its long history and worldwide fame.
Complementary industry: Manufacturing
Jingdezhen is an important modern industrial city in Jiangxi Province. The ceramic industry that started its production of daily-use porcelain from art ceramic has spurned major development in other industries - construction ceramic, industrial ceramic and electronic ceramic. Ceramic-engineering is the science and technology of creating objects from inorganic, non-metallic materials. Without ceramic, it would not have existed. A wide range of electrical applications - insulating, semi-conducting, superconducting, and magnetic - are critical to products such as cell phones, computers, television, and other consumer electronic products. For these reasons, the government developed Jingdezhen into an important ceramic exporting base and research center to support booming infant industries making automobile, machinery, electron, medicine, building materials and foods. The batches of developing enterprises include Changhe Aircraft Industry, Hay Electric Appliances, Coking Gasworks,Jiangxi Chemical Fiber and Chemical Engineering, and Dongfang Pharmaceutical.
‘Protecting’ jobs and an industry
The Chinese government has style. It does not have to erect tariffs to keep foreigners out of local jobs. It does not enact laws to shield its people from competition. All it does is implementing a comprehensive piece of economic machinery and ensuring that all its parts keep chucking along seamlessly. There is one more important piece in the economic machinery that the Chinese government has employed in preserving Jingdezhen’s historic ceramic legacy and the booming industries that it helps to bloom. It is Jingdezhen Ceramic Institute, the country's unique and comprehensive ceramic university, It is an important research and education communication platform with other ceramic art and ceramic engineering centers worldwide. The Chinese institution has already established the co-operation with ESCO Ceramic Arts Institute, America Ceramic Art Education Committee, Asia Ceramics Institute, and many more important universities in the world. In October this year, the exhibition: "Jingdezhen-Delt" in the city's Imperial Porcelain Museum, showcased a Sino-Dutch co-operation. Both cities - Jingdezhen and Delft - have a rich history in manufacturing of ceramics and the joint effort will only help to strength their position as ceramic centers of the world.
There is no closely-guarded secret behind this piece of economic machinery. It is open to all to see and copy. But it requires a deft approach that is hard to emulate.
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Union backs down as Australian operator threatens to close terminals
Summary of the news reports by Damian Brett
THE DATE: May 2011
THE ISSUE: Workers went on strike over pay and working conditions at Australia’s main container terminals of Sydney, Brisbane and Fremantle.
The clash started after Maritime Union of Australia (MUA) rejected a 4% pay increase for workers, with an additional 1% if “internationally recognised safety, productivity and efficiency targets” were met. MUA had asked for an annual 6% pay rises.
- (MUA) to immediately remove all threats of further industrial action - strikes which hurt not only Patrick Container Terminals, but also the hundreds of small businesses, farmers, truckers and retailers who are already voicing their concerns.
- The union should guarantee all Australians that it will take no further strikes, bans or limitations of any kind in its pursuit of an unsustainable wage increase and other demands from the company.”
- Otherwise, Patrick would close all its terminals and shut out all workers.
THE DIPLOMATIC ENDGAME:
Friday, the 27 of May 2011:
MUA recommended to its members that they end their partial strike.
MUA said it had made the recommendation to save Patrick from itself, after the operator decided it would close all its terminals on Wednesday.
MUA said: “The union has determined that work should resume in an effort to undo the damage from Patrick’s decisions.”
MUA said “We will now consult with our members and consult with the company and seek suitable resolution to the current dispute and the remaining areas of disagreement.”
The Gig Economy
Newspapers and magazines talk about the gig economy. You read about self-employed people using part of their time to work as Uber drivers. They are freelance workers on so-called gig jobs which give them independence and the chance to use their free time earning extra cash. More companies are now offering workers such gigs on contract-based terms instead of permanent jobs. It is one way to cut staff costs. It also gives companies flexibility in employing and deploying staff as against employees on payroll.
Workers beware ! The gig economy offers little job security. It is not good for personal planning like buying a home on a 20 or 25-year mortgage when regular income is unpredictable.
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Industrial and Port Workers beware!
Writer: Chén Róng
Activists and strikers should take a leaf out of Herman Melville's books, the author of the epic sea-story – Moby Dick. The author compared the huge wharves of the port of Liverpool to the Great Wall of China. Once a thriving port with warehouses line the roads near docks, Liverpool has a lot to thank port strikers for its revitalisation -- neglected warehouses have now being turned into riverside apartments for the rich and wealthy. It is a hint to all port strikers that all other British ports may also adapt if trade unions continue to ignore the effects of globalisation and how it has weakened the bargaining power of unions and their members. Companies can now credibly threaten to ship jobs to neighbouring countries, if industrial and port strikes disrupt their supply chains.
Liverpool was one of the six largest ports in Britain. Most of its traffic was in bulk goods such as oil, grain and coal. It could have continued to grow from strength to strength, but its lingering reputation for strikes has put shipping lines off, particularly container-ships would not want to call at Liverpool. The longer a port-workers' strike, the deeper the impact on just-in-time supply chain - from the manufacturers down to retailers. Someone in the supply chains will sustain losses because of late-deliveries. There are also exports that are not moving because a port is shut down. When the strike ends, it takes time to clear stacks of cargoes in warehouses. The strike's greatest impact could eventually be felt when shippers decide that enough is enough. They ship their goods through other ports for all future shipments. No shipper likes to send his goods to ports known for trouble. In 1995, the port strike in Liverpool went on for three years, It is déjà vu no more.
Moreover, striking workers created the disincentives to modify and deepen the port to accommodate the biggest ships. Peel Ports, the owner of Liverpool's port, wants to change this. A new terminal with a quay over 800-metre long is due to open in 2015. The extension will mean that ships do not have to pass through restrictive locks. Whether Peel Ports can succeed will depend on port workers. Obviously, the owners are taking a gamble. They reckon the days when unions had big strike funds that could ride out long disputes are over. And that decline seems to have accelerated with the recessions which reduce the bargaining power of workers.
Unions can no longer extract from employers a guarantee of lifetime employment for their workers. Even their jurisdiction over types of work - such as control of the planning of how goods in docks are stored and then sent for delivery by lorries and railway -- has eluded them. The key change came with the introduction of information technology such as bar-codes. Until now, data on cargo have been laboriously transcribed by union-clerks. Now, major ports like Singapore and Hong Kong are automated and cargo data transferred electronically between computers in data-processing centres. These places may be located outside port premises. Hundreds of maritime-clerk jobs simply disappeared.
Unions must wake up to reality; they no longer can have a rose-tinted view of employment. They should not look at employment as if it is the 1950s, where over 90% of people were on full-time permanent contracts. Many people in the workforce today are either working part-time or self-employed. Some even take on a few odd jobs daily to make ends meet. These workers may not see themselves as having any kind of relationship with trade unions. They argue against all those types of employment practices.
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