Unions will continue to work nationally and internationally to deepen an alignment of social and corporate values that underpin a civilised world says ACTU President Sharan Burrow.
You are probably well and truly over ACTU wisdom by now. As if your job is not hard enough, here we are, setting higher ambitions. I’m afraid that is the case. I am encouraged by the emergence of the debate concerning corporate governance, inclusive of corporate social responsibility, or as it’s often called, the triple bottom line. The harder edge of ethical investment is also encouraging, but my own view, despite the high profile of the United States and indeed Australian companies, is that the debate is still fragile and in order to shape a decent future, this is one all of us have to drive.
Certainly in my role as chair of the workers’ groups for the Multinational Enterprises subcommittee at the International Labour Organisation and as a member of the Global Reporting Initiative Stakeholder Council this is one that increasingly takes up serious amounts of time.
Civilising Global Capital
Unions have always stood in the middle of twin ambitions: to participate in the development of prosperous enterprises guaranteeing secure jobs and to ensure just wages and fair and safe conditions.
Bargaining, regulation and standards
A fair industrial relations system is about respect for the rights of working people. This requires adherence to standards which are based on the values we all believe should underpin a civilised world.
The rule of law
Corporations, whether in Australia or elsewhere in the world, just like citizens, must be subject to a fair set of rules.
The UN and the ILO set human rights and labour standards and collaborated to bring these together as a guide to business in the form of the Global Compact. The Global Compact has nine principles in the areas of human rights, labour and the environment, universal consensus being derived from:
and
The nine principles are:
Human Rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and
Principle 2: make sure that they are not complicit in human rights abuses.
Labour Standards
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: eliminate discrimination in respect of employment and occupation.
Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility;
Principle 9: encourage the development and diffusion of environmentally friendly technologies
As a set of values they provide a good framework for the standards all corporations should adhere to. Sadly too many don’t; in fact, they go to great lengths to exploit people in the name of profit. All too often our investments find their way into some related company structure of corporations who are guilty of the most gross violations and it must stop. A civilised world cannot tolerate exploitation of people in the name of profit irrespective of the degree.
Forced labour inclusive of child labour, indentured labour and trafficking is rife in our world.
Saipan: Corporate cowboys can bring down some of the biggest brands
Recognise these names?:
And with law suits against them and not yet settled:
That’s right. These are serious players in the retail industry – indeed it would be a real test to ask if there were any superannuation funds, the retirement savings of our members, tied up in these or related corporations – for they are all guilty of deliberate and systematic violations of both human rights and international labour standards.
Saipan
Out in the Pacific Ocean, on a chain of fourteen islands known as the US Commonwealth of the Northern Mariana Islands, a billion-dollar garment industry has been booming since the 1980s. Thousands of garment workers live and toil in deplorable conditions, working up to 12 hours a day, seven days a week, and earning $3.05 an hour or less, often without overtime pay. Yet, the clothes these workers sew carry labels that say ‘made in the USA’. After World War II, the US won control from Japan of the Northern Mariana Islands (the Marianas). Because of the Marianas’ limited economic base, the US delegated control of minimum wage and immigration laws to the Marianas’ government. The US also provided for duty-free imports of products into the US and no quota restrictions. Last year alone, the federal government estimated that contractors and US retailers avoided more that $200 million in duties for 1 billion dollars worth of garments shipped from Saipan, the main island of the Marianas.
With no US import tariffs, no US quota restriction, a minimum wage of $3.05, and lax immigration laws, the Marianas have attracted a host of foreign investors from China, Korea and other nations who produce clothes for some of the biggest brand-name labels, at the cost of exploiting workers.
Indentured Labour:
Over 90% of garment industry jobs in the Marianas are held by foreign ‘guest workers’, mostly young women from China, the Philippines, Vietnam, Bangladesh and Thailand. With promises of high pay and quality work in the US, workers agree to repay recruitment fees from $2,000 to $7,000, trapping them in a state of indentured servitude. They often mortgage their families’ homes and go into debt to secure these jobs. Once they arrive in Saipan they make $3.05 an hour and are often not paid for overtime. Food and housing costs are deducted from their pay cheques. The Chinese workers often must sign ‘shadow contracts’, waiving basic human rights, including the freedom to join unions, attend religious services, quit work or marry. Chinese workers have been forced to have abortions if they get pregnant.
Working conditions:
substandard;
curfews;
harm and summary deportation;
in Saipan have received more than 1,000 citations for violating US Occupational
Safety and Health Administration standards, many of which were characterised as
capable of causing death or serious injury.
Settlement Agreements:
Three separate lawsuits were brought by garment workers, Sweatshop Watch, Global Exchange, Asian Law Caucus and the US trade union UNITE, in an attempt to clean up the rampant sweatshop abuses in Saipan. Retailers began to settle the lawsuits in the summer of 1999. The plaintiffs have now reached settlements totalling approximately $20 million with 26 US mainland retailers and 23 Saipan garment manufacturers.
How do we prevent this? Indeed, how do we assure ourselves that corporate behaviour is worthy of investment of workers’ capital?
The development of standards, monitoring and reporting frameworks is a new industry in itself and I will touch on just a few examples. These examples are those that unions nationally and globally have participated in or support. It is not a definitive list.
At the global level:
ILO Multinational Enterprises Declaration
The ILO sees that the key to progress is a shared commitment to universal values that promote opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity. It is the universal basic reference point for social responsibility in the world of work..
The MNE declaration contains the only set of voluntary guidelines on social policy for multi-national enterprises globally agreed by the three groups – business, labour and government.
Referencing standards in core labour standards, equality of employment, employment security, training and occupational health and safety, these guidelines provide a basis for corporate legitimacy and effective risk assessment and control over brand-name integrity and reputation.
Global unions are, through the sectoral structures of the Global Unions Federation, increasingly negotiating global framework agreements with MNEs that put core labour standards and other issues referenced in the MNE declaration at the heart of these agreements.
Global unions are currently discussing how best to involve the ILO in the monitoring and possible dispute resolution associated with global framework agreements.
UN Global Compact
The principles of the global compact are outlined above. Established as a voluntary code of conduct by the UN, the number of companies participating has now grown to 1000 and more serious monitoring procedures are now being developed. Australian companies include:
Other developments include the OECD Guidelines on Multinational Enterprises and the Global Reporting Initiative
Union Activity
Two Examples
The US AFL-CIO and the UK Trades Union Congress both conduct surveys of fund managers. The AFL-CIO has for a number of years conducted the “Key Votes Survey”. The survey rates the voting practices of investment managers by surveying how they vote on proposals representing a working person’s view of value. The managers are ranked by the percentage of votes cast in accordance with the guidelines.
The TUC has more recently put its toe in the water and surveyed fund managers as to how they voted on shareholder resolutions. Barclay’s Global Investors, Invesco and Scottish Widows are among firms criticised in the TUC’s report. Barclays Global has responded assuring the TUC that its policy was to vote on every resolution and disclose its voting records to trustees on a quarterly basis.
One way or another, the issue of transparency is now a critical debate. Increasingly all shareholders and indeed stakeholders will expect full disclosure. This in turn requires investment managers to have the tools or the corporate research/recourse to make judgement. I suspect you know this already but your job just got a whole lot harder.
Australia is in a different space but we are catching up. There are two home grown initiatives worth noting:
REPUTEX – RepuTex delivers a publicly available rating system for corporate social responsibility. The model has been constructed as an equivalent to credit rating models which have been successfully developed in the global arena by Standard and Poors, Moody’s and Fitch.
RepuTex appraises an organisation’s impact in four key areas: Corporate Governance, Environmental Impact, Social Impact and Workplace Practices.
An increasingly important benefit is that RepuTex provides highly credible social responsibility analysis for investors. This is a high growth sector in most global financial markets, representing about 15% of funds under management in the USA.
RepuTex is unique in that it is based on criteria collected from business and community experts. It encourages community stakeholder involvement and it is released to the Australian public. RepuTex therefore not only delivers important community based information to SRI fund managers, it also provides an important point of reference for employees and consumers…and we know how important employees and consumers are to financial performance.
And the community does get it right: in 2000 the community ranked HIH and FAI at the bottom end of CSR performers in the former Good Reputation Index, prepared by Reputation Measurement, the same company behind RepuTex. Some company CEOs are orchestrating a campaign to oppose this index based on the fact that they don’t like the outcome – the challenge for them is to lift their game.
Fund managers should add RepuTex to their “social responsibility” profile of companies.
RepuTex ratings summaries will be published in the Australian media in October. At that time a new subscription service for fund managers will be launched. Subscribers will be able have access to detailed findings and reports on every Top 100 company.
In 2004 the RepuTex process is being further expanded beyond the Top 100 companies. A new service to accommodate the growing demand for requested ratings will also be released. The RepuTex Rating Committee is chaired by John Hewson.
The Australian Council of Super Investors
ACSI is a not-for-profit organisation formed in 2001 by superannuation trustees. The superannuation funds that belong to ACSI manage over $50 billion in assets.
ACSI undertakes research and education services for superannuation fund trustees on corporate governance issues that arise in companies in which superannuation funds invest. Up until recently, most Australian trustees have considered that an active interest or involvement in corporate governance issues was either too complex or costly for superannuation funds to pursue.
As a consequence of this, it has been left to fund managers to monitor the corporate governance practices of companies. Trustees generally have generally not monitored fund manager activities in this area. This may perhaps partly explain the comparatively lower levels of activism in Australia compared to Europe, the UK and of course the US.
Recent corporate collapses and failures have, however, required trustees to reassess their previously passive approach to these issues. A number of trustees, with the assistance of ACSI, are developing a framework in which to address corporate governance issues. Increasingly, fund managers and custodians will be required to report comprehensively their activities on corporate governance issues, particularly during the reporting and annual general meeting season. ACSI is a good development in the Australian context.
To date there has not been a strong culture of voting shares in Australia and little or no transparency, but this is changing. The ALP has made it clear that they will look for ways of ensuring an increase in this practice.
The Financial Services Reform Act
Due to the Financial Services Reform Act, product disclosure statements for products with an investment component must include disclosure of ‘the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention or realisation of the investment’ [S1013D(1)(l) of the Corporations Act 2001]. Similar requirements exist in some overseas jurisdictions.
This requirement is new, and will provide a challenge to investment managers and others required to disclose these considerations. Clear guidelines will assist in giving certainty to both product providers and consumers as to how SRI considerations operate in particular products.
The reforms also gave ASIC the power to ‘develop guidelines that must be complied with where a PDS makes any claim that labour standards or environmental, social or ethical consideration are taken into account in the selection, retention or realisation of the investment’ [S1013DA of the Act].
The ACTU agrees that the Global Reporting Initiative, together with the work being done to provide practical assistance for companies engaged in triple bottom line reporting is relevant and useful, and should be utilised by ASIC together with other material.
Clearly we would like all corporations to report on labour standards and other socially responsible practices. In this context we would encourage you to ask questions of the companies you choose to invest in and consider their ethics. At the very least, it would be heartening to know that companies who make money on the basis of investment of workers’ retirement savings are respectful of the rights of their own employees.
Can I reiterate that we do not want to do your job, rather we need to trust that you will do the best for financial gains in a socially responsible context. We are delighted to have opened a formal dialogue today and we will look for ways to extend a dialogue. If at any time we are able to be of assistance, please feel free to contact us.
On the policy and legislative front, unions will continue to work nationally and internationally to deepen legislative and regulatory guarantees that set the floor for 21st century values or, if you like, an alignment of social and corporate values that confidently underpin a civilised world where business and industry can prosper, such that we can grow secure jobs in the context of decent work.
Speech by Sharan Burrow, ACTU President to ACTU Investment Managers Seminar, 24 July 2003
