Reflections: Industrial Unrest in 2014 ER Part 2

Reflecting on past events is essential. It tells us trends. And very different points of view. It also points to issues before us. And hopefully it helps us learn and find a better way ahead. “Follow effective action with quiet reflection. From the quiet reflection will come even more effective action” said Peter Drucker.
So let us review the ER in 2014. This is the second part in the series of blog-posts. I have divided this note according to subject, and it is not in date-order.
I have not drawn conclusions. Often it is unnecessary to draw conclusions – particularly when they are obvious. And when facts are put forth to well informed readers like you! 
[This review is being published in parts. The third part will be published in two days.] We begin with the story of ING Vysya.
ING Vysya – Kotak Mahindra Bank Merger Deal
On January 7, the deal will be presented for shareholder approval and on the same day the unions which represent 35% of the employees intend to go on strike. Why? The fear is obvious. They want agreement to be signed between the two corporates and the union protecting the employees’ interests.
Kotak Mahindra Bank has extensively outsourced work so the ING Vysya employees are afraid that their future may not be bright. But the union has clarified that they are not opposing the merger, it is just that they want to ensure that their interests are protected.
The news report says, “”All protection related to employees have already been captured in the scheme of amalgamation which upon approval by RBI, Kotak Mahindra Bank shall fully standby and are obligated to comply with including sections relation to employees job security, wages, pension, gratuity etc.”
In a letter, KMB’s Joint Managing Director Dipak Gupta has written to ING Vysya Bank’s Chief Executive designate Uday Sareen saying that KMB will be honouring all IBA settlements and bi-partite agreements.
But the issue is job security.
For ER specialist the issue of ‘Successor-in-interest’ is of great relevance here. This doctrine is ordinarily applied to determine obligations when one corporate entity is replaced by another. In my opinion the ‘doctrine of continuing employer’ will apply here. I invite the knowledgeable readers to opine on this issue.
Will Kotak Mahindra respect the agreements with unions? They have already said ‘Yes’ to it. Quite obviously that is not the issue. The real issue is job security. And every M&A sees ‘rationalisation.’ That is the hard reality. Let us see how events unfold. Those who are not workmen under the ID Act have no protection, and are vulnerable. Whether [and how many among them] they have ‘marketable skills’ is also often issue. The attitude of ‘victor and vanquished’ takes the toll in M&A case.
Whatever the outcome, we should expect more reports of friction in this M&A. So, as they say, “stay tuned.”
Coal India’s Burning Problem
Coal India Unions have a problem on hand. The Government has decided to sell shares to the extent of 10%. That would fetch the Government about 23000 Cr Rupees. Overall plan is to sell stakes in some other PSUs too raising about 44000 Cr Rupees.
The unions threatened strike. They do not want the Government to sell stakes. Why? They fear loss of jobs. That is what happens with any divestment or restructuring.
Unions had earlier in 2010 resisted IPO too, they campaigned against employees buying and fell flat on their face. Employees lost a good amount had they invested in shares of their company.
After the strike notice, BMS union backed out. So the Coal India unions called off the strike. That was in the last week of November. Exactly one month later they have decided to go on strike again – from January 6 for a period of five days.
The Government had earlier promulgated an ordinance in October which apart from facilitating auctioning of the cancelled coal blocks, allowed private players to mine coal and sell it in the open market. This has fanned the fire again.
So yet again a strike notice is served. What’s next? Conciliation will begin. Let us hope that the parties will reach some agreement. I guess this kind of friction is inevitable. Let us see how this Government manages it.
One of the issues raised in Coal India and ING Vysya-Kotak Mahindra cases is common. How to carry the employees who stand to lose and will be adversely affected by the proposed moves. On one hand such changes are inevitable, but on the other hand there are livelihood of employees in question. No easy answers here!
Mercy Killing by Pfizer
Sometimes when an establishment ‘dies’, people want explanation – they want to know why it died. Like Air Asia case, some guess-work is done from what comes on radar. But the public awaits the Black Box to be found and ‘real’ explanation uncovered.
Hopefully this will happen someday. The case of GSK in Thane was no different. The company [GSK] shut down a profit making plant. Their union says that they got the compensation asked for, but they do not know why it was closed. There are of course theories that explain the mysterious closure of GSK [read my blog post covering this], and there will be theories about the closure of Pfizer plant in Thane.
One such theory points out that Wyeth-Pfizer merger has something to do with it. And there is that other theory – applied to all closures in Mumbai-Navi Mumbai belt – it is about real estate. The workers say the Company has been discussing wage increase for the last six years. The Company says ‘it has become impossible for the management to continue with the operations of the Plant in a peaceful and productive manner.’ The reason given is extreme indiscipline of employees.
The plant in theory is under lockout, not closure, but we know the shape of things to come. The official statement to BSE says ‘The above lock-out notice will have no impact on the business operations of the Company. The Company has in place a robust business continuity plan which will ensure that its medicines are available to the patients at all times.’
You know what it means, and what is in store, right?

Read this excerpt from a Frontline article:

Workers fear that the plan may be to sell the plot to a real estate company. This is not an uncommon strategy with large companies. In 2007, Pfizer sold its property in Chandigarh to CSJ Infrastructure for Rs.278 crore. In 2004, GlaxoSmithKline Pharmaceuticals sold its Mumbai plot at Worli for Rs.107 crore to I-Ven Realty Ltd, a joint venture between ICICI Venture Funds Management Company Ltd and Oberoi Constructions. In 2012, Bayer CropScience sold its Thane land for Rs.1,250 crore to the Kalpataru group.

My erstwhile colleague Salil Chinchore points out that ER experts expect a spate of closures. The Pfizer plant employed 225 persons. If the Government allows units employing up to 300 to close without permission [as required in the ID Act], then possibly it may happen.

Bosch Deal
This is what the news reports say
Bosch said on Tuesday that an indefinite strike by its employees here since September 16 ended after conclusion of a wage settlement for 2013-16 with the union. Bosch’s Bengaluru plant reached the settlement with the Workmen Union-Mico Employees’ Association (MEA) on December 8 and, with this, the prolonged “illegal” strike called by the union comes to an end, it said.
The Workmen Union has agreed to accept the company’s last offered wage and benefits proposal that would enable the earning potential – the monthly cost-to-company (CTC) – of an average workman to increase from Rs 64,000 to Rs 86,000, subject to working as per industrial engineering standards for 7.5 hours of work in an eight-hour shift.
With this mutually agreed wage settlement, the Bengaluru plant will continue to be one of the best paymasters in the manufacturing and other comparable industries, the company said in a statement.
We know that even Pune plant had a prolonged strike. While we know some facts, we don’t know all. So more about it later.
L&T Hazira falls in Comparison Trap
The wage dispute at Hazira factory of L&T dragged on for a long time. More than 3 moths. Why?
An L&T Kamdar Union official said the company had offered a 6,750-rupee increase to workers in Powai, but that Hazira employees were only offered a 4,500-rupee rise. While the average monthly salary at Powai is 45,000 rupees, Hazira employees only receive 25,000 rupees ($US410). L&T told media it will not increase its offer to the Hazira workers and, in a veiled threat to strikers, said it had the option of hiring replacement workers to maintain production. []
Nobody will accept Union’s stance. The Courts also do not accept. The union leaders played on the emotions of employees, and it is a cruel game. They say that ‘the Chairman gets a 35% increase, then why we can’t?’ Well, such statements can be scripted by Salim-Javed duo but reality does not accept. You may like to watch the video here on YouTube.
The point is huge and widening gap between rich and the poor. Between the highest paid and the lowest paid employee of any given organisation. The latter thinks he has missed the bus. Sharing prosperity of an organisation is important, and must be done. But so also managers have to be alive to the fact that there is a minima and maxima for any product or service. There is a range. Nobody will work for you for less than a certain minima [this seems to be minimum wage unfortunately] and no employer will pay more than a certain limit. The trouble is that it is individual’s judgement where the line is. Therefore it must be negotiated, such a balancing must be managed. That is the skill of managing industrial relations.
So much about the strikes and lock outs.
Before we stop here in this second part, here is a food for thought: Anthony Robbins says, “The quality of your life is the quality of your relationships.”
And we will reach out to you in the third part to continue this review. What’s your response to this blog-post? Do write, your comments will further learning of ER professionals.
Wishing you a very Happy New Year,
Vivek S Patwardhan
“What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others.”