Sunday, 19 May 2013

Labour and capital in practice

Given the perspective of my blog - basically a labour/Labour take on issues relating to ownership, shareholding etc - the recent noise around the National Express AGM, and the campaign it is part of, is rather interesting. This is a bit of a splurge of thoughts...

The principal claim made by US unions, the Teamsters in particular, is that in its US schoolbus business, Durham School Services, there is an anti-union culture. Furthermore they argue that the company's failure to engage with unions has knock-on negative effects on things like morale, safety etc. The Teamsters have been raising concerns about Durham for a few years now, and have made a number of trips to the UK, during which they have met investors. I think most people in the UK RI community are (or should be) aware of the issues the Teamsters have raised, whether they agree or not.

This year the Teamsters adopted a more shareholder-focused strategy and called on the company to improve the oversight and reporting of human capital issues. In lieu of this, the union called for a vote against the company's report and accounts at its AGM. Ultimately there were combined oppose votes and abstentions of about 5%. It doesn't sound like a lot but most of these votes go through with 99%+ in favour. About 3% of the vote against came from LAPFF members, who supported the call for improved oversight and reporting.

An interesting development in the run-up to the AGM was that Jim Sheridan MP wrote out to National Express shareholders on behalf of the Unite parliamentary group supporting the campaign. He also attended and spoke at the AGM. That s something I haven't seen before and may be a sign of things to come.

At the AGM both the chair and chief executive were clear that, while mistakes might be made, the company did not have an anti-union stance. The chief exec said a couple of times that he respected the right of employees to join unions. However the chair said the company would not adopt a position of 'neutrality' and would seek to put the other side of the story.

The chief executive suggested that its rival First Student, part of First Group, had suffered more problems since reaching a national agreement with the Teamsters. The clear implication here was that the company suffered a drop in performance that was closely correlated with union recognition. (I recently heard a mainstream asset manager make exactly the same point, which may show that the company's line is getting a receptive hearing). The chair made the point that labour relations in the US were different and more combative. He said the company took a view that was, basically, "when in Rome..." and would not seek to apply UK standards in the US.

So, what to make of all that? I personally think the company does take an anti-union stance in the US, and this message was, if anything, amplified at the AGM. The company may state that it respects the right of employees to join a union, but it is not within its gift for the situation to be otherwise. It might as well state that it respects the right of employees to vote for their choice of President. Whether it "respects" such rights or otherwise those rights will continue to exist because they are enshrined elsewhere. So what matters is how the company seeks to influence the exercise of that right.

Some of the documentation produced by the company in the US (which has been circulated to investors by the unions) is clearly intended to dissuade employees from joining unions, and subtle it ain't. The company's defence has been, broadly, that such material is within the law and that the unions are aggressive too. As noted above, the chair stated in the AGM that the company would not take a neutral stance. (He also said, in a semi jokey way, that the existence of unions was in a sense a reflection of management. In an ideal world unions wouldn't exist because companies would treat employees properly.) If seeking to suggest to employees that joining a union is costly/pointless/undesirable is not evidence of being anti-union, what is? Just because such a stance may be undertaken within the law does not change the nature of that stance.

If any investors were listening properly, what they will have heard is that the company does not want unions in its US operations if possible because that's the way the industry works there. In addition, the chief exec's comments suggest that the company thinks a formal agreement with the unions could harm its business.

I guess the interesting question is how the RI community views all this. As I mentioned earlier, the unions' claims about Durham are well-known. And the company has now set out its position pretty clearly, and publicly, at the AGM. The chief exec has, essentially, made a business case argument against agreeing a deal with the unions. Does a responsible investor consider this the end of the story - if you can't make a business case for not dissuading employees from joining a union, does that make such behaviour unchallengeable? Or, alternatively, is an anti-union stance unacceptable, even if it may provide a business advantage?

As I have written before, I think labour issues are hard for the RI community to address exactly because there are no easy answers here. Too often the assumption is that there is a win-win, especially if we can claim the company will see the benefit from doing the right thing "in the long term". After more than ten years in this field I'm sceptical about the value of such an approach, I think we might benefit from also asking more often "is the company's position good enough?"

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