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.
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!
review is being published in parts. The third part will be published in two
days.] We begin
with the story of ING Vysya.
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
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
But the issue is
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
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.
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
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!
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.
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
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. [wswj.org]
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
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
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,
you leave behind is not what is engraved in stone monuments, but what is woven
into the lives of others."
Labels: Bosch, Closure, Coal India, ING Vysya, Kotak Mahindra Bank, L&T Hazira, Lockout, M&A, Mico, Pfizer, Strike, Wyeth