Tag Archives: business

Stopping slavery – can assessing supply chains make a difference?

2 Nov

by Caroline Parkes, The Trafficking Research Project

In June 2012, the Labour MP Michael Connarty submitted a Private Members Bill which sought to:

Require large companies in the UK to make annual statements of measures taken by them to eradicate slavery, human trafficking, forced labour and the worst forms of child labour (as set out in Article 3 of the International Labour Organisation’s Convention No. 182) from their supply chains; to require such companies to provide customers and investors with information about measures taken by them to eliminate slavery, human trafficking, forced labour and the worst forms of child labour; to provide victims of slavery with necessary protections and rights; and for connected purposes.

Currently this proposed legislation is in its second reading (the first opportunity for Members of Parliament to debate the main principles of the Bill) in the House of Commons.  The Transparency in UK Company Supply Chains (Eradication of Slavery) Bill echoes the California Transparency in Supply Chains Act of 2010, recognising a more holistic interpretation of ‘modern day slavery’ in a globalised world, beyond the oft-repeated focus on sex trafficking.  Though brief, this Bill has the potential to improve the UK’s response to trafficking by requiring that companies publicly declare their efforts to eradicate slavery; where companies find such issues, they ‘shall take action necessary and appropriate to assist people who have been victims and shall report on that action in their annual reports.’  So far, so good.

But, a closer reading of the proposed legislation highlights a number of problems.

Firstly, we have concerns about the use of the phrase ‘worst forms of child labour’ which seems, perhaps erroneously, to indicate that there are acceptable forms of child labour.  There is of course a difference between sweeping leaves from the family driveway for pocket money and sustained work undertaken by children, often in hazardous conditions, which prohibits their access to education and impedes their development.  The definition as set out in Article 3 of the International Labour Organisation’s Convention Concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour and referenced by the Bill represents the most horrific end of the exploitative labour spectrum.  Rather, there is scope in utilising the broader interpretation of child labour as set out by the ILO in its work on this issue, which states:

The term “child labour” is often defined as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development.

It refers to work that:

  • is mentally, physically, socially or morally dangerous and harmful to children; and
  • interferes with their schooling by:
  • depriving them of the opportunity to attend school;
  • obliging them to leave school prematurely; or
  • requiring them to attempt to combine school attendance with excessively long and heavy work.

A forthcoming UN report to be launched next week by the UN Special Envoy on Education, former UK Prime Minister Gordon Brown will, according to the Guardian argue that ‘in China, under-age labour recruited by networks of agents from poor rural areas “has been found in factories supplying companies such as Apple, Samsung and Google”.’  This shows that the Bill is well-timed, but highlights the need to develop legislation moving beyond the ‘worst forms of child labour’ to affect the greatest change in assuring ‘clean’ supply chains.  Further, it is important to provide sufficient delineation between trafficking, labour exploitation and labour abuse within the assessment proposed in this legislation.

Secondly, the legislation will only apply to companies with annual global receipts of £100,000,000.  We advocate the inclusion of smaller companies within this framework; for instance companies with global receipts of £1 million will also have significant supply chains in which labour exploitation and trafficking could be an issue.  While we acknowledge concerns that this Bill may place a financial burden on companies to examine their supply chains effectively and make relevant changes, with coherent systems in place this burden should not be prohibitive.  Companies targeted by the Bill as well as smaller companies may fall within the scope of proposals from the Department of Business, Skills and Innovation, published this month, which will mean that:

quoted companies (those incorporated in the UK and listed on certain UK, EU or US markets) will be required to report, to the extent necessary for an understanding of the business, on their strategy, their business model, and any human rights issues.

Labour exploitation and trafficking are human rights issues, so such measures should be positive; with the caveat that the phrase ‘to the extent necessary for an understanding of the business’ is potentially limiting.  Taking this further, considering its buying power, Government, as a whole and as the sum of its parts (for example, the National Health Service), should also be subject to the same requirements.

Much work has been undertaken in recent years to engage various levels of business in a productive dialogue on human rights.  The UN Global Compact is a key example of this approach.  This has also been reflected in the work of organisations such as the Institute for Business and Human Rights; for example, though their joint campaign with Anti-Slavery International, a campaign which engages with the hospitality industry to improve labour standards.  While businesses may not be the subject of international human rights law, arguably they have a responsibility to respect human rights in their operations.

Thirdly, the scheme is lacking an effective stick.  There is no penalty for companies that may elect not to participate in the scheme, or those which utilise a substandard or inappropriate compliance assessment framework, for example, those which fail to carry out thorough inspections of their supply chains.  The development of a centralised regulatory oversight agency could assess the information supplied and establish a company’s efforts, both in reporting and combating trafficking and increase publicity on the disclosure of the annual statements of measures, which are currently limited to a company’s annual report and website.  Similarly, such a body could have the power to apply sanctions to companies which consistently fail to address trafficking and exploitation in their supply chains.  As noted by Michael Connarty during the second debate, there is space for the development of a kite mark, or similar scheme, to indicate if companies have reached the required standard.

Finally, the process of assessment proposed in this Bill is self-regulating.  In this respect, there are benefits in referring to the relevant international standards on trafficking and forced labour beyond citations to the ILO Convention; particularly regarding clause 2(c) of the Bill which encourages compliance with local national laws on trafficking and exploitation.  This clause ignores countries which lack designated legislation for trafficking and/or labour exploitation.  Efforts by Government need to be focused on developing legislation within these countries and thus making such countries unfriendly environments for those seeking exploited labour.  In this respect, much can be learned from the Global Framework Agreements, developed by trade unions to increase the protection of labour rights by multinationals.  For example, the Global Framework Agreement with Skanska (a global engineering and  construction company) protects eight fundamental labour rights, and directly resonates with the ILO and international law.

Clause 2(f) of the Bill focuses on recruitment practices used by suppliers and requires that they ‘comply with the company‘s standards for eliminating exploitative labour practices…’.  Again, absent from this requirement is any mention of national or international standards for eliminating exploitative practices and the provision of a framework for this assessment.

The issue of independence and spontaneity of inspections and assessments undertaken by companies needs to be reconsidered.  Clause 2(a) notes that the report ‘shall specify if the verification was not conducted by a person independent of the organisation …’; clause 3(b) requires disclosure whether advance notice was given of the audit.  Companies have a perverse incentive not to expose labour exploitation, given the potential costs involved and it would seem imperative that such verification should be conducted by an independent body. While companies may argue a capability to undertake thorough and unbiased assessments, as corporate social responsibility efforts have shown, a tension between human rights compliance and profit too often favours the side of profit.  It would be useful to assess the actual costs of such audits and any studies undertaken to assess the impact of negative publicity on labour issues and company profits.

The Bill proposes, at clause 3, that companies which encounter forced labour in their supply chains ‘shall take action necessary and appropriate to assist people who have been victims’.  This sentiment is positive, but should go further.  For example, there should be a requirement to report such exploitation to relevant national authorities, both in the country of exploitation, where this will serve to strengthen efforts to address exploitation issues at their source, and in the UK, which is particularly relevant in cases where the national authorities in the country of exploitation may be corrupt.

The Bill was introduced as Private Members Bill which means that it does not form part of the Government’s legislative work plan.  This makes passing such legislation more difficult.  At the Bill’s second reading on 19 October, Michael Connarty MP queried why the Bill had been transferred from the Department of Business, Innovation and Skills to the Minister for Immigration, commenting that while the Bill was partially concerned with human trafficking, the issue was slavery and labour exploitation in supply chains and that the Bill was concerned with trade and business and not migration per se.  The opposition Conservative, Jacob Rees-Mogg MP was encouraging of the sentiment behind the Bill.  Indeed the proposals find resonance with the Government’s commitment to the UN Guiding Principles on Business and Human Rights and the recent development of a toolkit to assist business working aboard, but concern remains that the Government is constructing the supply chain issue as one of immigration.

Portioning out the issue to be either immigration or business is significant following the cuts to the budget of the Gangmaster Licensing Authority (GLA), the agency which regulates labour providers or ‘gangmasters’ who provide temporary workers anywhere in the UK.  As a joint GLA and the Serious and Organised Crime Agency raid in early October showed, the use of exploited labour continues to be a serious issue – the raid found Lithuanian workers in situations of debt bondage, housed in substandard accommodation, seriously underpaid and the victims of abuse and violence.  They were ‘working’ for, according to the Guardian, ‘large chicken farms in a chain that supplies premium free range eggs to McDonald’s, Tesco, Asda and M&S, “Woodland” eggs to Sainsbury’s, and the Freedom Food and Happy Eggs brands to leading retailers’.  Cutting the budgets of existing oversight mechanisms appears to be a short-sighted view of the issue by Government.

The Bill has gained broad civil society support, including the Ecumenical Council for Corporate Responsibility, a range of churches such as the Church of Scotland, as well as NGOs concerned directly with forced labour, trafficking and vulnerable groups.  It is hoped that the momentum gathered here can be transferred to Parliamentarians to participate in the debate on this Bill specifically and the issue of business and human rights more broadly.  This Bill represents a good starting point but, as our critique has shown, there is the potential to do more.

This article originally appeared on The Trafficking Research Project blog. TTRP are a collaborative initiative analysing the issue of human trafficking. Utilising human rights and social policy perspectives, TTRP aims to make a positive and pragmatic contribution to the current policy and research developments on this issue.

Top bosses’ pension pots nearly 25 times the average

6 Sep

Directors of the UK’s top companies have built up pension pots worth an average of £4.3 million, according to the TUC’s tenth annual PensionsWatch survey published today (Thursday).

PensionsWatch, which analyses the pension arrangements of 351 directors from FTSE 100 companies, shows that the average transfer value (pension pot) for a director’s defined benefit (DB) pension has increased by £400,000 over the last year to reach £4.33 million – providing an annual pension of £240,191. The biggest pension pot in this year’s survey is worth £19.4 million.

The total value of the 144 directors’ DB pension pots analysed in PensionsWatch is a whopping £600 million.

PensionsWatch shows that the value of the average director’s pension has increased faster than most ordinary pension schemes and is now 24.4 times the size of the average occupational pension (£9,828).

The survey finds that the average company contribution to directors’ defined contribution (DC) pensions is £144,508. The average employer contribution rate to a director’s pension (as a percentage of salary) is 22 per cent. This is nearly four times the size of the average employer contribution rate (six per cent) in DC pensions. The figure is also more than seven times the size of the maximum employer contribution required under the new automatic enrolment regime that will start being phased in for all workers from next month.

An increasing number of top directors now receive cash payments instead of participating in company pension schemes. The average cash payment was £164,925, an increase of £26,489 on last year. The biggest cash payment was £818,594.

The most common Normal Retirement Age (NRA) for senior executives is 60, with three times as many directors able to retire at 60 than 65. In contrast, the most common NRA for ordinary scheme members is 65, a figure which is expected to rise further.

The ever-increasing value of directors’ pensions is in sharp contrast to the fortunes of the pensions of most ordinary workers, with the number of employees saving in employer-backed schemes falling every year.

As pensions are generally not performance-related, the TUC believes there is no case for the stark differences between the pension terms enjoyed by directors and those offered to the rest of the workforce.

Private sector companies should follow the example of the public sector, where there are no platinum-style boardroom pensions and all staff are members of the same pension scheme and enjoy the same benefits, says the TUC. Indeed in public sector schemes better paid employees pay higher percentage contributions from their pay than lower paid workers.

Executive pay and bonuses have been under close scrutiny recently, forcing the government to look into possible reforms. But the TUC report says that because of the confusing and sometimes misleading reporting of directors’ pensions, the scale of executive excess has largely escaped the attention of shareholders and the media. The TUC is calling for greater clarity in the reporting of pensions, including the mandatory disclosure of accrual and contribution rates.

The TUC wants to see a legal requirement for more comprehensive reporting on company pension provision for directors and employees in company annual reports. The government is currently consulting on revisions to remuneration reporting regulations, and changes to pensions reporting should be included as part of these reforms.

Pensions will be a hot topic at the 144th annual Congress next week, when unions will debate the acceleration of the increase in the State Pension Age (SPA), condemn attacks on the pensions of workers across the public and private sectors, and call for a restoration of trust in the pensions system by tackling hidden and excessive charges.

TUC General Secretary Brendan Barber said: “Companies continue to chip away at the pensions of ordinary workers while awarding their directors solid platinum pensions worth hundreds of thousands of pounds a year.

“Top executives already enjoy huge pay packages that go up every year irrespective of the success of their company or the state of the economy. These salaries alone guarantee lucrative pensions so the generous packages uncovered are an insult to the vast majority of workers who are denied such favourable terms.

“The gap between the pensions of top directors and everyone else does not just reflect the excess of the super-rich, but shows just how poor pensions are for ordinary workers in the private sector, where more than two out of three get no employer pension help.

“Automatic enrolment is a great advance as it will make employers contribute to pensions for the first time, but we need to see employers offering more than the bare minimum if we are to avoid a growing pensioner poverty crisis.”

PensionsWatch 2012 is available to download at http://bit.ly/TA8zLR

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