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Corporate Social Responsibility (IVOR nr. 77) 2010/10.5
10.5 Failing dialogue leading to lawsuits
Mr. T.E. Lambooy, datum 17-11-2010
- Datum
17-11-2010
- Auteur
Mr. T.E. Lambooy
- JCDI
JCDI:ADS364589:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
WebFinance, Inc.; http://www.businessdictionary.com/definition/stakeholder.html, accessed on 2 March 2009.
See above: section 1, and notes 5 and 6.
Employees' family members can visit the company doctor when needed. FFI/JKPL also paid for several hospital visits of family members.
Neighbours of the production units were consulted when appropriate in respect of upcoming issues of water use and the purification thereof, smell, as well as noise.
E.g. R. van Tulder, A. van der Zwart, International Business-Society Management - Linking corporate responsibility and globalisation (Abingdon (UK), Routledge, 2006; simultaneously published in the US and Canada), chapters 11 and 19.
When searching 'CCC' and 'FFI', Google produced easily over 60,000 hits containing approximately the same information.
S. Frost, 'Suing stakeholders: solution or setback?',in CSR Asia weekly, Vol.3, Week 33, 15 August 2007.
SAI Public Statement, 30 April 2007, at: http://www.saasaccreditation.org/docs/SAI_ Public_Statement043007.pdf, accessed on 2 March 2009.
Information communicated to Ms Lambooy when visiting the factories in Bangalore, in March 2008, and later confirmed on various occasions by FFI/JKPL management by email. However, due to their disappointment about the SAI decision, FFI/JKPL management considered liaising with other CSR initiatives such as BSCI.
Also, independent audits confirmed that FFI/JKPL's units conformed to all labour laws and CSR standards. Information by Indian counsel, March 2009.
Information provided during a meeting, and also by email, to Ms Lambooy by a SAI representative in the spring of 2008.
M. van Huystee, P. Glasbergen, 'The Practice of Stakeholder Dialogue between Multinational and NGO', Wiley InterScience 2007, p. 10; at: www.interscience.com, accessed on 1 May 2009.
An important element of CSR is maintaining good relations with one's stakeholders. Where possible, one should involve them in the company's decision-making process in order to ensure that 'planet people profit' concerns are balanced against each other, the so-called stakeholder dialogue. Literature and practice offer different definitions of the concept of a ' stakeholder'.A common definition is the following:
a person, group, or organisation that has a direct or indirect stake in an organisation because it can affect or be affected by the organisation's actions, objectives, and policies. Key stakeholders in a business organisation include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. Although stake-holding is usually self-legitimising (those who judge themselves to be stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled to different considerations.1
Regarding the FFI/JKPL-GATWU dispute, the question arises who can be considered a stakeholder. From a legal perspective, considering the representation threshold requirement for trade unions2 and the fact that GATWU did not represent any FFI/JKPL employees, FFI/JKPL was not obliged to enter into negotiations with GATWU. On the other hand, GATWU, cooperating with the other organisations, undoubtedly had an influence on public opinion concerning FFI/JKPL - after all, many apparel brands stopped ordering from FFI/JKPL.
In practice it may thus be difficult to determine what constitutes a stakeholder. For instance, the SA 8000 Guidelines refer to 'stakeholder engagement' (clauses 9.13 and 9.14), but do not define this term. Consequently, parties had a difference of opinion concerning the term 'stakeholder': FFI/JKPL considered its employees and their families,3 people living on neighbouring plots,4 and any acknowledged unions, as stakeholders; whereas the Indian Organisations and CCC/ICN considered themselves as stakeholders of FFI/ JKPL and G-Star, based on the argument that they campaign for better labour conditions in the textile industry in general.
Moreover, companies have an understandable preference for resolving any CSR issue behind closed doors. They fear reputation damage and setbacks vis-à-vis competitors.5 As this case seems to confirm, information that damages one's reputation is easily spread and tends to meander for a considerable length of time.6 Attempts to start a healthy dialogue did not lead to success in this case. After the first official meeting, FFI/JKPL and GATWU could not even agree upon the minutes. The same is true for the first meeting minutes between G-Star and CCC/ICN.
Another issue that particularly bothered FFI/JKPL was CCC/ICN's pressure on SAI to repeal FFI/JKPL's SA 8000 certification for suing its 'stakeholders'. Although SA 8000 has no official grievance mechanism, CCC/ICN filed a 'formal complaint' with SAI in November 2006, in which it 'expressed fundamental doubts regarding the quality and reliability of the certification process: with the restraining order in place, no meaningful consultation of the directly concerned local stakeholders could have taken place, which is a prerequisite of the SA 8000 procedures.'7 In reaction, SAI released a public statement on 30 April 2007, stating that:
The existence of a court order or other impediments to discussion of the company's internal affairs by external stakeholders renders a full investigation impossible. ... It is SAI/SAAS's policy that, in cases where a legal or other impediment exists to consultation with external stakeholders regarding issues affecting the certified organisation, the continuation ofcertifica-tion is inappropriate. (SAI Statement)8
Subsequently, SAI suspended FFI/JKPL's SA 8000 certification. The company was furious about this sudden change of certification requirements giving in to pressure from CCC/ICN. FFI/JKPL considered this to be a restriction of its democratic right to litigate and protect its interests. Meanwhile, FFI/JKPL communicated that they were still keeping their factories in compliance with the SA 8000 standards.9 Monthly checks by staff revealed good results.10 SAI indicated that as soon as the litigation had ended, FFI/ JKPL's SA 8000 certificate would be revalidated, subject to the outcome of regular external audits.11
The main reason, however, why the stakeholder dialogue between FFI/JKPL (and G-Star) and the Indian Organisations (and CCC/ICN) had failed relates to the diverging opinions about the factual labour conditions at FFI/JKPL. Since the first meeting in which FFI/JKPL refuted GATWU's accusations and explained which measures the management (and lawyers) had taken to resolve any issues, FFI/JKPL persistently denied all allegations made by GATWU et al. The Indian Organisations and CCC/ICN on the contrary kept on repeating those allegations. Apart from that, accusations, whether true or not, tend not to be the most fruitful starting point for a stakeholder dialogue.12 As FFI/JKPL was convinced of its own beneficial behaviour towards its labour force while nevertheless incessantly being attacked by GATWU et al., the FFI/JKPL management felt insulted. FFI/JKPL considered that it had no option other than to resort to one means: legal proceedings to stop the public allegations and insults and to recover damages suffered from lost business.