The leftward and other blatherings of Span (now with Snaps!)

Monday, April 30, 2007

Growing profits through diminishing workers

I'm a bit late to this party, but the EPMU Our Media campaign is still just warming up, to protest the redundancies at TVNZ and in other parts of the NZ media.

Andrew Little makes a good point in a media statement about the out-sourcing of sub-editing at APN:

"This is a dark day for our members but also for news and democracy in New Zealand. APN already makes tens of millions of dollars in profit out of this country, now they're trying to squeeze out a little more and it's going to come at the cost of decent jobs and news quality."
Businesses, and their bosses, seem to be solely about maximising profit these days. There appears to be no other role for them, from their own point of view. And the bigger a company gets the more divorced its management is from the actual workers who do the work; the more expendable those people become in the thirst to win at Greed.

I was very sad to hear last week about Sleepyhead and Fisher & Paykel moving significant parts of their manufacturing offshore. As with Air NZ's recent round of job cuts, I feel as if we could never keep these jobs when the motivation to axe them is grounded in bigger profits no matter what. We have never been able to "compete" with cheap labour in countries with appalling work conditions. And we shouldn't try. To me it is shameful that companies that are actually doing fine are moving offshore anyway, to exploit workers where unions are busted or corrupt, fire exits are painted on, and they can get away with paying people $20 a day.

It's not exactly the caring face of business is it?

(Pic Via)


Gerrit said...

Be interesting to see what their ROI figures are rather then straight out profit.

If you investment is $100M then a decent return (profit) with the current interest rates is at least 10% or $10M.

As a shareholder you would think twice investing in a company that only produced a 10% return on investment. You would be better to stick the money in the bank (for the banks to lend on ever more expensive housing) and get the 10% return for no risk.

Perhaps the profit should be read in that context. It is not the princely sum but the % return on investment.

Now to grow the company and to employ more workers the company needs to borrow (unlike the government who simply takes taxes from the taxpayer at an ever higher rate) and to do this the banks need to see where the repayments plus interest will come from. Hence the higher the ROI the more you can borrow to expand the business.

Now why dont unions get their members to buy shares in the company they work for? Get ownership and a return.

Or if they wanted more take home pay get the government to tax them less.

This is not even addressing the issue of productivity. Where unions would be getting a share of the increased productivity if they owned shares in the company.

Something the Warehouse has done for a number of years.

However as shareholders they may also be asked to front up with the readies to baleout a company (and their jobs) if the market for their goods and services turns to custard.

Do the workers want the rewards (and the risk) of working for and owning a comapny?.

If the answer is no they will always be just that, workers.

The reward lies in ownership. A good socialist position surely?

Owning the means of production.

Span said...

Well last I checked the Government does borrow to fund things actually.

But anyway...

Some unions do buy shares in the companies their members work for. EPMU has shares in Air NZ for example. However the reality is that workers cannot afford to buy a significant portion of the shares of big companies, whether they do it through their union or otherwise. The main reason the EPMU bought shares in Air NZ was to allow them to speak and vote at the shareholder meetings, and use this as a forum to confront those operating at a remove from the workers with the real situation for them.

I do agree that workers should have more control of the businesses they work for, and I'm all for workplace democracy. But I somehow don't think the system we work under is.

Gerrit said...

Why are the four workers in the picture shown wearing balaclavas?

Going back to the EMPU having shares in Air New Zealand. They would as shareholders be privy to the profits being made and the ROI percentage. Being a minority shareholder is good as you can take some profit but the risk is equal to your exposure.

If the EMPU had bought Air new Zealand shares when I did at 28 cents (after the Ansett debacle) they would be sitting on a pretty tidy profit. A resolution could be put to the members of the union if they wanted to sell their shares and take the profit. Or sell some and retain say the value of shares equal to the original investment (to maintain shareholding and access to the Air New Zealand accounts).

Take the money or invest it in another company, or Government bonds.

"do agree that workers should have more control of the businesses they work for..."

But with control comes risk and the only way currently is to buy shares.

The union of workers could always plow any profit they make from shares in starting their own company so the workers would be in control.

Why are unions not as pre-emptive as the EMPU. That guy Little is onto it. Smart cookie.

Span said...

No idea about the balaclavas - but they don't totally look like scary ones. I sort of thought maybe they were ski hats, rather than burgler equipment. They certainly look jaunty.


Little has a particular approach which seems to win him points with those on the right. I'm not convinced that's a good thing for a unionist. Certainly the SFWU has got a better result at Air NZ with more militant tactics (and less doing the boss' job for them) imho, but I admit I'm not very well informed on the details.

Gerrit said...

I'm suprised at your statement that more militant tactics get a better result.

Have a feeling that this militant=better is a union mindset and any other form of worker empowerment is to be denegrated.

Have commented previously on how little unions actually do for the workers in regards getting a bigger reward. No profit sharing, no reward for productivity increase, no training schemes to get workers into better paying jobs, etc.

I know you are going to come out with the poorly paid cleaners needing protection from a union.

But if that union was to train its cleaners to run their own businesses, that would be empowering.

Maybe, as I have stated in the past, the unions got the cleaning contracts and bypass the cleaning companies so that the workers actually pocketted the cleaning companies profits. That would be empowering.

Why dont union organisers look at these alternatives?

What happened to union run credit unions?

That was empowerment for the workers to pool their capital and bypass the banks for low cost loans (mind you with low cost laons come low interest rates and the propencity for the workers to be greedy and plonk their excess in the bank for higher interest rates instead of the common good credit union).

The union movement fixation on "we are left and socialist" vesus "you are right and capitalist" with a never the twain shall meet attitude, has to stop.

So many opportunites to empower workers is being missed because of this dogma.

Is it because by empowering workers, the union organisers loose power?

Meanwhile those workers outside the union movement are taking advantage of all opportunites and empowering themselves, leaving union members even further behind.

James Leadbeater said...

Gerrit, credit unions exist. What you're proposing - workers' control of industry - is a good thing, but the means you propose are not that simple. The EPMU is never going to be able to compete with Coca-Cola or Pepsi. What you're asking unions to do is both impractical and contrary to what unions are about.

Span, if the EPMU had taken the SFWU's approach at Air NZ the whole lot would have been outsourced. The SFWU only managed to avoid outsourcing and pay cuts because the EPMU did the hard yards and the SFWU had such small numbers on site that they could not have been outsourced independently. It's a bit rich for them to benefit from the EPMU's work, then slam the EPMU for doing it. Ovens nearly damn well sunk the deal for everyone, which would have meant even greater pay cuts, less job security and employment by an overseas-owned contractor.

The boss didn't need anyone to do its dirty work - Air NZ was more than happy to do that by itself.

In other news, I hear the SFWU is now down to fewer than 10 members in ground services, so I guess that shows the ultimate success of their strategy. I also hear that's not the only site they're losing members hand over fist.

Gerrit said...

"What you're asking unions to do is both impractical and contrary to what unions are about"

Maybe what is required is a fundamental shift in attitude and approach.

Anonymous said...

Or perhaps you need to realise that it's stupid to believe workers on $12 an hour could ever afford to buy enough shares in the company they work for to actually have a say in its operation.

I think your critique of unionism is grounded in fantasy and bears no relation to the economics of what you're suggesting. We're talking here about an economy worth tens of billions of dollars, and unions struggle to make a few tens of thousands of dollars in donations once every three years during elections campaigns.

Gerrit said...


Yep you are right it bears no relationship to your economics.

However if just a few unions had bought eve small parcels of Air New Zealand shares at 28c who know what state the union coffers might be in now.

Especially as the government took a controlling interest and if you had a good look at the people in charge plus the direction (nich destinations like Vancouver) the airline was taking with the purchase of 777 and 787 aeroplanes you'd have to think, yep that worth something.

What are the shares trading at now?

Still doing nothing by choice is doing something I guess.

Good luck.

Span said...

Just a quick note, cos I'm a bit busy, but Gerrit you commented at 7am (!) that I said militancy always gets better results, when that's not what I said. What I did say was that my observation was that in one particular example (recent cuts at Air NZ) I thought militant tactics had been more successful. I admitted I did'nt know the details of that situation and James has kindly supplied some. While some of what he says doesn't gel with what I've heard, it's interesting to hear the other side of that debate too.

Anonymous said...


The disagreement is that unions are not businesses. Their primary role is to represent and advocate for their members. Similar to what Federated Farmers or Business NZ do.

What you're suggesting is a different kind of organisation together. Feel free to start one if you wish, but don't try to bash unions for being something they can't be and were never intended to be anyway.

Gerrit said...

Not bashing at all, just looking for ways to empower workers. If it is not suitable cool, but at least it has been discussed and dismissed.

Famers do in fact own shares in the business that does their end processing(Fonterra or AFFCO).

That is how those companies got started. Workers (in this case farmers) clubbing together to own and control their processing.

Span said...

Anon you are bang on. Gerrit, what you are talking about are co-operatives, and Fonterra is one example (although I suspect many members of that co-op might beg to differ). While many union members might be keen to turn the businesses they work for into co-ops I doubt their bosses would be into it. And if the only way workers can make this transformation is to buy shares on the open market, whether through their union or otherwise, they are never going to have the dough to do it - even when the shares are cheap.

James Leadbeater said...

Span, I suspect what you heard is a result of the fact that it's rather trendy on the radical left to bash the engineers without actually analysing why they're doing what they're doing, and what results they get for their members and for the wider union movement.

Gerrit said...

Thank you James. As a once proud member of the engineers union I.m glad they at least are looking for alternative ways to empower the workers.

Span, just work out what 2 million workers putting in $10 per week (the price of a packet of smokes) could purchase on the sharemarket or in the private market. Every week you could buy 80 houses to distribute to members.

Yes it is all about cooperatives where a volume of purchasing power can make a difference.

I really dont know how to get the unions into the 21st century. Maybe the right has won by divide and conquer tactics.

And the left has lost becasue they cannot see the power of the masses to cooperate.

Anyway my disappointment in the union movement ends here.

Span said...

James, I certainly used to be of the Evil Empire mindset when it came to the EPMU, but I've seen a few things recently that have given me pause. A lot of what they do is very valuable work and I have a great deal of respect for many people who work there (paid or unpaid).

That said, I don't always agree with the EPMU, just as I don't always agree with the SFWU, the NDU, or indeed many other unions. One of the aspects of the union movement that I love is the way we can have democratic debates and disagree while still mostly moving in the same general direction. I don't think disagreement is unhealthy, quite the reverse in democratic institutions such as unions.

When unions bash each other, particularly on worksites, it is usually workers that lose. Need I mention Watties? Anyway, there is a definite difference between bashing and open democratic debate. I hope I'm not falling into the trap of the first when I try to do the second.

Span said...

Gerrit - union membership is not at 2 million, it's at 350,000. And many workers seriously cannot even spare $10 a week.

I have no idea, but perhaps some readers do - have unions overseas, who are more powerful and have more dosh, had any success with the share-buying strategy Gerrit proposes?

Gerrit said...

Appreciate that not every one can afford the $10 per week and that the work force in unions is 350k. plucked 2m out of the air as the total NZL workforce.

Even if you only owe 1% of a company it is better then 0%. At least as we discussed on Mainly Political blog, the glass is 1% full not 100% empty.

I'm not claiming all ideas workable, but at least discuss them.

Think some unions are deeply conservative (whom I call the cloth cap brigade) for whom any idea of change is difficult.

Lastly do you appreciate the buying/bargaining power that those 2350K union members have collectively?

Unions dont seem to get them together very well. That should be the first priortiy.

Gerrit said...

should be 350K not 2350k , fat finger syndrome strikes again. As is lazyness not to do a thorough review prior to posting.

Mitchell said...

While well-meaning, this is a somewhat fatuous post. Companies are required_ by_ law_ to maximise profits. Always have been, so there's no "these days" about it. Legally, there is no other point to their existence. Any CEO who acts contrary to the law is liable.

The people that fund and / run companies are exposed to significantly more risk than employees, and it's a truism that risk is proportionate to reward.

If a company can't make a profit at least equal to interest rates, or say 10% for the sake of argument, then there's not much point in doing what it's doing.

Basic economic theory argues that if companies can't make a profit doing what they do, then they should either close down or start doing something else they can make a profit at - and leave it to those business that can make a profit.

In this way consumers / citizens win from higher quality, lower-cost products / services - and from not having to prop up businesses / industries via subsidies from their tax dollars.

(There is an argument to be made for perhaps having some protections for certain industries such as agriculture or defense, depending on a country's geostrategic political situation, but that argument doesn't really apply to lil old New Zealand).

Sure companies should act ethically and responsibly towards the humans, plants, animals and environment that their actions affect, and legislation governing corporate practice is evolving in that direction - but it's an extremely tricky thing to legislate given the problems of unintended consequences - particularly to well-meaning people / laws.



Span said...

While well-meaning, that was a somewhat patronising comment that rather proves the point Mitchell.

Business people in the media have in the past pointed to the social and economic roles their businesses play, beyond simply profit for shareholders. Now we see what a pretence that was, as companies like Air NZ cut jobs (and the wages and conditions of the jobs that aren't to go) in order to increase an already large and healthy profit. As you yourself point out, it's all about the money (and not the money for workers either). I suppose at least I should be glad they are being honest rather than continuing to mislead people.

If we are going to have a capitalist society, and currently we do, then I don't see why businesses can't be expected to act ethically and responsibly within it. We put restrictions on business in terms of issues of fair trading, financial reporting, pollution, where they can be situated, and so on. Businesses are not some untouchable sanctified part of our society that must never be restrained, imho.

James Leadbeater said...

The people that fund and / run companies are exposed to significantly more risk than employees, and it's a truism that risk is proportionate to reward.

Tell that to the Origin Pacific workers who've been cheated out of 80% of their redundancy and are still yet to see a penny more than six months after the fact.

Gerrit said...

Mitchell says
"Companies are required_ by_ law_ to maximise profits. Always have been, so there's no "these days" about it. Legally, there is no other point to their existence. Any CEO who acts contrary to the law is liable."

And the board of companies (who are the final arbitrators - not the CEO) are free to distribute those profits to those they deem to be the best beneficiaries. Shareholders (dividends), Workers (bonusses), Customers (discounts), Suppliers (quicker settlements), etc.

While the ROI figure is an important KPI it is by no means the only one that measures sustainable (very, very important word as CEO's tend to look about 2 years ahead while a board is more likely looking 5-7 years ahead)performance.

In a manufacturing industry you would be having as an important KPI the "in full on time" delivery percentage as a measurement of how well you service your customer. Also the number of days finished goods and raw materials are stocked, as a measurment on how well you are controlling the cashflow.

There is much more to being a CEO then just returning a healthy ROI figure.

Not least being a good retainer of quality people so that the skills gained by the staff are retained for the company's growth.

Mitchell said...

Span my apologies for coming across as patronising, please forgive me.

Would you care to define what the large and healthy profit in question was? Which also begs the question, what would be a 'fair' way of distributing profits to workers etc (Gerrit's point), bearing in mind their lack of risk.

I agree that "Businesses are not some untouchable sanctified part of our society that must never be restrained", and am curious to hear if you have any proposals for a legal framework that incentivises them to act more ethically?



Span said...

1. Workers do take risk - they risk their livelihoods if a company goes bust. In turn that means they are risking the money they live off, the money that pays the rent or mortgage, the money that feeds their families, etc etc.

2. Air NZ showed a 60% increase in profits according to this EPMU media statement:

3. As for legal frameworks that encourage businesses to act more ethically, I'm all for labour laws that protect workers, resource laws that protect the environment etc. But I suspect when you use the word "incentivise" you may mean tax cuts in exchange for basic worker rights and anti-pollution laws?

Mitchell said...

Hi Span,

No argument about workers having a risk of losing their jobs if a company goes bust. This is however, a different and reduced risk to actually investing something of your own in a company, as everyone at a company shares the same risk of job loss.

If you put your own money on the line, you expect a greater share of profit than someone who contributes 'only' their time and not their money as well, as a general rule.

I had no agenda or pre-planned response I was looking for regarding incentives for ethical corporate action, but I guess I'm thinking of the way carbon-trading requires companies to pay the full cost of production, in terms of removing their (de facto) government subsidies to pollute - as well as offering profit potential for operating more cleanly.

Given that companies are legally mandated to return a profit, I would imagine that's the best lever to get them to respond in the way we want. But I'm open to other ideas if you have them.

Mitchell said...

PS while Air New Zealand's profit may be up 60% on last year, their profit margin is still significantly under a 10% return. Which means the company is performing worse than sticking your money in an ordinary bank account...

Span said...

How would you see Govt offering "profit potential" for operating cleanly? Sorry if I'm being a bit dense but I'm not very up with the kind of language you are using. To me that kind of stuff all screams "tax cuts" ;-)

Air NZ has been through some tough times but they are coming out of them well - is it really necessary to cut jobs when profit improvement is significant anyway?

Gerrit said...

Span re

"Workers do take risk - they risk their livelihoods if a company goes bust. In turn that means they are risking the money they live off, the money that pays the rent or mortgage, the money that feeds their families, etc etc."

That is a risk shared by shareholders and workers. A slightly different risk then morgaging your house to invest or start a business as well as feed the family and repay the now higher morgage.

"2. Air NZ showed a 60% increase in profits according to this EPMU media statement:"

If the made a $1 profit last year then the 60% increase is $1.60. Massive in percentage terms but Board and CEO firing material when compared with income received. You must look at the actual dollar figures not the percentages. It is dollars that get paid out not percentages. They are only used to measure variations.

"3. As for legal frameworks that encourage businesses to act more ethically, I'm all for labour laws that protect workers, resource laws that protect the environment etc. But I suspect when you use the word "incentivise" you may mean tax cuts in exchange for basic worker rights and anti-pollution laws?"

Again the unions can not seem to get their heads around profit sharing proposals. By not even negotiating for them you are playing into the company's hands. They have a fixed overhead called the payroll. Easily managed and if you have massive increases in profits you only have to add 5% to the payroll to keep the workers happy. What will it take to get unions the bargain for profit share?

Why do unions settle for 5% every year when like shareholders you could gain massive increases (or decreases) in wages. Are unions that conservative?

By having profit share by the workers to comapny has added another tier of people who want the company to succeed. Workers councils to correct any processes or procedures that effects their take home pay.

But I guess we are getting into territory that is not socialist in nature, thus probably untenable to unions?

Mitchell said...

Hi Span,

I was actually asking you how you would create a framework that better encourages companies to act more ethically.

Imo it's very similar to the situation we have with politicians' behaviour - good people go to parliament with good intentions but because of the way the system works, end up acting in shall we say, 'unconstructive' ways.

And as Gerrit elaborates re: Air NZ, a 60% increase on fuck all is still good cause for firing the CEO, or selling the company outright, if they're not making at_least_ a 10% profit.

And letting someone else step into the breach who can do it better and cheaper.

I'm no free-market apologist btw (my background's in the humanities), but I think an understanding of basic economic theory is important when discussing political stories such as this.

Single Malt Social Democrat said...

There are a couple of questions that havent been asked here, which I think are critical. The one I would like to focus on is, why is that capital (shareholders) get a major say in business decisions, while labour (the workers) get very little say? If I invest $10,000 in Air NZ, I get more say than someone who has worked at Air NZ for ten years. The workers actually take more risk than the average shareholder, espeically in skilled professions, or in areas with little alternative employment. If a worker loses their job, their life is turned upside down, they may lose their house, their self respect, they may even be forced to move to another country to find work. The shareholder may lose some money, or at least make less profit than they would otherwise, but they are not exposed to nearly as much risk.

Yet, for some reason it is taken as a given that capital's interests are paramount, and labour's interests are irrelevant.

zANavAShi said...

Amen to that Single Malt Social Democrat!!!

I was planning to pick up on that point too, but you stated it so much more elegantly than I.

One of the most vulgar disparities of capitalism (as I see it) is the god-like status given to shareholders above workers.

It is my belief that time is the most under-valued of all commodities under the capitalism system.