Meredith Jones, Shelley Marshall and Richard Mitchell Faculty of Law University of Melbourne

1. THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY POLICY ON BUSINESS EMPLOYMENT PRACTICES: TWO AUSTRALIAN MINING INDUSTRY CASE-STUDIES Meredith Jones, Shelley Marshall and Richard Mitchell Faculty of Law University of Melbourne

2. Overview • Central Question • Sources of Content and Obligations • National and International • Conditions that engender a CSR strategy • Case studies • Rio Tinto and BHP

3. Question • What influence does CSR have on the relations between companies and their employees? • Indicators examined: • Freedom of association and right to bargain collectively • Partnership style relations • High Performance Workplace Systems

4. Sources of obligation and content • Australian Regulation • Corporations Law • Insolvency Law • Labour Law • ASX Principles of Good Corporate Governance

5. International Regulation • Type One: • Sets out broad minimum standards and principles • Examples are ILO Declaration on Fundamental Principles at Work, OECD Guidelines for Multinational Enterprises • Type Two: Reflexive regulation • Set out process by which companies might achieve a best practice CSR programme • SA 8000, Dow Jones Sustainability Index and FTSE4 Good

6. Example: Freedom of Association The Dow Jones Sustainability Index disclosure: • Compliance with ILO convention on freedom of association • Percentage of employees covered by collective bargaining agreements or represented by an independent trade union. • Extent of consultations with trade unions over organisational change The SA 8000 requires that companies: • Respect right to form and join trade unions, • In situations where right of freedom of association is restricted, facilitate parallel means of independent and free association and bargaining.

7. Comparison • National regulation • No CSR obligations • Little content consistent with CSR • International regulation • No obligations, soft law • Comprehensive guidance re content of good CSR practice

8. What conditions engender a CSR Strategy? • CSR adoption not widespread in Australia • We hypothesised that companies adopt as a response to: • Reputational risk and desire to extend social license • Heightened by: • Industry specific factors, esp. in mining • internationalisation

9. Rio Tinto Case Study: Overview • Brief History • CSR Strategy • Freedom of Association and Collective Bargaining - principle and practice • HPWS and Partnership - principle and practice

10. Rio Tinto • Dual listed companies structure the result of merger in 1995 between CRA (Australia) and RTZ (UK). • Emerged as one of the largest mining companies in the world. • Business strategy post merger explicitly built around creation of long term value for shareholders

11. Rio Tinto • Prior to merger the Australian arm, CRA had been engaged in conflict with CFMEU over de-unionisation strategy. • Post merger, becoming increasingly focus of attention from environmental groups, human rights and international trade union organisations.

12. Increased reputational risk • Stakeholder reports detailing environmental harms, human rights abuses, and breaches of labour standards. • CFMEU co-ordinated a high profile shareholder campaign focussed on both corporate governance issues and labour standards.

13. CSR Strategy • CSR strategy adopted in sophisticated and integrated way. • Incorporated into governance - board committee overseen by Chair • Company wide policy statement - The Way We Work. • Annual report on targets and performance against targets, now moved to GRI reporting. • Externally assured and verified • Local level initiatives - community based.

14. Commitments • Adopted key instruments such as: • UN Global Compact • UN Universal Declaration of Human Rights • US/UK Principles Security and Human Rights • Founding member International Council on Mining and Metals • Global Mining Initiative • Partnerships with Civil Society groups such as Earth Watch • Included in Dow Jones Sustainability World Index

15. Freedom of Association and Collective Bargaining • Principle and Practice examined • Priniciple: Outlined in key policy document and recognises right of employees to choose whether or not they wish to be represented collectively. • Also declare support for ILO Declaration on Fundamental Principles and Rights at Work and OECD Guidelines for Multinational Enterprises. • These contain strongest statement of freedom of association and right to bargain collectively.

16. Freedom of Association and Collective Bargaining • Declared commitment to freedom of association and right to bargain collectively does represent a shift. • Previously took position of open opposition to union involvement • Declared that award employees less valuable to company than ‘staff’ employees.

17. IR: Practice • At the level of practice, Rio does engage in collective bargaining. • Collective agreement at around 13 sites, 9 union agreements. • Agreements contain very few union rights provisions, some provide for consultation about major change. • Pragmatic rather than ideological approach.

18. HPWS and Partnership • Increased disclosure on employment practices evident over the years of CSR reporting. • Approaches consistent with HPWS include six sigma methodologies, ‘open communications flows’ via 360 feedback and skill development frameworks.

19. HPWS and Partnership • Partnership: Mobilising whole workforce behind common goals, participation on business outcomes and collaborating on achievement of changes. • Clear evidence of commitment in principle to partnership style relations and high performance workplace systems. • Difficult to determine approach ‘in practice’ as no reporting against targets in this area.

20. HPWS and Partnership • CSR only minor influence on employment practices at Rio Tinto • HPWS pursued since 1980s • Some change in emphasis on consultation and participation in CSR reporting • Not reflected in industrial agreements.

21. Conclusion • Rio Tinto: CSR has not been a major influence on employment practices. • Change in declared commitment to freedom of association and right to bargain collectively • Pragmatic rather than ideological in practice • Employment systems disclosed are consistent with HPWS or partnership • Practice difficult to assess

22. Conclusion • Very different environment now - commodities boom means ensuring production not cost cutting is the focus. • Will CSR influence employment practices in the future?

23. BHP Billiton Case Study Background: • Adopted CSR strategy following DLC merger in 2001 • Decade prior to merger a low point for BHP: • Ok Tedi environmental disaster • Profits waning • Responded by writing off bad investment and pursuing aggressive de-unionisation in Pilbara

24. DLC merger increased reputational risk for BHPB • Billiton had a controversial human rights record in Africa • Unions feared that ‘savings from synergies’ = job losses • Increased attention from analysts in capital markets where CSR concerns are more mainstream

25. Responded to risk by: • Aligning core policies of operations, including CSR policies, against the general trend of de-centralisation • CSR policies driven by Board • 2 CSR related committees of the Board • Major CSR report every year released with Annual Report • Linked to managers’ performance indicators

26. Strong formal commitment to freedom of association and bargaining collectively • Uses language of partnership in disclosure documents • Committed to many international instruments, including UN Global Compact (since 2001) • Listed on Dow Jones Sustainability Index and FTSE4Good

27. What was happening aside from formal commitments? Freedom of Association: • Continues to negotiate collective agreements with unions in most sites around Australia • Pilbara campaign to move employees onto individual contracts (Iron Ore) continued • Contrast with Illawarra where mixed approach used (Coal)

28. Pilbara Dispute • Proposed merger with competitor revealed substantially lower labour costs due to use of individual contracts • November 1999: offered individual contracts which contained only 6 clauses • Union attempts to compel company to enter into collective negotiations failed • Unions then shifted focus to BHPB’s commitment to Global Compact

29. Global Compact initially sympathetic towards unions, based on ILO’s findings of incompatibility of Australia’s labour law with collective bargaining components of CLS • Global Compact later retracted this statement on the basis that the Compact ‘does not prescribe a particular form of workplace arrangement’ • According to BHPB around 60% of employees are now on individual agreements in Pilbara

30. Illawarra • Only introduced individual agreements at one site • All other sites have collective agreements • New sites have ‘greenfield’ agreements which are substantially more flexible

31. Partnership relations at BHPB • Hard to tell from available evidence • Pilbara: • No ‘partnership’ with unions at Pilbara • Absence of structured and permanent consultative arrangements and low job security • Illawarra: • Strong partnership with unions on face of agreement, but little trust in practice (highly adversarial)

32. High Performance Work Systems at BHPB • Pilbara • High levels of temporal, functional and spatial flexibility, but no consultation • Illawarra • Union agreements offer high levels of consultation over work practices, but aim of agreement is to limit flexibility

33. Analysis • Internationalisation and risks associated with mining did contribute to growing commitment to CSR • Adoption of CSR not without organisational tensions: • Mergers necessitated de-centralised management • CSR accountability requires bureaucratic centralisation

34. Adoption of CSR resulted in ‘ratcheting up’ of level of employment policies in both companies, to comply with standards in most rigorous jurisdiction • Gap between applicable national laws in Australia and standards committed to by companies • However, international regulations are not enforceable, despite strong normative force • National laws continue to ‘matter most’ where competitive pressures at play

35. Product market conditions significant • Individualised agreements in both companies in iron ore industry where commodity prices slid • Collective agreements remain in coal in both companies, which has received a steadier price • Adoption of CSR did not lead to a turn-around in employment practices • Question whether CSR a source of re-regulation