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Corporate governance, sustainability and a new HRM arrangement

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Corporate practices continue, quite rightly, to be scrutinised around the globe. Strategies developed since the Enron scandal almost two decades ago have not abated concerns about corporate ‘abuse’. Indeed quite the contrary: things seem to be worse or continue unchecked. On almost a daily basis corporate leadership is questioned about ethical issues. The Rana Plaza collapse in Bangladesh, which killed over 1100 people, has led the authorities in India to seek arrests for murder. Apple’s recent tax avoidance debacle in Ireland further illustrates the lack of faith in governments to ensure equitable regulation.

In Britain, its parliament voted in October 2016 to rescind Sir Philip Green’s knighthood after he sold the retail giant, British Homes Stores (BHS), for £1. It was sold to a former bankrupt, Dominic Chappell, who had no retail experience and his consortium then went on to collect at least £17 million from BHS’s collapse. The scandal has resulted in a £571 million employee pension fund deficit, with thousands of workers now destitute and broke because of Sir Phillip’s corporate greed. 

Having a well thought-out Corporate Social Responsibility (CSR) policy, often with a mission to protect things like the environment and a community, is pretty meaningless: all these scandals were in corporations that said, on paper, they do the right things.

The ‘new’ HRM agenda

The goal for sustainable HRM governance can learn a lot from history. From the 1950s until early 1980s management systems responded to the rise of large bureaucratic corporations and public entities. With that came the need for administrative efficiency. As a result, corporate conduct was more regulated, transparent and based on a value model that included various stakeholders: workers and their unions, suppliers, citizens, community groups. All that changed after 1980s in the serach for management to be ‘strategic business partner’. Stakeholder interested were shunned in pursuit of greater financial returns (the era of financialised capitalism was born).

In the process, however, communities around the globe suffered and the neo-liberal model failed abruptly with the crisis of 2008.

A new arrangement now demands better sustainable approaches, both domestically and globally. One key lever is supporting global supply networks. Outsourcing is an established global phenomenon, yet the challenge now is to ensure other suppliers conform to Codes and Agreements for ‘decent work’. For example large MNCs can obligate all supplier firms to meet basic standards such as a living wage, end zero-hours contracts, and ensure labour contracts are permanent with a set of basic HRM policy standards in place, such as employee consultation.

Importantly, any cost implications of things like living wage policies will be offset by wider societal spending, raised living standards, improved health and better social wellbeing. These are benefits shared by all, including longer-term corporate sustainability, as opposed to boosting exclusively short-term shareholder profit. The moral economic utility will also have spill-over effects: educating and mentoring a network of supplier organisations to improve their humanist systems will embed a social sustainability.

A further cluster of arrangements in the new HRM agenda is engagement and inclusion. The challenge for many corporate brands is ‘sustainable governance’, especially as consumers are increasingly more sophisticated about the ethical issues of the brands they purchase. At its heart a new HRM arrangement supports transparency of participation, voice and empowerment. Even Teressa May, the British Prime Minister in her post-Brexit rhetoric, tried to alleviate fears that Britain leaving Europe might damage worker voice: she promised rules to allow worker representatives on company boards.

However, the new HRM engagement approach is difficult (even controversial) for many corporations. Having genuine voice is more than a soft policy that gives workers a suggestion scheme or a speak-up programme. The relationship is essentially one of power, by owners, over employees. Genuine voice means a shift in that power dynamic. For many managers employee engagement is seen as a loss of power or authority. But that is misguided. The reality is those managers who have the capability to facilitate wider inclusion end-up with better and more robust decision-making. In other words, learning how to share power through participation enhances corporate legitimacy and trust.

A future collaborative paradigm

The new HRM approach is not an easy, simple or a ready-made solution. Nor is it a single or straightforward tool-kit. Globalisation and neo-liberal forces are constant pressures that make it difficult for managers to support sustainable ethical arrangements with employees. Because of this, a future collaborative network is proposed which connects businesses, academia and government.

At The University of Manchester, for example, global sustainability is advanced not only through innovative research breakthroughs (e.g. green energy, new material compounds, business ethics, global equalities – among others), but also by shaping its students to be globally aware citizens. In September 2016 probably the world’s largest ever ‘project team’ took place in Manchester, when over 8000 first year students engaged in new innovative sustainability extra-curricular challenges.

Such activity is part of the new HRM approach outlined here. We know such collaboration is difficult, yet also extremely rewarding and fulfilling. We also know the benefits point to a better arrangement whereby citizens around the world, as workers and consumers, and corporations and the planet, may coexist and cohabit in a more sustainable future.

Tony Dundon

Tony Dundon is Professor of Human Resource Management & Employment Relations at Alliance Manchester Business School, The University of Manchester.

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