The P&O debacle has become a touchstone for business ethics.
Few would like to be in the shoes of Peter Hebblethwaite, the Chief Executive, who admitted in oral evidence to a joint sessions of the Transport and the Business, Energy and Industrial Strategy Committees, that he had broken the law on consultation with trade unions. He argued that without this decision there was no future for the company and 3,000 rather than 800 job losses would result. The crews would be replaced with an agency model, with levels of pay above the internationally agreed levels for the model, but considerably below the UK minimum wage provisions. It was, he said, the only decision which could be made and he would do so again.
The basic facts
The facts on the ground are relatively straightforward.
There are some other disputed issues – for example, the requirement to give 30-45 days’ notice to relevant flag state authorities – for which there appears to be an exemption and whether or not the Secretary of State was informed, but there appears to be no disagreement on the main three points above.
The initial responses:
What options were available to P&O?
The company had lost, according to the CEO, an unsustainable amount of money, around £100m in the last year. What then were the options open to P&O?
There may have been other short-term options (property sales, loans) but in essence a company in the situation that faced P&O almost certainly has to reduce its wage bill, one way or another. Perhaps the chief executive was correct when he said that was no other decision he could make?
Nevertheless, if this is the case, why would you not follow the appropriate and required legal processes for achieving these redundancies? Why risk further damage to reputation by failing to do so?
Ironically, the market may sort out both the economics and the ethics.
My real point is not to defend P&O, but that the rule of law provides remedy.
I am not sure that I like the fact that agency seafarers are paid such low wages. Indeed, for the government to take the lead in reforming the international maritime system would be a point of moral leadership. However, to arbitrarily introduce legislation affecting only British ports could destabilise the competitiveness of British ferry companies to the detriment of all their employees.
There are some signs that the government has accepted that legislation to achieve this is not possible under international agreements; indeed, arrangements agreed with international trades unions. There also appears to be some moves afoot to declare some or all P&O directors unfit with an investigation launched by the Insolvency Service into both criminal and civil liability.
I have no comment on whether the standards are met, but it is right that the company and its directors are held account for their actions. I do not support the manner in which these redundancies were handled at all. I believe workers should be properly and generously treated, their dignity respected and that they should be well-paid. P&O have done themselves serious business damage through the impact on their reputation, for which the directors are responsible.
However, we need far more care in discerning the real issues in this and similar disputes. The rush to judgement helps nobody and usually requires backtracking.
The market has an extraordinary way of filtering out bad business practice. The employees would probably be best advised to seek alternative employment and the unions advised to help them. But I also wonder whether the shareholders want a board of directors in place that causes such unnecessary reputational damage by failing to follow due process? The consequences are entirely commercial.
Dr Richard Turnbull is the Director of the Centre for Enterprise, Markets & Ethics (CEME). For more information about Richard please click here.