Unionizing for Change: The Case for Worker Empowerment at Samsung India and Beyond
-Shreya Jain
Abstract
This article discusses the strike at Samsung India, focusing on the workers’ demand for the recognition of the Samsung India Workers Union (SIWU) under the Trade Unions Act of 1926. Despite the withdrawal of the strike following negotiations, the workers’ quest for union recognition remains unresolved. Drawing on insights from the theory of ‘extractive and inclusive institutions’ by Nobel laureates Daron Acemoglu, Simon Johnson, and James A. Robinson, the article tailors the concepts of ‘extractive’ and ‘inclusive’ institutions to the micro-level dynamics of labour relations as the debate between short term growth and long term growth remains relevant in both the contexts. It advocates for collective bargaining, as a means to empower workers and foster a cooperative relationship with management, aligning with theories from Kahn-Freund and Sinzheimer on economic democracy. The article underscores the necessity of an inclusive institutional framework for sustainable organizational growth and the resolution of labour conflicts. It discusses the dichotomy between short term corporate profits which is achieved through an extractive institutional setup and a long term sustainable ecosystem, driven by worker empowerment which perpetuates an inclusive framework within an enterprise. Ultimately, in consonance with the theory of ‘constitutionalization of industrial relations’, it argues that legal recognition of trade unions is crucial for enhancing worker representation and promoting a level playing field within the enterprise.
Recalibration of Labour Relations
At the heart of the protests by Samsung India workers at Sriperumbudur in India lie the demand for registration of their trade union-Samsung India Workers union (“SIWU”) under the Trade Unions Act,1926. The State Government and Samsung have argued that SIWU is backed by the Centre of Trade Unions (“CITU”), having communist leanings. Workers have also raised issues pertaining to stressful work intensity and low wages during the course of the strike. While the strike has been withdrawn after negotiations between the workers and Samsung management, their demand for recognition of SIWU remains unrealised.
The strenuous working conditions in these enterprises is driven by their management mantra of having origins in the post-World War II Japanese quality circles. Kaizen, introduced by Masaaki Imai, encourages continuous improvement, involving employees at all levels of a company and strives for greater efficiency, higher quality and minimal waste within an enterprise. Accordingly, it creates a regimented approach to continuous improvement in the enterprise by ensuring that there is maximum utilisation of labour at minimum costs. The mantra of ‘Kaizen’, which focuses on maximizing labour output through continuous improvement without allowing for breaks, coupled with the refusal to recognize the workers’ trade union SIWU) illustrates how the system serves only the interests of the elite. By denying workers economic freedom, it reinforces an ‘extractive, rather than an inclusive, structure.’
In this article, the author discusses the dilemma between short-term gains and long-term sustainability. The focus of short-term gains is on immediate profits which is accomplished by indiscriminately extracting resources of the country on a macro level. On a micro scale, it is achieved by reducing production costs quickly by disempowering workers and undermining long-term stability. In contrast, long-term sustainability emphasizes on building an ecosystem, that fosters enduring success such as investing in the empowerment of workers which leads to minimal worker dissatisfaction and high productivity in the long run.
Since lack of recognition of ‘SIWU’ is the paramount concern raised by Samsung workers in their strike against the management, the importance of collective bargaining effectuated by unionisation would be discussed in the article, taking recourse to the theories of Kahn Freund and Sinzheimer. In the wake of the 20th century, when industrialisation was at its peak and labour exploitation was massive, scholars like Freund and Sinzheimer focused on the need for fairness and equity in labour relations, highlighting the importance of creating just systems for workers, which would lead to long-term stability within an enterprise. They lay stress on the idea of collective bargaining and creation of an ‘inclusive space’ within an enterprise which reduces the inequality in the bargaining chip of the workers.
In the 21st century, the resolution of the dispute at Samsung would entail an extension of the theories of Sinzheimer and Freund as it is imperative to tread the delicate balance between the demands of the management and workers. This balance bodes well with the growing recognition that accentuating fairness and equity within an enterprise is not just important for alleviating the inequality in the bargaining chip of the workers but is a strategic business decision as it minimizes costly labour disputes which is highly disruptive to productivity and innovation. ‘Inclusive institutional frameworks’ within an enterprise create a positive feedback loop as empowered workers are more likely to be productive, innovative, and committed to the company’s long-term goals. This leads to higher profitability in the long run as opposed to an ‘extractive setup’ which although promises short-term profits but is detrimental for the enterprise in the long-run. This inclusive approach also ties directly with Corporate Social Responsibility (CSR) of these enterprises, which reflects a growing expectation for companies to contribute positively to the wider community while pursuing profit.
In the light of this juxtaposition between short term gains and sustainability, the author proposes that the theory of ‘extractive and inclusive institutions’ carried out by Daron Acemoglu, Simon Johnson and James A Robinson (“AJR model”) on a macro level can pave the way forward for the resolution of these issues faced by enterprises like Samsung on a micro scale as the dilemma remains a critical issue for enterprises and nations alike. Accordingly, in the further sections of the article, the demarcation between ‘extractive and inclusive institutions’ carved out by the economists influencing the trajectory of growth of nations would be tailored to be applicable to the micro-level dispute at hand. Furthermore, the theories proposed by Sinzheimer and Kahn-Freund will be linked to the concept of ‘inclusive institutions’ to lay stress on the idea of collective bargaining to amicably resolve the dispute by agreement rather than coercion.
Collective Bargaining : The key to Labour Empowerment
Kahn Freund’s theory of ‘collective laissez faire’ and Sinzheimer’s theory of ‘constitutionalization of industrial relations’ provide interesting takeaways to the aspects of democratisation and ‘inclusive institutional framework’ on a micro scale. In an era of rapid industrialization, these ideas were particularly relevant, as labour movements and unionization efforts were growing in response to exploitation of labour. These theories provided a foundation for subsequent labour reforms, focusing on fairness and equity within an enterprise.
The base of Kahn Freund’s theory was the postulation of two universal truths. First, in an employment contract, there is an inherent imbalance of bargaining power between the employer and the individual worker. In this relationship, the employer holds the power, while the worker does not, leading to the worker’s submission to the terms set by the employer. Second, there is a perennial conflict in any enterprise between the aims of management and those of labour as the aim of the management is to maximise investment and the priority of labour is high wages. From these two universal truths emerge two requirements: strengthening the bargaining chip of the workers and a method of regulating the conflict between the management and labour. To alleviate the inequality of bargaining power between the employer and employee, collective worker representation limited to representation by trade unions in collective negotiations with management is the solution proposed by Freund. As per Freund’s scheme, collective negotiation determining the terms and regulations is more feasible and desirable than statutory regulation as collective negotiation spearheaded by trade unions is more flexible and creates an equilibrium between both parties. The role of law is to act as a countervailing mechanism to minimise the inequality of bargaining power which is inherent in the employer-employee relationship.
This is where Sinzheimer’s theory of the “constitutionalization of industrial relations” becomes relevant. He argued that simply transferring ownership of the means of production from capitalists to workers, as suggested by Karl Marx, would not, on its own, address the underlying issues related to private ownership.. It was the transfer of the power to manage and not mere transfer of ownership that is relevant to the domain of democratisation of the economic sphere (which determines prosperity and progress of a nation). His theory syncs with the theory of ‘inclusive institutions’, when he argued that democratization in the political sphere does not suffice and it is only when political democracy is supplemented with economic democracy, to be effectuated by the elimination of despotism at the workplace and entrenched through constitutionalization, would true democracy be realised. Accordingly, constitutionalization of industrial relations is instrumental to bring equity in the economic sphere and to free workers from the subservience inherent in the relation of employment.
As theories by economists like Freund and Sinzheimer highlight, within any enterprise, there exists an inherent inequality in the bargaining power between management and workers. This imbalance can be addressed through the creation of avenues that allow workers to voice their grievances, ensuring that their interests are considered. One effective way to achieve this is by promoting an inclusive institutional framework, which governs the economic and political life of the organization. At its core, this framework is realized through collective bargaining, a practice rooted in democratic principles and the “bottom-up” approach. Unionization of workers serves as a mechanism to redress these imbalances, ensuring that interests of the workers are recognized in shaping the direction of the enterprise.
Extension of Democracy from the Political Sphere to the Economic Sphere- an Inclusive Institutional Framework
The tale of Nogales, on the border between USA and Mexico, is taken as a reference by the economists to analyse the demarcation in their institutional framework, responsible for the remarkable difference in the progress and prosperity of the two regions despite their cultural homogenisation. Nogales which is cut in half by a fence has two parts- North Nogales and South Nogales. North Nogales in Arizona, USA is a wealthy area with long lifespans, high school diplomas, secure property rights, and free elections. However, compared to South Nogales in Sonora, Mexico, residents are generally poorer, face organized crime, and struggle to replace corrupt politicians. The key difference lies in their type of institutions, not geography or culture. North of the fence residents benefit from the USA’s economic system, which is open and democratic, while south residents face challenges owing to the lack of political and economic freedom.
According to the AJR model, this demarcation in institutions is attributed to Spanish expansion and colonization of Mexico in 1519. The Spanish strategy of colonization was highly effective as it subdued opposition by capturing the indigenous leader. This strategy enabled the Spanish accumulate humongous wealth and force the indigenous population to give tribute to the colonisers. The next step was setting themselves up as the new elite of the indigenous society and assuming absolute control over taxation, tribute, and forced labour. The indigenous population was subjugated through the institution of ‘encomienda.’ It involved the grant of indigenous peoples to a Spaniard, known as the encomendero. The indigenous peoples had to give the encomendero tribute and labour services. Furthermore, Spanish created an ‘extractive framework’ to exploit the silver. For extracting silver, they required miners, for which they first moved the indigenous population, concentrating them in new towns called reducciones, which facilitated the exploitation of labour by the Spanish Crown. To further exploit the labour, a labour institution (mita) was erected, which enabled the use of forced labour to run plantations In return, the Spanish elite provided famine relief and security to the labour. Additionally, the encomienda was consolidated into a head tax which included a fixed sum payable by each adult male every year in silver. This was designed to force people into the labour market and reduce wages for Spanish landowners. Exploitation of silver merely by extracting maximum from the labour was the foremost concern. Therefore, the Spaniards focused on short term gains, in contrast to building an ‘inclusive institutional framework’, promising economic freedom, which would have led to sustainable long- term development.
This reflects the difference between the ‘extractive institutions’ and ‘inclusive institutions’ which on a macro-scale determines as to why nations succeed or fail. Institutions connote the rule that govern and shape the symbiotic life of politics and economy and can either be extractive or inclusive. The purpose of extractive institutions is to steer the economic rewards towards a relatively small elite. Two dimensions characterise extractive institutions: concentration of power economically and constrained political freedoms which results in deep economic pain. The economists take the instance of Mexico where political institutions were extractive as the Institutional Revolutionary Party(PRI) was the most dominant political party which held uninterrupted power from 1929-2000 and there was dearth of inclusiveness. This resulted in the post-Revolutionary state economically weak in many aspects, such as in the fiscal system which led to a meagre 10% of national income as tax revenues till the 1970’s, resulting in inadequate infrastructure in the state. In contrast, inclusive institutions where economic freedom and empowerment is guaranteed, push for a mechanism in which power is vested with a broad coalition. Politically inclusive institutions propel economically inclusive institutions which harness energy, creativity and entrepreneurship in society by providing for incentives and opportunities. Scandinavian countries (characterised by high development) exemplify this ecosystem, where mutually reinforcing institutions grounded in democracy provide both political choice and freedom in economic activities to their citizens. Accordingly, democracy has been classified as an imperative ‘inclusive’ institution for long term economic prosperity.
These insights into democratization and the establishment of an inclusive institutional framework on a national scale are equally relevant when considering the trajectory of growth within an enterprise. Similar to the institutional structures of ‘encomendero’ and ‘mita’ erected by Spaniards where maximum profits to the elites were reaped on the plank of exploitation of the indigenous labour community in Mexico, labour exploitation and denying workers a stake in the decision making process of an enterprise stifles sustained growth in the enterprise. The success of an organisation is often contingent upon the nature of the relationship between management and workers.These theories have shown that institutions created to exploit the masses tend to stifle long-term growth, while institutions that promote fundamental economic freedoms and the rule of law foster development which is sustainable. This institutional lens of AJR’s model can be extended to entities like Samsung because just as nations with ‘inclusive institutions’ tend to be more prosperous, companies with inclusive workplace practices have higher satisfaction among workers, leading to increase in productivity and corporate profits in the long run. Accordingly, by focusing on long-term and fostering an inclusive work culture, enterprises like Samsung can build the institutional foundation for long-term success.
Way Forward- A Blueprint for Resolving Labour Disputes
In the light of the discussion in the previous section, it is argued here that an ‘inclusive institutional framework’ which grants room to the workers to express their grievances through collective bargaining would pave the way forward for prosperity in an enterprise. . discussed in the previous section, political inclusiveness has a positive correlation with the economic progress and prosperity of the nation at macro level and an enterprise at a micro level. As long as the purpose of the enterprise is to concentrate the fruits of produce to a relatively small elite (“the management”) and constrain economic freedom of the workers by curtailing the recognition of their trade union, it would stay in the trap of an ‘extractive institution’. This was exemplified in the case of Mexico, where concentration of power in the hands of the Spanish elite, led to the decline of sustained growth in the country and explain the difference in the economic status of the two Nogales.
An inclusive institutional mechanism in enterprises like Samsung promise power being devolved to multiple stakeholders including the workers, resulting in manifold increase in productivity of labour as empowering them would provide them an incentive that their future gains will not be expropriated by the management. Power maximalization by the management runs contrary to the idea of economic democracy proposed by Sinzheimer. Accordingly, to minimise the inequality in the bargaining chip of the workers in an enterprise like Samsung, ‘constitutionalization of industrial relations’ (countervailing force) is paramount, which can be attained when their trade union- ‘SIWU’ is registered under the Trade Unions Act, 1926. The registration of their trade union would pave the way forward for collective bargaining and correspond with the solution proposed by Freund to resolve the unending conflict between the workers and management as it would place the workers on an equal pedestal, leading to redressal by collective negotiation. This position regarding ‘constitutionalization of industrial relations’ propounded by Sinzheimer is applicable in the Indian legal context which recognises the role of the law to facilitate the minimising of inequality of bargaining power. It was in the case of B.R Singh v UOI, that the court recognised the right to form association or unions as a fundamental right under Article 19(1)(c) of the Constitution, actualised by Section 8 of the Trade Unions Act which provides for registration of a trade union. The rationale for registration of a trade union was to confer certain rights on trade unions for voicing the grievances of labour and act as mouthpieces for their demands. Furthermore, in line with Freund’s theory, the case of Karnal Leather Karamchari V. Liberty Footwear company spelled out that the purpose of the Trade Unions Act, 1926 was to achieve social justice through collective bargaining. The court reiterated that the recourse to amicable agreement and voluntary arbitration between labour and management, which is imperative for the dispensation of justice in industrial adjudication warrants collective bargaining.
Conclusion
The strike at Samsung India, with its demands for union recognition and better working conditions, underscores the importance of considering workers as a genuine stakeholder in the organization’s setup. The theories discussed in the previous section highlight that an enterprise operating under an extractive institutional model, where power and economic benefits are concentrated in the hands of a small elite, long-term progress is stifled. On the other hand, adopting an inclusive framework that values the contributions of workers not only fosters a more equitable environment but also enhances productivity and organizational stability. The legal recognition of workers’ unions, such as the registration of SIWU under the Trade Unions Act, 1926, is a vital step toward addressing these power imbalances. This would facilitate collective bargaining, a mechanism that allows workers to participate in decision-making processes and resolve disputes without coercion. The principles laid down by Freund and Sinzheimer, particularly the ‘constitutionalization of industrial relations’, provide a path towards ensuring that workers’ rights are enshrined within the rules of the organizational structure as law acts as a countervailing mechanism to address the inequality in the bargaining chip of the workers. Ultimately, the transition from an extractive to an inclusive institutional framework in enterprises like Samsung is imperative not just for resolution of labour disputes but for creation of a sustainable and thriving organizational culture that drives long-term growth. By empowering workers, recognizing their economic freedom, and embracing the democratic principles of collective bargaining, Samsung can tread the path towards sustainable development.
Author is a student of Rajiv Gandhi National University of Law.