The imbroglio at Muthoot Finance has reignited concerns over Kerala’s business climate. However, the hard positions taken by the management and the union are not surprising as in any negotiation it is quite expected that both parties will show aggression even when they end up suffering short-term losses. The Muthoot management is being blamed for insensitive handling of the union’s concerns, closing down branches without doing enough to find a solution and even threatening to quit the state. On the other hand, the union is facing criticism for apparently striking work without the support of majority of workers and making it difficult for normal business to function by preventing non-striking workers from reporting for work and inflicting major financial losses on, what many claim is, an otherwise generous and well paying employer.
Ultimately these are hard bargaining tactics and the final outcome will depend on how much each party has to gain or lose from their actions. The party that has more to lose and less to gain has the weaker bargaining position (for instance if Muthoot really does not want to leave Kerala) but they typically conceal their true positions as in a bluffing game like Poker. It is usually the case that both parties end up losing somewhat because of the aggressive posturing but one of them may gain certain concessions that will become useful in the future. The result arising out of the impasse also depends on the skills of the negotiators or the role played by an arbitrator such as the Labour Commissioner.
lose-lose point of no return
Are there steps which businesses, unions and the government can take to prevent things from reaching a lose-lose point of no return? Big companies like Muthoot should consider using their Corporate Social Responsibility(CSR) Fund to spend on the community and create a sympathetic impression in the minds of employees’ families and the local people so that they can gain the union’s trust and also make it hard for the union to show aggression. The company can also encourage other sections of its workforce to start parallel unions who can weaken the monopoly of the dominant union. Companies should understand that dealing with well functioning unions is better than handling an unorganised workforce, particularly during periods of crisis or change. A union can try to win the management’s trust by showing greater understanding of the latter’s genuine concerns and ordinarily playing a collaborative role for growth of the business.
Mutual trust and cooperation can prevent lose-lose outcomes in a bargaining game. The government and the political class can also help in this regard by calming things down rather than take unilateral positions or stay aloof just for short-term gains. As is widely acknowledged, such incidents do little to help Kerala’s unflattering image as a poor business destination.
(The writer is professor of economics at IIM-Kozhikode)