ROADMAP FOR FNV TRUSTEES IN PENSION FUNDS RELATING TO FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING

Transcription

1 ROADMAP FOR FNV TRUSTEES IN PENSION FUNDS RELATING TO FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING

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3 TABLE OF CONTENTS PREFACE 5 INTRODUCTION 7 THE FNV AND FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING 10 HOW TO CONTINUE? 13 APPENDIX 1: UNIVERSAL DECLARATION OF HUMAN RIGHTS 17 APPENDIX 2: ILO CONVENTIONS 87, 98 AND

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5 PREFACE Dear reader, The FNV plays a major role in establishing and managing pensions in the Netherlands. We have representatives who act on behalf of employees and retired employees in a large number of Dutch boards of trustees of pension funds. As a result, we can exert considerable influence on the investment policies of these funds. One of the FNV s most important basic principles is that pensions be invested in a fair way, or - to put it in other words - in a socially responsible manner. In this respect, the following three focal areas can be distinguished: Environment, Social and Governance (ESG). Environment refers to taking into account the environment, and ensuring that the world remains habitable for future generations. Social has to do with respecting labour and human rights, such as the right to organise and the eradication of child labour. Governance involves, among other things, applying sufficient checks and balances to the boards of companies, as well as a responsible remuneration policy. The S in Social is particularly important to the FNV and the ITUC (International Trade Union Confederation). This is not only because it is the trade unions sphere of activity but also because studies have shown that usually little attention is devoted to the social component in investment policies. Based on the FNV/CWC Building Workers Power project, we have therefore requested the Dutch Association of Investors for Sustainable Development (VBDO) to investigate the way in which pension funds in the Netherlands determine how companies in which they invest deal with employees freedom of association and their right to collective bargaining. As a result, it can be concluded that most pension funds do not give priority to these two topics, and that adequate information is not always available. We consider VBDO s study to be a first scan, and we now know that the Dutch pension funds devote scant attention to these two major ILO Conventions, which form the basis of trade union work within companies. However, there are more ILO Conventions that are important, and they usually become binding after they have been ratified by the Member States. In 1998, the 5

6 ILO adopted The Declaration on the Fundamental Principles and Rights at Work. It states that a number of principles and rights relating to labour are understood to be fundamental labour standards and therefore apply universally. This means it is not necessary to ratify them, and that every country affiliated with the ILO should respect, promote, and legally support these rights. The following fundamental principles and rights at work are involved: freedom of association and effective recognition of the right to collective bargaining (ILO Conventions 87 and 98); eradication of all forms of forced labour (ILO Conventions 29 and 105); effective abolition of child labour (ILO Conventions 138 and 182); eradication of discrimination in employment and occupation (ILO Conventions 100 and 111). These standards are also morally binding to all people in every country (including companies in less economically developed countries). Moreover, every country is obliged to report on compliance with these Conventions, whereby an additional obligation to report applies with regard to ILO Conventions 87 and 98. It has therefore become an issue for the FNV to address. In order to help the boards of trustees of pension funds to assume their responsibility of implementing a responsible investment policy, in which fundamental labour standards are included as key focal areas, we have developed a road map that may help them to formulate or review a socially responsible investment policy (SRI policy) for the pension fund. The road map can be found in this brochure, we wish you every success in applying it. Coen van der Veer Treasurer & Chair of the Committee on Workers Capital 6

7 INTRODUCTION Within the framework of activities relating to the Building Workers Power project, the Dutch Association of Investors for Sustainable Development (VBDO) has investigated the way in which pension funds in the Netherlands determine how companies in which they invest deal with employees freedom of association and their right to collective bargaining. This investigation was initiated after studies conducted by both the Committee on Workers Capital and ourselves had shown that usually little attention is devoted to the social component of the environmental, social and governance (ESG) criteria. The outcome of the VBDO s investigation and the FNV s basic premise is discussed. Subsequently, How to continue, sets out a road map, which boards of trustees of pension funds can use to draw up a socially responsible investment policy or to review the fund s current policy. Of course, other individuals involved in the fund, such as members of the accountability body, can also make use of this plan to call attention to the fund s social responsibility. In many cases, the process of arriving at a socially responsible investment policy or a review of it will not be a smooth one. After all, together with their fellow trustees, employers and retired employees, the trade union officials who represent the FNV in boards of pension funds will need to arrive at a policy that is supported by all stakeholders. However, we can help them with the road map. RESULTS OF THE VBDO INVESTIGATION On 5 December 2016, the VBDO presented the results of their investigation to FNV treasurer Coen van der Veer and trade union official Catelene Passchier. This presentation was also attended by fellow trustees from a number of major Dutch pension funds. During this meeting, the VBDO reported on its findings. In summary, it was observed that two thirds of the investigated pension funds claim that they practise freedom of association and the right to collective bargaining, and that they assess companies in this respect. In fact, it turned out that only about one third of the participating pension funds actually do, and all the others do not pursue this policy. 7

8 Photo: Frans Dekker Furthermore, the remaining one third of the pension funds involved do not focus on these topics at all. As a result, it can be concluded that most pension funds do not give priority to these two topics, and that adequate information is not always available. If pension funds do incorporate them into their investment strategies, the way in which they do so and the impact are often unclear. Their actions are often based on standards and guidelines. The underlying problem is that these are usually formulated too generally and have no consequences if one fails to comply with them. Furthermore, boards of pension funds do not consider that these topics represent a risk. However, we know that if funds seek to put child labour and a living wage on their agendas and wish to achieve results, this is only possible if there is a basis for people to organise and negotiate collectively on their rights. Trade unions have a responsibility to negotiate on labour rights on behalf of their members. Institutional investors such as pension funds may also play a role in this by including in their investment strategies freedom of association and the right to collective bargaining. 8

9 The investigation shows that attention to these topics is largely incident driven, and mainly occurs in the Netherlands and the United Kingdom. Furthermore, acting on both topics is complex, not only because little information is available but also because hardly any guidelines are in place for investors to adequately embed these standards and norms in the process of investment, and to use them to assess whether companies are making progress. In order to have an impact, pension funds should state more clearly in their policy what they, as investors, expect from companies in which they invest, and the entire chain of companies behind them. They should provide the asset manager with more specific guidelines on their objectives and on what they seek to achieve. This is particularly important in countries that have no legal framework that supports freedom of association and the right to collective bargaining. In this respect, the Corporate Human Rights Benchmark could serve as an example. Finally, because of the complexity of the production chain, it is important that companies, investors, trade unions and NGOs, both inside and outside the sector, step up cooperation in order to: arrive at complementary, worldwide recognisable standards; define objectives and collate relevant data. 9

10 THE FNV AND FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING The FNV considers the VBDO investigation a baseline measurement. We now know that Dutch pension funds rarely focus on assessing whether and how companies devote attention to these two fundamental labour rights. It has therefore become an issue for us to address. Freedom of association and thus the right to join a trade union is one of the fundamental human rights, as set out in Articles 23 and 24 of the Universal Declaration of Human Rights (Appendix 1). The universal trade union rights are part of the Fundamental Principles and Rights at Work, drawn up by the International Labour Organization (ILO): Conventions 87, 98, and 135 (Appendix 2). These labour standards are so fundamental that every ILO member state is deemed to be bound to them, even if they have not ratified the associated treaties. This means that employees should not be disadvantaged for being active in a trade union outside working hours, and that trade unions should be able to negotiate unrestrictedly with employers on employment conditions. The FNV s core task is to represent employees rights, which is done not only within companies but also at other locations. The FNV has representatives in a large number of boards of trustees of pension funds - funds that invest the pensions of their participants, of the people whom we represent. The FNV feels that this money should be invested in such a way that the position and rights of employees are strengthened. This is also the FNV s basic premise with regard to socially responsible investment policy. Pension funds run risks by investing in companies that operate in countries that do not comply with internationally agreed workers rights. Refer to the ITUC Global Rights Index for a list of these countries. These risks involve disruptions in the supply chain and reputational concerns. We, the FNV trade union, are being held accountable because we co-administer these pension funds. We therefore consider it imperative that all our trade union officials in 1) 10

11 pension funds propose that a policy be drawn up that can be used to make companies more aware of employees freedom of association and their right to collective bargaining during shareholder meetings. However, it is also important to take into account the differences between countries, and the possibilities for and consequences of rapid changes. Sometimes a small step is already considerable progress. Photo: Catrien Ariens 11

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13 HOW TO CONTINUE? Our pension fund trustees should assume the responsibility of implementing a responsible investment policy, in which freedom of association and the right to collective bargaining are included as key focus areas. This is important because these fundamental rights also form the basis for combatting child labour and achieving a living wage. The following road map may be helpful in this respect. ROADMAP FOR A SOCIALLY RESPONSIBLE INVESTMENT POLICY (SRI POLICY) STEP 1 Determine whether your pension fund has its own socially responsible investment policy (SRI policy) Attention: This is not the asset manager s policy. If so, please continue with step 2A Determine how freedom of association and the right to collective bargaining are included in the investment policy. Are these topics actually addressed (1) or not at all (2)? No, please continue with step 2B There is work to be done to define the FNV s basic premises. THE FUND DOES HAVE AN SRI POLICY IN PLACE STEP 2A Investigate whether the policy includes ILO Conventions 87 and 89, how the policy is implemented, and whether any measurable arrangements have been made with the asset managers. Yes. In this respect, you could consider the following: Investigate which standards and conventions are applied; Check which guidelines the fund has provided; Check which tools (ESG integration, engagement, voting at shareholder meetings, exclusion, etc.) are applied, and how the asset managers report on what they have done. Assess whether this is in line with the arrangements made by the fund. You do not need to take follow-up steps if everything is arranged adequately. 13

14 No. Suggest a review of the SRI policy. You can use steps 3B to 7B to review your SRI policy. Put forward that we want attention paid to the fundamental labour rights regarding freedom of association and the right to collective bargaining. Determine, as a pension fund, how the assets manager should implement this, and what your measurable arrangements are. THE FUND DOES NOT HAVE AN SRI POLICY IN PLACE STEP 2B Suggest developing an SRI policy for the pension fund within a scheme that involves the entire board, in cooperation with an expert. Start by formulating the fund s SRI convictions. The board will record the SRI convictions in a decision. It may be useful to determine in advance whether you have supporters within your fund, and to include in the discussions that the pension sector has also emphatically put social responsible investment on the agenda within the framework of socially responsible entrepreneurship in the financial sector. STEP 3B Develop and formulate an SRI ambition level, and suggest that, in addition to other matters, the fundamental labour standards also be included as a focal point. Start by applying existing standards and conventions such as: the ILO s labour standards, the UN Global Compact, the UN Guiding Principles on Business and Human Rights, and the Principles for Responsible Investment. The board will record the ambition level in a decision. 14

15 STEP 4B Adapt these guidelines to your fund by focusing more on components of them. If you opt for increased focus on labour and human rights, as a fund you can include freedom of association and the right to collective bargaining as basic themes. After all, these rights are also significant for combatting child labour and realising a living wage. Record these arrangements in a board decision Tip: Link up with what is going on in the sector and what is keeping people occupied. This will make it easier to obtain a wider support base within the board of the pension fund. For example, if codes, covenants, or agreements are in place between the collective bargaining parties, these can be used for this purpose. However, other specific agreements governing the protection of people who are employed in the sector may also be useful in this respect. STEP 5B Discuss the definition of convictions, themes, and ambitions in the pension fund s investment portfolio. Discuss how the specified focal points can be further defined within the various investment categories. Next, discuss which tools would be preferred, such as: exclusion, engagement, ESG integration etc. Also discuss the limitations of various tools and possible solutions. Record the preferences and choices in a board decision. STEP 6B Draw up a pension fund memo on the ESG policy. Content: Describe the established ESG policy as a whole; Describe the administrative process of how it was established; The aim of this pension fund memo is that the entire process of arriving at a policy and which considerations played a role should be recorded in a clear manner, so that, in the event of a change of board members, it will be evident why certain choices were made. The board decides on the pension fund memo. 15

16 Photo: Frans Dekker STEP 7B Implement the agreements made, and draw up mandate guidelines for the asset manager. Content: Record which measurable topics the asset manager needs to steer; Record the consequences of non-compliance with the guidelines, what measures will be taken, and who will be the first point of contact; Record the frequency of reporting and what should be included in these reports. Record everything in a board decision. Steps 2B to 5B are components in which the entire board of the pension fund should be involved. For this, a number of course days/afternoons may need to be planned so as to arrive at a supported policy through sound discussions. Steps 6B to 7B can be prepared by the investment committee (if the pension fund has one). However, agreements and documents always need to be approved by the board as a whole. 16

17 APPENDIX 1 UNIVERSAL DECLARATION OF HUMAN RIGHTS ARTICLE 23 1 Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment. 2 Everyone, without any discrimination, has the right to equal pay for equal work. 3 Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection. 4 Everyone has the right to form and to join trade unions for the protection of his interests. ARTICLE 24 Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay. 17

18 APPENDIX 2 ILO CONVENTIONS 87, 98 AND 135 FREEDOM OF ASSOCIATION AND PROTECTION OF THE RIGHT TO ORGANISE CONVENTION, 1948 (NO. 87) This fundamental Convention sets forth the right for workers and employers to establish and join organizations of their own choosing without previous authorization. Workers and employers organizations shall organize freely and not be liable to be dissolved or suspended by administrative authority, and they shall have the right to establish and join federations and confederations, which may in turn affiliate with international organizations of workers and employers. RIGHT TO ORGANISE AND COLLECTIVE BARGAINING CONVENTION, 1949 (NO. 98) This fundamental Convention provides that workers shall enjoy adequate protection against acts of anti-union discrimination, including requirements that a worker not join a union or relinquish trade union membership for employment, or dismissal of a worker because of union membership or participation in union activities. Workers and employers organizations shall enjoy adequate protection against any acts of interference by each other, in particular the establishment of workers organizations under the domination of employers or employers organizations, or the support of workers organizations by financial or other means, with the object of placing such organizations under the control of employers or employers organizations. The Convention also enshrines the right to collective bargaining. (see also under collective bargaining). WORKERS REPRESENTATIVES CONVENTION, 1971 (NO. 135) Workers representatives in an undertaking shall enjoy effective protection against any act prejudicial to them, including dismissal, based on their status or activities as a workers representative or on union membership or participation in union activities, in so far as they act in conformity with existing laws or collective agreements or other jointly agreed arrangements. Facilities in the undertaking shall be afforded to workers representatives as may be appropriate in order to enable them to carry out their functions promptly and efficiently. 18

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