Bonus payments dispute at KGHM settled

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In October 2005, the management of Poland's KGHM copper conglomerate signed an agreement with trade unions that put an end to a collective dispute that had broken out in September. The agreement provides that all 17,000 KGHM employees will receive a bonus payment equal to one month's wages. The unions had demanded bonuses on the grounds of higher-than-predicted profits made by the company.

A collective dispute was initiated on 16 September 2005 against the managing board of KGHM, Europe’s biggest producer of copper (PL0506101N), by members of the Copper Industry Employees' Union (Związek Zawodowy Pracowników Przemysłu Miedziowego, ZZPPM). The constant high demand for metals in the first half of 2005 boosted KGHM’s profits above management expectations, and it has been estimated that the year’s end profit will be twice as high as predicted. The strengthening market position of KGHM and, most of all, its continually growing output, coupled with ever-improving financial results were used by the workforce as arguments for making bonus claims. In letters sent to the managing board on 23 August and 7 September 2005, the ZZPPM union bonus called for:

  • bonus payments equal to one month's wages to be paid in September 2005;
  • regrading and pay rises for at least a third of the workforce;
  • amendments to the current collective agreement so as to guarantee that ex-employees who receive pre-pension benefits have a right to obtain a sum equivalent to the coal allowance granted to employees; and
  • increasing the corporate capital of KGHM group companies, to enable investments and the acquisition of new technologies.

The KGHM's chief executive invited representatives of all trade unions organising at the group to a meeting on 7 September 2005. The unions accepted the invitation but expressed surprise when none of the six members of the managing board turned up for the meeting. The board delegated as its representative an office worker, who reportedly admitted that he had not received proxy powers to make any binding agreements with respect to bonus payments or regrading.

A further meeting, this time with members of the board, took place on 16 September. However, differences prevented any agreement and a collective dispute was initiated, with a 'discrepancy protocol' signed on 22 September 2005.

The political context of the conflict was also significant, and indeed some commentators saw the actors in this dispute as being politically motivated and ascribed this primary importance. ZZPPM was not the only organisation that promoted the idea of bonus payments. The National Copper Mining Section of the Independent and Self-Governing Trade Union Solidarność (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność) presented similar claims. However, it did not appear as determined in its efforts as ZZPPM. Some observers believe that the increased activity of ZZPPM stemmed from the fact that its leader, Ryszard Zbrzyzny, was standing for parliament as a candidate of the Democratic Left Alliance (Sojusz Lewicy Demokratycznej, SLD) in the general election held in late September. It is argued that his involvement in the KGHM bonus payments dispute helped Mr Zbrzyzny win a parliamentary seat. The political aspirations of the ZZPPM leader thus arguably increased the effectiveness of the union in this case.

Dispute resolved

A mediator from the Ministry of Economy and Labour intervened to assist with a settlement of the dispute between ZZPPM and the board of KGHM. The board proposed a compromise that the unions did not find satisfactory. On 29 September, the KGHM press office announced that the managing board was going to pay a total of PLN 50 million, which meant that workers would obtain bonus payments worth only 50% of a month's wages. The board did not accept the union’s demands referring to the level of the payments or the regrading of employees. It was stated that the KGHM supervisory board planned to examine the payment of bonuses during a meeting on 21 October 2005.

The collective dispute finally ended on 3 October, when the managing board and representatives of the nine largest trade unions operating in KGHM signed an agreement. Based on the deal, on 4 November 2005 all 17,000 KGHM employees with the exclusion of the board members) receive a bonus payment worth 100% of one month's average remuneration, equal to PLN 6,300 (EUR 1,600) gross per head. The managing board thus made a major concession compared with the previous proposal. The unions, for their part, abandoned their regrading demand but also stated that this subject would come up again during negotiations over the next annual pay increase at KGHM.

Commentary

As to why the KGHM managing board yielded to the main demand of the unions, a statement made by a company spokesperson seems interesting. He accounted for the managing board’s changing attitude by saying the board would redouble its efforts to generate even higher profits than those indicated in the latest updated version of KGHM's 2005 financial forecasts. This explanation seems somewhat naive. It is arguably more likely that the board hopes to see the prices of copper rise on international markets by the end of 2005, which would obviously boost KGHM’s profits. Increasing corporate income by intensifying working efficiency in 2005 may be rather irrelevant in this context.

It is very likely that in 2005 the KGHM conglomerate will again - as after every general election - become an issue of political disputes, as a result of which people connected with the victorious party will take top positions on the corporate boards. As he recent conflict indicates, the political context is always present in KGHM’s actions, not only after elections but also before them. It appears that some trade union officials may treat their activity as a 'trampoline' that enables them to jump as high as the parliament. The case of ZZPPM’s leader was not the only one in the September 2005 elections. A number of other trade union activists enjoyed the support of the All-Poland Alliance of Trade Unions (Ogólnopolskie Porozumienie Związków Zawodowych, OPZZ) as parliamentary candidates. The question is therefore if and when the employment matters will cease being part of political games? While in this particular case the political context helped trade unions to get what they wanted, in a long-term perspective it is not yet known if this will also be of advantage to the company itself. (Piotr Sula, Institute of Public Affairs [Instytut Spraw Publicznych, ISP] and Wroclaw University [Uniwersytet Wrocławski, UWr])

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