Initially, there are two apex employer organisations, namely the All India Organisation of Employers (AIOE) and the Employers Federation of India (EFI), which come under the umbrella of Council of Indian Employers (CIE). The Council of Indian Employers is not registered under any Act of the country, but the two constituents of the CIE are registered. CIE’s mission is to interact with the Indian Government to formulate long-term labour, economic and social welfare policies in relation to labour (http://www.ioe-emp.org/en/member-federations/index.html?tx_gsifeuserlist_pi1[showUid]=65) [Accessed 20 April 2011].
In order to meet these goals, the CIE embraces mutual cooperation amongst workers’ organisations and the employers within the country. Being the seventh largest country in the world, India’s use of regular meetings with the central trade union of workers are held, helping to understand the viewpoints of the employers and employees and enabling them to have a voice, in the vast labour market.
EFI was established in 1933 with the purpose of protecting and promoting the interests of employers. The EFI has kept up-to-date with the changing business environment in India, such as the changes that occurred during the independence from Great Britain and in 1991 with the liberalisation of the economy. The Federation represents the employers’ concerns and views at various committee meetings at both state and national level, informing at a higher level the concerns of employees and employers in companies within India, http://www.efionline.in/the_institution.html [Accessed 20 April 2011].
As well as engaging with employers throughout India, the EFI also engages with the Chamber of Commerce and creates a pro-active policy environment supporting the industry effectively by including various points of view from various sources. This is achieved through frequent interactions with the state and central government presenting the employer’s perspective on such issues. By interacting with both the government and employers, the environment in which policies are determined has improved which in practice decreases the need for trade unions to be used.
Collective Bargaining Structures
Collective bargaining is a method whereby the employer and the employees can settle their disputes; this process of settling disputes was adopted with the emergence and stabilisation of the trade union government. According to the Royal Commission of Labour (1931), India’s first collective bargaining agreement was conducted in 1920’s at the instance of Mahatma Gandhi, the prime minister at the time, regulating labour management relations between a group of employers and their workers in industry. The emergence of the concept of a welfare state implies an end to exploitation of workmen and as a consequence, collective bargaining came into its own, reducing the conflicting interests of the workmen and the employer. As well as benefitting employers in industry, collective bargaining impacts society as a whole including the government.
Collective bargaining improves the sense of job security for employees, reducing the labour turnover for employers as workers feel safe that they will keep their job, consequently, reducing the cost to the employers. Before the adoption of collective bargaining, labour was at a great disadvantage in obtaining reasonable contracts of service from its employer. Before the development of trade unions in India and collective bargaining becoming the norm, it was found by the employers that instead of dealing with individual workers, it was more convenient and necessary to deal with the representatives of the workers.
The Trade Unions Act 1926 amendments in 1947 made collective bargaining compulsory for both employees and unions under certain conditions. This important change in the Trade Unions Act of 1926, helped to move the Indian policy towards a labour relations based system supporting the MNCs located in the country, Kennedy (1958). With a collective labour relations system, Indian businesses are able to work together with other countries and MNC’s within their own country to improve efficiency.
Company Governance Arrangements
‘The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company’s relationship with its all stakeholders’ Business Dictionary (2011). The historical and cultural developments of India have affected the corporate governance of the country, although having some of the best corporate governance laws, India suffers from poor implementation together with socialistic policies of the pre-reform era affecting corporate governance.
In 2008, the ‘Code on Corporate Governance’ was published providing several principles that relate to different sections of organisations such as the Board of Directors, Chief Executive Officer and the Shareholders. The code, which is not a rigid set of rules, yet a guide of good practice derived from consultation and practice over many years and ensuring transparency in business transactions; http://business.gov.in/corporate_governance/combinedcode_2008.php [Accessed 20 April 2011].
Corruption in India is widespread, thus transparency in transactions allows all members trading to ensure that no part of the deal is being corrupted or disadvantaging the other party. The ‘Code on Corporate Governance’ also offers instruction on the protection of shareholder interests and the relationship amongst the shareholders. In order for businesses to run soundly, the cooperation of shareholders is necessary for business decisions to be made. However in India there are a large proportion of businesses are run within the family; ‘Family businesses constitute most businesses in India´ Ramachandran. K (n.d), therefore in addition, cultural and traditional values need to be followed.
India is a collectivist culture, Hofstede (1980) whereby teamwork, a strength of employees is followed, generating productivity and efficiency as employees work together to complete tasks. Moreover, in India, there is a noticeable lack of privacy and a smaller concept of personal space; several generations live together under one roof. For Indian business practices this places an additional importance on interpersonal contacts, avoidance of conflict and a more indirect approach to communication as close contact with other people is an everyday occurrence. Good company governance needs to be exploited by the employees to ensure sound interaction with foreign businesses in order to avoid confusion when dealing with business matters.
This case study has shown how political, historical and cultural contexts of India have helped shape its Human Resource Management practices. The influx of foreign investment within in India has forced India to make changes in the way they deliver their HRM practices. More time and effort is being spent on the training of employees, as the education system in India is inadequate for such a large country; training is being set to the standard that MNCs employ in their organisations to match western benchmarks. Training is also given by companies to expatriates, in order for cultural differences to be understood and the different ways in which business is dealt with in India.
The changes in the laws relating to HRM arose out of the independence from Great Britain, whereby India chose to ensure that the laws were relevant to the country and not just based upon the British economy of the time. The changes have helped secure inspections of factories increasing the quality and care given to employees, increasing job satisfaction with regards to the Factories Act 1948.The Shops and Commercial Establishments Act help to define working hours and pay in each state, improving job security for the employees. However as a result of the bureaucracy regarding HRM, corruption is strife within India, the developing nation status prevents implementation of the legislation to be carried out effectively. By being a developing nation, the incomes are low therefore money is coveted by employees, however, with the increase of foreign direct investment, corruption will decrease as incomes increase and the level of education available for all also increases.
The independence from Great Britain in 1948 has helped India’s trade unions develop alongside the bureaucracy and hierarchy within the country. The high power distance observed by Hofstede (1980) presents India as a society which accepts the unequal distribution of power is evident as India accepts that trade unions are run by the political parties.
Employer organisations within India have helped to formulate policies in relation to labour, economic and social welfare. They helped to form a bond between the workers organisations and the employers within the country, enabling clear and easy communication between the two groups. The EFI supports HRM in India, maintaining a peaceful environment in which to disclose problems enabling sound interaction between workers and their organisations to which they belong decreasing the need for trade union powers to be used.
Mahatma Gandhi in the 1920’s developed the first collective bargaining agreement to settle disputes between employees and employers. The Industrial Disputes Act 1947 was passed which provides for the investigation of disputes, benefitting both employee and employer. The use of collective bargaining has improved the job security for many employees as they believe that disputes can be settled with their employers without being dismissed straight away, with the backing of the state and government. This will help firms compete successfully on the international market as the security of jobs will enhance productivity as labour turnover decreases.
Historical and cultural developments within India have affected the company governance of the country, although laws surrounding the issue are sound, the implementation of them are to be desired. Although India benefits from a code on corporate governance, the guidelines are there to be interpreted by the employees and employers which due to various languages spoken in the various regions of India may be interpreted differently.
Corporate governance offers advice regarding the relationships of shareholders within the business; however, the large family run businesses in India corroborate with the traditional values which are inherently implanted in the activities of the owners. In order to compete and trade internationally, firms in India will have to ensure they accommodate the differences with other countries and their cultures regarding the family and collectivism.