World’s top 3 asset management firm APG sent a letter to Mahindra Group, the major stakeholder of Ssangyong Motors, urging it to resolve on-going incident … Political sphere and civil groups also add pressure
Reporter Jeong-hoon Lee 이정훈
Last Feb. 15 marked 1,000th day of protest by workers discharged from Ssangyong Motors. During those 1,000 days, 9 died including Mr. Min (49, a voluntary retiree) in last Feb. 13 and 12 committed suicides. It is hard to fathom when this ‘death parade’ would end. Remaining ones suffer extreme symptoms of PTSD. Company does not flinch a bit, and the struggle of Ssangyong Motors laid-off workers still lingers on.
APG Asset Management, “We are concerned about damages on Mahindra’s public image”
As the situation gets grimmer, international institutional investors such as APG Asset Management start to move. It was they who demanded Samsung to clarify controversies regarding leukemia industrial disaster cases of Samsung Electronics in 2010. At that time, eight institutional investors including APG Asset Management sent a joint inquiry letter to Ji-sung Choi, then CEO of Samsung Electronics (currently vice chairman), urging Samsung to perform transparent investigation of leukemia deaths and to clarify related facts.
This time, it was APG Asset Management of Netherlands, one of the world’s top 3 asset management firms, who moved first. Last Feb. 20, it sent an inquiry letter that contained worries about Ssangyong Motors incident and asked the intention of India’s Mahindra Group, the major stakeholder of Ssangyong Motors, to resolve it.
As an investor, APG Asset Management did not conceal its concerns about lengthening Ssangyong Motors incident. The contents are like this. “If the issue of Ssangyong Motors laid-off workers gets worse and lengthens, the responsibility of Mahindra Group as the major stakeholder will afloat, which concerns us as an investor to Mahindra Group due to the possible impact on Group’s image and business. It is all the more worrisome since, as a stakeholder, we highly appreciate the trust Mahindra Group accrued from the society and consumers so far.” They also asked two questions. They inquired “if managing staffs of Mahindra Group, as the major stakeholder, recognize the character, the development, and the complexity of the Ssangyong Motors labor dispute issue sufficiently” and “what role Mahindra Group will do, to preemptively prevent damages on its own image as the major stakeholder, to let Ssangyong Motors managing staffs to resolve the issue for themselves.”
Before long other institutional investors look like to join APG Asset Management’s move. An official from APG Asset Management said “We know other institutional investors have laid close eyes on Ssangyong Motors incident all the while. We asked Mahindra Group first about their opinion on Ssangyong Motors incident.” This official continued “We know other institutional investors will continue to discuss about Ssangyong Motors incident and send similar inquiry letters to them.”
This kind of move can be an enormous pressure to Mahindra Group who emphasizes corporate social responsibility (CSR). Mahindra Group took over Ssangyong Motors with 522.5 billion KRW (468 million USD) in Oct. 2010. Following China’s Shanghai Motors who was engulfed by the ‘eat-and-run’ controversy in the end, it became new owner holding 70.4% of stakes. Mahindra Group is also deeply involved in the management of Ssangyong Motors by sitting Dr. Pawan Kumar Goenka, the president of Mahindra’s Automotive and Farm Equipment Sectors, as the chairperson of board of directors.
Mahindra Group, also active on CSR
Besides producing farm equipments, SUVs, and trucks, Mahindra Group is expanding to finance, IT, and real estates sectors. It hires about 144,000 employees in about 100 countries and recorded 14.4 billion USD sales last year. It acts proactively on CSR too. In the third sustainable management report released last year, it wrote that it also focused on human rights management. In the report, Mahindra Group revealed that “In May 2009, we announced a policy to consider human rights issue in deciding economic policy. When we draft investment contracts, we also include human rights items.” Through this effort, Mahindra Group is considered highly among institutional investors. One official from an institutional investor said “Along with Tata Group of India, Mahindra Group is considered to spend a lot of efforts for socially responsible management.”
But, Ssangyong Motors incident can taint the whole image of Mahindra Group all at once. In particular, since Ssangyong Motors is highly dependent upon European markets by providing items to many European car makers like Volvo, Land Rover, Daimler AG, Renault, pressure from institutional investors is a sensitive matter.
To this development, Ssangyong Motors does not show any response yet. A Ssangyong Motors official said “We haven’t had a chance to confirm the letter institutional investor had sent to Mahindra Group yet” and added “We have no official announcement yet” but Ssangyong Motors union expressed expectations. Former Ssangyong Motors union planning team manager Chang-geun Lee said “For the case of Tata Daewoo Motors in Kunsan, Jeonbuk that was taken up by Tata Group of India, company’s image has improved drastically by beefing up CSR efforts like changing irregular workers to regular workers. Mahindra Group that is respected as much as Tata Group in India should be involved in solving the Ssangyong Motors incident more proactively.” Former manager Lee pointed out that “As time goes by, the issue will nothing but grow. It is natural that institutional investors are engaged at a time when the image of Mahindra Group itself can be tarnished.”
How can we understand that world’s top institutional investors show interest on Korean companies again in less than two years since Samsung Electronics. The head of Hankyoreh Economy Institute Won-jae Lee said “Korean companies grow to be global companies and global capitals take over Korean companies now. It is becoming a crucial factor for companies to be more socially responsible” and continued “This kind of movement is expected to expand more, centered around Europe-based pension fund investors.”
On top of this, many organizations including politicians and civil activist organizations also start to press Mahindra Group as well. 49 organizations such as Korean House for International Solidarity, Catholic Human Rights Commission, Cultural Action, Dasan Human Rights Center sent a joint letter titled ‘Letter from Korean Labor, Human Rights, Civil and Social Organizations’ to managing directors of Mahindra Group in Feb. 24.
49 organizations “engage in conversations to resolve the incident”
The organizations wrote in the letter that “Pains of Ssangyong Motors workers have claimed lives of more than twenty. Korean labor, human rights, civil and social organizations feel very sorry for Mahindra Group for not exerting any efforts to issues they had to show faithful responsibility after taking over Ssangyong Motors.” Then, they urged Mahindra to actively engage in conversations to resolve the issues and to reinstate unpaid workers, laid-off workers, irregular workers, and voluntary retirees.
Unified Democratic Party representative Dong-young Chung also plans to sidekick the move on his part as well. An aide of Rep. Chung’s office said “Rep. Chung is planning to send a letter to top managing officials of Mahindra Group of India to urge resolution of the incident at the end of Feb. or early Mar.”
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- Original article of this post (in Korean) can be found in the following link: 마힌드라가 직접 나서라 [2012.03.05 제900호]