THE year 2016 has come to a close and what a year it was.
The global political dynamics have changed significantly and will set a new stage for leadership going forward. Clearly the western world has voted to express their rejection of globalisation. Political noise has been focused on raising protectionism, especially with regard to trade and immigration.
We are also seeing a strong movement in terms of the political rhetoric against climate change. At the same time, we are also anticipating that more liberal policies are likely to be introduced to industries that had been bound by restrictive policies, especially those industries that have an impact on the environment.
The investment world is watching to see exactly how these liberal policies may come into play, especially when there has been a massive push for change in the way businesses operate. It is now becoming an increasingly common practice to look at how all stakeholders have been impacted by a particular business decision. Are we about to see new approaches that include ignoring the small stakeholders, the environment and safety standards?
Our recent on-site visits in the region may provide a clue of what to expect in 2017. The on-the-ground message in certain industries has clearly changed, and we hope – although hope isn’t a strategy – that the practices and standards are too ingrained in certain industries to be changed.
At one of our visits to a construction site, we were informed by the management team that they had implemented a smoke-free policy on-site a few years ago, to meet both health and safety standards. The management representatives commented that the incidence of fires has significantly reduced since the policy was implemented, and their insurance premiums have also followed suit. In fact, the insurance industry charges the companies more if they allow their workers to smoke on-site. From the employees’ perspective, there have been fewer health claims from the workers as well as fewer “breaks” to have a puff. All in all, the cost of doing business has come down due to the view that it makes monetary sense to ban smoking from construction sites.
This discussion took an interesting twist when management explained that this construction site was key to a new government-led development, which is guided by international standards. Under these standards, the company not only has to ensure that their workers are skilled but also be committed to delivering consistently high-quality work. Towards this end, the various measures taken by the team include:
> Organising a townhall session to get feedback from the senior workers. The latest change implemented as a result of feedback received was to have more serving stations in the canteens to ensure that the workers had enough time to actually eat; instead of spending most of their time queueing up for their food.
> Improving the workers’ living conditions to ensure that they are not too cramped and that they have adequate space to move around and even exercise during their non-working hours.
> Providing regular medical check-ups for all staff as well as having an on-site clinic for workers who are not feeling well.
The most interesting part of our conversation was when the management explained that they now regularly conduct random drug tests. We nearly fell off our chairs upon hearing this. We knew that schools performed random drug tests, but now even sophisticated construction companies are doing the same.
The construction company cited a few fatal accidents such as crane drivers who were unable to control their crane, placing of drain pipes where the excavator driver lost control, mixing incorrect raw materials together which created inferior structures. The list goes on but the underlying issue is that the workers who created all these problems were under the influence of drugs.
The construction company explained that the rationale behind this practice is that employing workers who use or push drugs within the sites is very harmful to their business model and prevents the company from meeting the specific targets that have been set for a particular construction project.
The percentage of workers found to be drug users was much higher than what we anticipated at 10%. The reason behind the high rate of drug use is the availability of the drugs, especially with drug pushers coming to the sites, sometimes under the guise of delivering other goods.
With the explosion of smartphone technology, communication has reached a level where it is increasingly difficult to maintain control on workers’ access to drugs. Our discussion with the management team provided the insight that drug pushers are making headway among the workers by getting into chat groups to widen their distribution channels.
These companies have no choice but to handle this intrusion into their ecosystem by implementing new measures, such as random drug testing.
On the positive side, we are pleased that companies are being so pro-active to ensure higher safety standards for their workers and deliverables. On the flip side, it is a worrying sign of how serious the issue of drug use in the workplace has become.
Despite these emerging global political changes and noise, businesses need to remain focused on what is sustainable for their earnings and all stakeholders.
Datuk Shireen Muhiudeen is MD of Corston-Smith Asset Management in Malaysia, a fund management company that makes investment decisions based on corporate governance.