Bangladesh’s 2018 Corporate Governance Code

On 10 June 2018, Bangladesh’s new Corporate Governance Code (Notification No. BSEC/CMRRCD/2006-158/207/Admin/80, dated 03 June 2018) was published in the Bangladesh Gazette. It repeals and replaces the earlier Corporate Governance Code of 2012 (Notification No. SEC/CMRRCD/2006-158/134/Admin/44, dated 07 August 2012) and listed companies will need to comply with this Notification by 31 December 2018. I will write a more detailed analysis of the Code later but it is striking that in its gazetted form, the Code leaves out the (controversial) section on corporate social responsibility that was a significant component of the draft Code.

Morshed

Leiden

Advertisements

My response to the Bangladesh SEC’s public consultation on draft corporate governance guidelines

My response to the Bangladesh SEC’s public consultation on draft corporate governance guidelines

On 21 December 2017, the Bangladesh Securities and Exchange Commission (hereinafter the “BSEC”) published Draft Corporate Governance Guidelines (hereinafter “the Guidelines”) on their website for public consultation, applicable to all companies listed on stock exchanges in Bangladesh including banks, financial institutions and insurance companies. The Guidelines are a welcome update of the earlier Notification No. SEC/CMRRCD/2006-158/134/Admin/44 of 07 August 2012, as they elaborate upon the existing guidelines (referred to hereinafter as “codes”) concerning the role and composition of the board of directors, senior management and the audit committee and introduce codes on, inter alia, other board committees, corporate social and environmental responsibility, financial and non-financial reporting and the responsibilities of Stock Exchanges with respect to the corporate governance of listed companies.

The proposed reform of Bangladesh’s corporate governance framework comes at an opportune moment given the concerns raised about the underperformance and misconduct of bank boards, which has contributed to the burgeoning of non-performing loans. As of September 2017, non-performing loans comprise 10.67% of loans disbursed – or BDT 80, 307 crore in absolute terms. (Dhaka Tribune, 22 November 2017) Analysts have attributed these default loans to nepotism, wrongful related party transactions and board interference in management decisions, among other factors (Dhaka Tribune, 26 November 2017; Dhaka Tribune, 17 December 2017). The prevalence of financial crimes and unethical practices has eroded investor confidence (BIBM, 17 December 2017), undermining laudable initiatives of the Securities and Exchange Commission and Stock Exchanges to enhance the robustness of the securities market through digitalization, financial literacy drives and other ancillary services. Similar issues have arisen with respect to non-financial listed companies, particularly corporate groups. Good governance will be key in rebuilding investor trust.

This update also complements the recently enacted Banking Companies (Amendment) Act 2017 and ongoing effort to pass a Companies Act that will succeed the Companies Act, 1994. In particular, given the concerns raised that the former will further concentrate directorial power in single families, extend board tenure and diminish the power of the Bangladesh Bank to oppose the appointment of a director, MD/CEO and Chairman (The Daily Star, 27 November 2017; Dhaka Tribune, 08 May 2017), the proposed Guidelines go some way towards allaying these apprehensions by providing extensive qualification and experience requirements for the appointment of executive, non-executive and independent board directors.

Corporate governance codes are also being revisited in jurisdictions with developed capital markets, such as the United Kingdom and the Netherlands, with both countries replacing earlier guidelines in 2016. The UK’s Financial Reporting Council is again revisiting the country’s Corporate Governance Code and it is likely to be substituted in the first quarter of 2018. While learning from these developments is useful, I suggest that the Guidelines should be tailored to the realities of Bangladesh’s corporate sector, with its concentrated share ownership and family-dominated boards, rather than uncritically transplanting provisions from jurisdictions with dispersed shareholding patterns (Siddiqui, 12 May 2017). For instance, among the 30 banks listed on the Dhaka Stock Exchange, directors/sponsors have a greater shareholding in 16 banks than public, institutional, governmental and foreign shareholders. In two others, government and institutional investors respectively have greater shareholdings than directors/sponsors, foreign and public shareholders do. A similar pattern emerges among non-banking companies (Farooque et al, 2007:131). Thus, as the horizontal agency problem between majority and minority shareholders is more acute in Bangladesh than the vertical agency problem between shareholders and directors, the country’s corporate governance regime should ensure that the former is adequately addressed. Along with this pragmatic approach, the Guidelines should facilitate the strategic objectives of Bangladesh’s capital market (Bangladesh Capital Market Development Master Plan 2012-2022) and economy in general, in terms of both overall growth and sustainability (Vision 2021; Sixth Five Year Plan Part 1: 61-62, Part 2: 69-70). In view of this, the recommendations for amendment of the Guidelines in the enclosed document are informed by examples of other developing countries that share similar corporate ownership patterns and are often bracketed in the same group of rapidly emerging economies: Thailand, Pakistan, Nigeria and the Philippines (PWC, 2017: 5; Goldman Sachs, 2007; Thanatawee, 2013: 122; Abbas et al., 2013; Okafor et al., 2016; Pratyaksa et al., 2015: 53).

Given that the Guidelines opt for a rules-based system of corporate governance, with codes that have to be mandatorily complied with, the decision to open the Guidelines for public consultation is appreciated. (Chapter D on the Environment and Social Responsibilities Committee will have to be mandatorily complied with after a transition period ending on 31 December 2020. During the transition period, a ‘comply or explain’ approach will be adopted.) The comments below, in response to this public consultation, mainly address the substance of the Guidelines, with only a few remarks as to the clarity of the codes/conditions. The comments are furnished in my personal capacity as a lawyer and academic researcher of corporate law and corporate governance. They do not reflect the views of my employer.

Response to Public Consultation of SEC on Draft Corporate Governance Guidelines – Final

Morshed
The Hague

Bangladesh’s original transport disruptor

“Rickshaws continue to grow in numbers thanks to trade unions” (Dhaka Tribune, 4 November 2017)

30 years before Uber entered the Bangladesh market, rickshaws were ‘disrupting’ Dhaka’s transportation industry by making transport more accessible and creating work for the marginalized, in a city that has long been under-served by public transport. Rent-seeking associations – under the cynical guise of being ‘trade unions’ – have not emerged overnight but have grown in the vacuum created by a combination of over-regulation, under-enforcement, judicial gridlock and regulatory capture.

In discussions regarding regulatory design, it is common to speak of how the law delegates regulatory powers to ‘gatekeepers’. Doctors and pharmacists are responsible for preventing potential drug abuse among patients and customers and more recently, ISPs are responsible for filtering illegal content. They monitor behaviour in a manner that regulators cannot. What this vacuum does is effectively position these associations – and I imagine Uber and its likes in the future as well – as de facto gatekeepers. They monitor and control who can ply our roads but unlike de jure gatekeepers, they have no accountability and little incentive to close the gates.

The ‘safety valve’ for giving de jure private gatekeepers some authority is that they can be held liable if they break certain terms. Some of those terms are codified in hard law, others in ‘soft’ law (like industry best practices that are self-regulated), the idea being that hard law will always be playing catch-up while soft-law is better at keeping up with more ‘creative’ practices that might harm the public interest. Of course, this system is not perfect but in the case of de facto gatekeepers like the ones I mention above, they carry out certain functions that they have not been formally authorized to do. Trade associations have a coterie that can profit handsomely from issuing illegal licenses and can extort poor rickshaw-pullers that have no/limited alternate employment options.

Some de facto gatekeepers can become de jure gatekeepers. See how Air BnB is being regulated in several cities, where they underwent just such a transformation. In Amsterdam, a property will be automatically removed from the platform if it has been rented-out for more than 60 days in a year.

 

Morshed
The Hague

Notes on the ‘Reshaping Work in the Platform Economy’ conference, Amsterdam, 19.10.2017-20.10.2017

Introductory Remarks

(I realise that I have not finished posting my reflections on the Workers’ Economy Gathering in Argentina. There is still much to be said; I will try to return to that theme in the next few days)

The past Thursday and Friday, I had the pleasure of attending a thought-provoking conference on work in the platform economy, organised by the University of Amsterdam (UvA) in collaboration with ShareNL. As one of the organizers, Dr. Niels van Doorn of UvA, noted in his closing remarks, the conference represented a concerted effort to bring together the various stakeholders of the platform economy in one venue. This included: gig workers, platform company executives, policy makers, trade unionists, staffing agency representatives and (academic) researchers – particularly ones with a legal background.

I made notes of the presentations and roundtable talks I attended which are attached available at the end of this paragraph and at the end of this blog post; they provide insight into the type of research currently being done regarding work in the platform economy and the methodologies being used. A version of these notes will appear as a conference report in the European Company Law journal, February 2018. [NB: My own contributions and remarks in the notes are in red font. Platform, sharing and gig economy is used interchangeably by the speakers, which is reflected in my notes. Please excuse any grammatical/spelling errors or any omission of content. The copyright of all the slides belong to the respective presenters and serve to fill gaps in my notes.]  Below is a summary of those notes. One common conclusion among the assorted participants is that much of the research is still tentative and exploratory: there is still much left to be done to understand this complex ecosystem.

Reshaping Work in the Platform Economy – Conference Notes by Morshed Mannan


Summary

The conference, held at Amsterdam University College, commenced with the key note address of Very Demary, an economist at the Cologne Institute for Economic Research, on how digital platforms enable work. Demary’s presentation set the tone for the conference by explaining what platforms are, what their economic model is and how a vast, heterogeneous collection of platforms can be categorised. This was followed by a survey of the types of work done on, and for, platforms as well an evaluation of the opportunities and challenges they presents to service providers.

Parallel Paper Presentations # 1

This was followed by parallel paper presentations on ‘Crowdwork in the Global Economy: Challenges and Opportunities’, ‘Platform Economy, Technological Disruption and Online Reputation’ and ‘The Protection of Digital Labor: National and International Legal Perspectives’. It was quite difficult to choose among these panels, but I ultimately opted to see the presentations on digital labour.

RechtDeur: Case Study of a Platform for Lawyers

The first presentation by Susanne Heeger of Utrecht University was a case study of a new platform for lawyers in the Netherlands, Rechtdeur, conducted under the aegis of Utrecht’s interdisciplinary research project on the Future of Work.  The research question for this case study is whether the lawyers using the Rechtdeur platform to connect to clients have a subordinate and dependent relationship with Rechtdeur. In other words, whether an employment relationship exists between Rechtdeur and the legal service providers. After evaluating the degree of control the platform exercises and the extent to which the lawyers are able to act independently, Heeger concluded that Rechtdeur is not likely to be considered an employer.

Tax

The subsequent presentation by Professor Diane Ring concerned a topic that is opaque for gig workers and researchers alike: the tax implications of gig working and the gig economy. After briefly going over sharing economy developments in the US and the worker classification tests commonly used by lawyers and regulators, Ring expressed concern about how the worker classification debate has not adequately considered tax implications as well as the fragmented, un-synchronised manner in which the classification discussion in the sharing economy has been approached in the US. Lawyers, regulators, academics and policy makers operate in their own silos, leading to incorrect assumptions, over-simplifications and generalizations. ‘First movers’ such as class action litigants and local ordinances are able to address some of the immediate, short-term exigencies of the platform economy (e.g. platform drivers’ demand to unionize) but can shift focus/de-emphasize long-term, structural issues such as the re-evaluation of employment classifications. Ring calls this an ‘incomplete conversation’ and argues that better classification conversations are needed. She calls for legislation that would minimize (adverse) impacts of the sharing economy, legislators to question their assumptions and greater attentiveness to potential ramifications and first mover effects.

Transport Law and the Protection of Platform Couriers

The third presentation of this panel by Dr. Wouter Verheyen of Erasmus School of Law explored an alternative legal basis to protect platform service providers, such as couriers, other than under employment law. The speaker argues that (critical) contract law can have an important role (e.g. unfair contract terms) as well. The speaker did research on how transport law in Belgium and the Netherlands can protect users without requiring the re-classification of independent contractors. Verheyen compared the differences between employees and freelancers (ZZPers) in how liability for damage to contract parties, third parties, personal property and personal injury are allocated. He also compared ‘fair compensation’ under labor law, contract law and carriage law of said service providers and analysed the working time regulations applicable to couriers. Based on this analysis – detailed further in my notes – he concludes that transport law could provide for an almost equal protection of the (courier) freelance service as labor law does. The limitation is that laws governing carriers are drafted with trucks in mind, which often leaves bicycle couriers outside of certain protections afforded under said laws.

Can Gig Workers be considered Franchisees? 

Another alternative approach to protecting platform service providers was suggested by Hanneke Benaars of the University of Amsterdam: analysing whether certain protections can be extended to these providers via franchise law by treating service providers as franchisees. Given the limitations of existing legislation in encompassing new forms of work, franchise law could provide a useful alternative that does not require the employment status of service providers to be reclassified. In short, Benaar notes the resemblance of the platform-service provider relationship to that of a franchiser and franchisee, in particular how a franchising agreement seeks to rebalance the bargaining relationship much as an employment contract (ideally) does. Benaars refers to the (non-binding) franchise code of conduct prepared by the Dutch Franchise Association in 2016 which requires franchisers to refrain from misleading recruitment and advertising with respect to results/possible earnings, as well as pre-contractual information obligations to provide written information on market situation, forecast of turnover and costs and limitations of non-competition clauses. The franchiser also has to provide commercial, operation and logistic means to the franchisee, along with training and assistance if the franchisee’s results lag behind. While there are notable differences between franchising and employment relationships, particularly with regard to payment and risk structures, it is worth considering whether default categorisation of platform work as a franchising arrangement would extend at least some protections to the service provider (e.g. insurance). Benaars concluded her presentation by forwarding the idea of a platform code of conduct.

“Think-Like” Round-tables

After lunch, the conference participants congregated in different round-tables to speak to entrepreneurs, gig workers, policy makers, labour organisers, incumbent (platforms) and staffing agencies about their experiences and thoughts on the platform economy. Given my particular research interests, I attended the rountables led by labour organisers and gig workers.

Should an intermediate ‘worker’ category be introduced in more jurisdictions?

In the first round-table, the discussion centered on whether an intermediate employment category – between employee and independent contractor – should be introduced in the Netherlands, as it has been in the UK (‘limb (b) workers’). Dr. Jason Moyer-Lee, General Secretary of IWGB, a trade union that represents couriers and other members of the precariat, was of the opinion that an intermediate category was a positive regulatory introduction. In his experience, the average courier (for e.g.) didn’t want to be an outright employee and enjoyed the preferential national insurance contributions and tax relief they would otherwise not be entitled to as employees. As such, limb (b) worker classification struck a balance between employment protections and independence. In contrast, Irene van Hest and Mei Li Vos, representatives of the FNV and AVV, two Dutch trade unions attempting to organise platform workers, were of the view that a third category is undesirable. (It should be noted that there is effectively a third category of worker in the Netherlands already, in the economic sense that there are protections for non-employee workers such as resting time for truck drivers and health & safety rules which apply irregardless of employment status) They both had strong words regarding the adverse effects of the platform economy, in terms of worker rights erosion as well as social security contributions. The floor was then opened up for other participants to share their thoughts on a third category. I pointed out the article by Cherry & Aliosi (2016) on Dependent Contractors in the Gig Economy which, after comparing the implementation of third categories in Italy, Spain and Canada, found it not to be a panacea for extending protection. The discussion then turned to labour organisation. Some of the discussants were concerned that such unions of, essentially, self-employed individuals could be caught by EU anti-cartel regulations but this concern was allayed by Dr. Moyer-Lee who pointed out that limb (b) workers in the UK have the right to collectively bargain and this right has not been challenged before the EU courts. Dr. Mohammad Anwar of the Oxford Internet Institute observed that from his research on 5 African countries, there was clearly an interest in unionizing in other, developing countries. There may also be much to learn from nascent organising practices in these countries as well, such as the extensive use of WhatsApp groups.

The Deliveroo Riding Experience & Tentative Attempts at Rider Organising

The second round-table was led by Yorick Bleijenberg, a rider for Deliveroo who has been employed by the platform for 18 months on a ‘min-max’ contract. (A min-max contract is a part-time employment contract which commits the employee to a minimum amount of work per week but the employer can call for the employee to work additional hours, to a pre-defined maximum, if required.) Bleijenberg described his average working week, his payment structure and the changes that are currently underway in Deliveroo – namely, a transition away from min-max contracts to full freelancer arrangements where riders would be paid by order, rather than per hour. He also spoke about the informalisation of rider communities as the platform provided fewer opportunities for riders to interact. He wrapped up by discussing the priorities of the Riders’ Union, a collective bargaining organisation supported by the aforementioned FNV, that has been trying to end freelance contracts as well as push for the introduction of CAOs, works councils and permanent contracts for riders. Interestingly, it seems that the riders have considered the option of forming a cooperative but have thus far been disinclined to pursue it further due to high start-up costs (especially technology) and fierce competition from other platforms.

Parallel Paper Presentations # 2

After two stimulating round-tables, there was another series of parallel paper presentations: ‘A fair share – Safeguarding public interests in the sharing and gig economy’, ‘Platforms as Employers and New Forms of Collective Action’ and ‘How Platform Work is Changing Working Conditions’. Again, each of the panels were chock-a-block with interesting presentations but I ultimately chose to attend the one that had researchers presenting case studies as I am thinking of using case studies for my own doctoral thesis.

Regulating Cross-border Digital Labour

The first presentation, by Dr. Johanna Jacobsson from IE Madrid concerned the transnational regulation of digital work. Her research conceptually stems from Richard Baldwin’s contention that “knowledge crossing borders in massive amount is the big new disruptive thing”. Dr. Jacobsson traced the liberalisation of cross-border work and explained how the current international regulatory framework for such work is insufficient. She concluded that questions regarding employment classification, remuneration, working conditions, collection of taxes and social security payments and immigration should be regulated internationally – not just subject to national diktat.

The Extent to Which Etsy Reshapes Work

The second presentation, by Dr. Anne Jourdain of the University Paris-Dauphine, concerned a sociological study into the use of the Etsy platform by hobbyist handicrafters and professional artist-craftsmen for self-employment. Through a combination of qualitative and quantitative research, Dr. Jourdain found that Etsy is not a business opportunity for most sellers and that most of the successful sellers on Etsy were not makers of products. In terms of ‘reshaping’ work, Etsy prompted users to do activities other than producing goods, such as help improve Etsy’s algorithm, and encouraged users to think of themselves as entrepreneurs.

How La Belle Asiette is Creating a Marketplace for Private Chefs in France

The third presentation, by Dr. Sidonie Naulin of Sciences Po/Grenoble, also regarded an ongoing sociological study. However, instead of looking at handicraft production via an online platform, Dr. Naulin’s investigation was on La Belle Asiette, a platform connecting private chefs with clients in France, so as to better understand the demographics and motivations of private chefs as well as the role of the platform in creating a marketplace for such services. Preliminary results from interviews indicate that the vast majority of private chefs are male, operate in metropolises and choose to use the platform because of disillusionment with traditional catering. An interesting observation made by Dr. Naulin was that some private chefs develop a personal connection with their customers, who eventually start booking their services directly.

How do people feel about, and cope with, the collection and commodification of their data?

The final presentation of the day, by Michael Etter and Dr. Giulia Ranzini of Copenhagen Business School and VU Amsterdam respectively, shared the results of a large-scale, multi-country project on how consumers feel about the collection and commodification of their (personal) data. 18 focus groups were conducted in 6 European countries involving 98 millennials on how they feel about data collection by platforms, in terms of how they perceive control over the exchange and fairness of the exchange. The results of the focus groups were divided in 4 categories, resignation/inevitability, optimism, negotiation and cynicism. This was complemented with a larger survey of 12 European countries involving 6,111 participants, asking them whether they felt they got out of the platform what they put in (i.e. data). In short, it seems from their ongoing analysis that there was a wide variety of responses to these questions, from fatalism and cynicism to even a modicum of acceptance and control.

This concluded the first day of the conference.

The second day of the conference began with a couple of key note addresses, by a platform CEO and acclaimed academic respectively.

Key Notes: CEO of Helpling & Dr. Jeremias Prassl

The first key note was by the CEO of Helpling, a tech company operating Europe’s leading marketplace for household services.

Why ‘Good’ Public Policy is Critical for the Platform Economy

Benedict Franke, the CEO of Helpling gave a brief overview of Helpling’s activities as a curated online platform that connects households with service providers worldwide. The platform, among other things, vets, books, matches and schedules service providers and manages a variety of payment and invoicing functions. Franke cursorily covered the ‘usual’ complaints against platforms before turning to what he thinks to be the ‘real’ issues that merit attention: bridging income inequality and participation in society with access to social security for entrepreneurs. As is often the case with entrepreneurs, he places the onus on governments and local municipalities to create public policies that simultaneously facilitate platforms and protect the incomes of service providers. He advocates for adopting the French model of regulating household service providers. He contrasts the ‘good’ public policy of France with the ‘bad’ public policy of Germany, whereby the former offers generous tax credits and a high VAT free income threshold while the latter does not. One of the purported advantages of the French system is that it has brought a greater number of household workers into the legal market from the black market.

Rethinking Norms for a World of Intermittent Work

The subsequent address by Dr. Jeremias Prassl, Associate Professor at Oxford University, explored the two dominant narratives regarding the gig economy: the ‘freedom’ narrative and the ‘medieval exploitation’ narrative. He side-stepped favouring either narrative and cautiously commented that there is truth to both narratives because of the vast heterogeneity of self-employment. With regard to the challenges of regulating new forms of work, he contended that some forms of work are thinly-veiled attempts to avoid employment relationships. Others do create new boundaries of work and are more difficult to address. However, what is most challenging is re-conceiving norms regarding work in an economy where it has become fragmented and intermittent. He concluded his presentation by drawing an analogy between the Mechanical Turk – a purportedly automated chess-playing machine that was operated by a human from a dark compartment – with modern algorithms. The analogy is important to remember as no matter how shiny the platform or how complex an algorithm may seem to be, there is always some human(s) influencing it.

Questions to, and from, Gig Workers

The following segment was quite creative, at least as far as conferences go: gig workers and representatives from platform enterprises were able to share a stage, to share their perspectives on the platform economy as well as their own personal thoughts and experiences. The discussion was generally civil but there were moments where the tension in the air rose precipitously, particularly when the Uber representative (passive-aggressively) asked why the gig workers chose to work for digital platforms.

Laurin Sepoetro, a Senior Associate at the EU Public Policy department of Uber, spoke about the advantages and opportunities Uber offers its drivers and informed the audience about the new functionalities the app is rolling out. This includes a ‘tips’ and ‘insta pay’ function, which in my view essentially diminishes the centralising role of Uber that cumulatively led to it being considered a transport company and employer in some jurisdictions. Other noteworthy recent developments include Uber’s new partnerships for benefits and protection of drivers and the introduction of mechanisms to receive feedback from drivers. Michelle van Os, Managing Director of Helpling Nederland, repeated some of the remarks of the Franke and added some comments regarding new functions that may soon be added to the app. For instance, as many of the service providers that use Helpling are cleaners, the company is considering adding a min-max hours option, information about additional work that cleaners are willing to do and, potentially, the ability of workers to negotiate their own wages. The contributions of gig workers like Alina Lupu (also a conceptual artist) added nuance to the popular understanding of the gig working experience. One example is the mental and emotional toll of gig working; the moments spent mentally preparing to cycle 40 km for a shift. A remark from an Uber Eats cyclist is that while riders have freedom to log in and log off the app, the fact that you are paid per delivery means that during certain times of the day/week (dinner, weekend evenings) when there are many order, you are compelled to be available.

Parallel Paper Presentations # 3

After lunch, the final round of paper presentations took place. I had to choose from ‘The Implications of the Automation of Work’ and ‘Boundary Work: Ambiguous Worker Identities and Social Protection’, ultimately selecting the former.

The Influence of Platforms in Shaping Institutional Logics

The first presentation was by Professor Koen Frenken of Utrecht University who analysed seven platforms operating in the Netherlands in relation to the main institutional logics of a society (i.e. market, corporation, profession, state, family, religion and community). In the last 200 years, the market, corporation, professions and the state predominated. Digital platforms are now carving an entrepreneurial space for themselves and fiercely defending it. He spoke about how digital platforms are shifting to new institutional logics due to the emergence of algorithms, checks and bans and rating systems. However, what is interesting is that while these 7 platforms share certain common traits, they define themselves in different ways and as a corollary, seek disparate forms of regulation. In other words, he argues that they have taken three different trajectories. Some platforms have adopted a community logic by building a sustainability raison d’etre for their business, some have incorporated a family logic by utilising a tech/hobby argument while others have appropriated a state logic by contending that it formalises certain activities. As a consequence, institutional logics such as the corporation and profession are being rendered redundant.

The Digitalisation of Work

The second presentation was by Dr. Mascha Will-Zocholl of Hessian University of Public Administration, Wiesbaden and was perhaps the broadest in its scope, at least among the talks I attended. It delved into ‘theories of informatisation’ and distinguished between informatisation, digitisation and virtualisation, terms that are often used interchangeably in popular media. According to Dr. __ the theory of informatisation “[e]xplains the connection between information producion, handling use and capitalist economies” (Schmiede 1996; Boes 1995). Informatisation is the “socio-historical process of systemic handling of information”, such as double-entry book-keeping, and digitisation is the “computer-based transformation/creation of digitised and/or digital information” which makes “data exchangeable through ICT-systems.” Virtualisation takes digitisation a step further, as it is “based on digital representatives of physical and digitised entities ‘possibly there'”. It makes me think of the difference between a remote physical assistant who may be reachable by phone or e-mail versus a virtual assistant who can carry out certain tasks and instructions if certain inputs are delivered. If we trace the change of work using the metrics of time, place, employment and qualification, we can see the emergence of new forms of work, from knowledge and information work that was done from the middle of the 20th century to the more recent platform-based work and virtual work. Some scholars (e.g. Schmiede 2016) are even speaking about the evolution of a homo faber digitalis. Dr. Will-Zocholl then turned to a hot topic in the domain of digital work: automation. She pointed out that the numbers of jobs projected to be displaced by automation differ widely, depending on the context that is taken into account. As with earlier speakers, Dr. Will-Zocholl sought to temper the furor regarding human obsolescence by observing that automation has the potential of creating new types of jobs and that there is an inherent capacity of humans to adapt (as occurred after earlier technological revolutions).

Legal Interpretation and Implications of Algorithmic Management on Worker Rights

The final paper presentation concerned an early-stage research project on the nature of algorithms and the implications it may potentially have on worker rights. Dr. Julia Tomasetti of City University of Hong Kong research touches upon, among other things, the liability implications of legal actors attributing actions to digital algorithms. By suggesting that algorithms are hyper-rational and benefit from hyper-cognition that is beyond the capacity of mere mortals, human agents try to exculpate themselves from actions taken by algorithms (e.g. price-fixing). Questions regarding the capacity of algorithms to have subjective opinions and to be involved in price-fixing conspiracies are now subject to lawsuits in the USA and these decisions will contribute to a better understanding of the potential and limitations of algorithmic management.

Key Notes: Professor Benjamin Sachs and Professor Evert Verhulp

The conference concluded with key note addresses by two eminent professors of employment & labour law.

Regulating Gig Workers in a Progressive Jurisdiction

The key note address by Professor Benjamin Sachs of Harvard Law School began with a normative question about how gig work should be regulated:

What is it that a progressive jurisdiction, one that is interested in the lives of gig workers, what is it that such jurisdiction should do?

Professor Sachs cogently argues that gig workers need minimum standard protections, collective voice & negotiation mechanisms and protection from technology-related job loss. His remarks regarding the third requirement were particularly illuminating as he addressed the need for a ‘robot tax’ to offset the costs of automation-induced human job loss and equity-ownership of platforms by drivers. He then turned to the question of how the gig economy should be regulated so as to achieve this progressive objective – an ambition that seems increasingly elusive in the US due to current political conditions. He canvassed the much discussed options of treating gig workers as employees, as independent contractors or being subject to a third employment category, conceding that any of the options may be favoured by regulators but personally arguing for expanding the reach of employment law; by understanding employment more “capaciously”. If the status quo of treating service providers as independent contractors are sustained he contends that at a minimum health & safety coverage and anti-discrimination protection should be extended and a universal ‘portable benefits system’ should be created. (Further detail on his aforementioned arguments are provided in my notes)

So what do we do about digital platforms and platform labour?

The last key note address of the conference was by Professor Evert Verhulp of the University of Amsterdam who shed light on the Dutch perspective on regulating platform labour. As with many of the speakers, he spoke about the implications of platform labour before exploring why employment status may be desirable – or not – from the vantage point of the putative employer and service provider. He pointed out that in the Netherlands the tax advantages of being self-employed and the onerous requirements imposed on employers if an employment relationship is established (e.g. up to 2 years of sick wages at 70% of the full wage) can dissuade either party for seeking an employment relationship. At the same time, it is apparent that a number of people engage in activities like crowdwork not because they personally enjoy it but because it is a source of income. He argued that in light of these disparate interests, and given the need for protection (especially for those who are self-employed without alternative choices) the fundamentals of labour law and social security need to be reviewed, the state needs to step in to create a floor of rights along with the environment for service providers to develop a sense of community, and the way we value work and its place in society needs to be reconsidered.

With those recommendations, the conference was brought to a befittingly open-ended conclusion.

Reshaping Work in the Platform Economy – Conference Notes by Morshed Mannan

Morshed
Leiden

Reflections on the 6th International Gathering of the Workers’ Economy (Argentina, 23.08.2017-03.09.2017), Part II

As some businesses slip into the cracks created by financial crises, new grassroots, bottom-up organisations begin to coalesce, attempting to fill the socio-economic vacuum left in their wake.

One such organisation is the occupied factory. From the early years of industrialisation in Europe, there have been instances of worker takeover and self-management of factories. Fuelled by militant unionism or ideological fervour, workers occupied their workplaces when confronted with factory closures and unpaid wages. This can be seen from the takeover of tobacco factories by workers in 1819 (Miranda Lorenzo 2011: 77) to the evolution of the modern worker cooperative movement through the efforts of Robert Owen, Philippe Buchez (among others) to the Biennio Rosso mass occupations of factories in Italy by half a million workers between 1919-1920.

More recently, this tradition has continued in countries like Argentina, as well as Greece and Spain where the unemployment rate peaked at over 25% in the years following the 2008 global financial crisis. In 2001, at the height of the Argentine financial crisis, 2,600 businesses were going bankrupt every month (Magnani 2003: 37)! Market failure and a dearth of employment opportunities fomented the occupation and restart of several closed businesses by its workers, usually in the form of worker cooperatives operating under a type of self-management known as autogéstion. As of March 2016, there are 367 such recuperated enterprises in Argentina run by 15, 948 workers (Ruggeri 2016: 8). They operate in a broad variety of industries, from printing presses and parillas (steakhouses) to metallurgical factories and media outlets. What makes the Argentinian experience truly unique though is the longevity and resilience of these enterprises as well as their provenance in non-union movements. Of a total of 411 recuperated enterprises between 2002 and early 2016, only 43 have gone out of business, roughly 10% (Ruggeri 2016: 13).

unemployment rates in greece and spain
Unemployment Rates in Greece and Spain between 2000 and 2017, as compared to the EU and the Netherlands

Thus, as Marcelo Vieta argues, these recuperated enterprises have evinced similar, if not more pronounced, counter-cyclical and resilient qualities as worker cooperatives and other labour-managed firms (Vieta 2013: 9, Birchall 2012). In an economy that has moved from crisis to crisis, with relatively brief periods of recovery, this is an impressive achievement.

The resilience of such labour-managed firms may be attributed to several intrinsic and extrinsic factors. Empirical studies have shown that such firms are less likely to fail during periods of economic depression as they prioritise the retention of employees rather than profits for investors. To achieve this, they are willing to (democratically) introduce flexibility to wages and working hours, laying off workers only as an undesirable last resort (Pérotin 2013, Harrison 2013, Birchall & Hammond 2009). Worker cooperatives generally require a contribution of both labour and capital to the business, thereby aligning worker interests closely to that of the business. An additional feature of recuperated businesses in particular is their close ties with the communities in which they are located. The process of recuperation is rarely smooth and it is the solidarity exhibited by community members, standing shoulder to shoulder during factory occupations or by purchasing products, that acts as a critical lifeline in the early years of the business. In the post-default period, the survival and economic growth of said enterprises had a knock-on effect on government policies and regulations, shaping the laws of expropriation, bankruptcy and cooperatives as well as creating new avenues for financing worker cooperatives and recuperated enterprises.

However, as I was to discover during my visits of worker-recuperated cooperatives in the province of Buenos Aires and the eponymous capital, much has changed since the inauguration of the government of Mauricio Macri in December 2015.

Reflections on the 6th International Gathering of the Workers’ Economy (Argentina, 23.08.2017-03.09.2017), Part I

Argentina was once one of the ten most developed countries in the world – and it shows.

Its baroque churches and neoclassical banks leave as much of an impression as the people sleeping on mattresses at their doorsteps. The parks and avenues are lined with blooming Jacarandas yet pedestrians clutch their bags tightly as they rush under the tree boughs as night descends. Buenos Aires has more bookstores per capita than any other city in the world, in spite of two severe financial crises in the past fifteen years.

Argentina became a major fault line in the global economy in 2001. The overvaluation of the Argentinian peso (after being pegged to the US dollar in the late 1990s) and higher utility prices following a wave of privatization raised the cost of doing business in Argentina compared to regional competitors, leading to a depression in foreign investor confidence, the shuttering of domestic companies and mass redundancies. Excessive borrowing by the government from foreign markets through the issuance of sovereign bonds precipitated the rise of domestic interest rates, making credit more expensive for domestic enterprises and further precipitating business closure and unemployment. Public discontent soon reached a boiling point, with runs on banks out of a fear of devaluation and frequent looting of supermarkets (Time). This also contributed to a shortfall in tax revenue, as a consequence of which the IMF refused to extend a previously agreed US$1.3 billion loan, citing Argentina’s failure to meet budget deficit reduction targets (NY Times). These developments eventually came to a head on 23 December 2001, when the President of Argentina declared that the state was defaulting on US$ 93 billion of its sovereign debt (Rabobank), most of which was in the form of bonds held by foreign creditors.

Buenos Aires erupted in a cacophony of clanging pots and pans (cacerolazos) as citizens took to the streets to air their grievances.

Academic papers I enjoyed reading

Since September 2015, I’ve been working as a Research and Teaching Faculty member (now PhD candidates with teaching responsibilities) of Leiden University, the Netherlands and as part of my role, I’ve been reading a wide variety of academic papers.

I thought I would post some of the articles I’ve read, and found particularly interesting, through this post. Maybe you will enjoy reading them to.

I will briefly comment on the aspects of the paper that I found to be interesting. Obviously, for intellectual property considerations, I’ll only provide links to the full text of articles that are already available in the public domain. (Usually this is done through university repositories and SSRN]

  • Feldman, Eric and Stein, Alison I., Assuming the Risk: Tort Law, Policy, and Politics on the Slippery Slopes (2010). Faculty Scholarship. Paper 296. [Also published in Feldman, Eric and Stein, Alison I., “Assuming the Risk: Tort Law, Policy, and Politics on the Slippery Slopes”, DePaul Law Review, Volume 59, 2010, pp. 259-303]This was part of our required reading for International Tort Law during my LLM (Adv.) programme in International Civil and Commercial Law at Leiden University.  I will be honest- aside from a few perilous journeys down a ski slope, I was largely unfamiliar with the ski industry before reading this article. Not only did I learn about how the ‘assumption of risk’ doctrine (a.k.a. volenti non fit injuria) historically developed in the USA, but I also became informed of how the ski industry works in Vermont and Colorado and how a nexus of factors influence the debate on assumption of risk in an inherently ‘risky’ activity: inter (and intra) state politics, the clout of large ski slopes, the leverage of insurance companies and, of course, landmark tort litigation. The article serves as a reminder of how strong the law and economics scholarship is in the US!
  • GM Gulati, TMT Isaac and WA Klein, ‘When a Workers’ Cooperative Works: The Case of Kerala Dinesh Beedi‘, UCLA Law Review, Vol. 49, 2002, pp. 1417-1454.This is an article I just finished reading (04.02.2016) as part of my research into the internal administration of worker cooperatives. A lot of the literature (in English) on this topic concentrate on cooperatives in the Global North (i.e. Spain, USA, Italy, UK) with a relatively small number of academics studying those that exist in the Global South. In some ways, the latter group should be the locus of a rich vein of research. On the one hand, cooperatives in developing countries have suffered from endemic government interference, corruption, dearth of necessary cooperative education and training as well as the degenerative tendencies of many cooperatives: lack of a long-term orientation, intra-member conflicts over residual profit distribution, managerial impotence and shirking being just some of the observed problems. On the other hand, examples like the Kerala Dinesh Beedi cooperative(s) is a heartening example of how worker-controlled and managed firms can flourish in a capitalist economy.Let me first explain why it is so remarkable. Several cooperatives in India, and in the state of Kerala in particular, have failed due to government interference. Beedi, the product manufactured by these workers, is a cheap cigarette and the return per pack of Beedi is infinitesimally small. As a result, wages and working conditions in the industry are correspondingly abysmal, with regular media exposés of child labour being used. In such an industry, it is remarkable that the workers of such an industry were able to buy-out a Beedi manufacturer and establish a firm that has been a market leader in the production of Beedi since the mid-1960s, employs tens of thousands of heterogeneous member-workers, pays well above the industry standard (3 times in 2002) and has now diversified into other products. They were able to survive, even when their annual turnover was reduced by two-thirds!What the article reveals is the confluence of factors that allowed such a cooperative to survive the vicissitudes of competition, recession and falling demand for tobacco. By fleshing out the internal workings of the cooperative, from the shop floor worker to the central cooperative board of directors, we see that having ideologically dedicated and hard working directors and professional management, a slim management structure, mutual monitoring by workers, high product quality standards and high worker satisfaction can collectively contribute to a successful and long-lasting worker cooperative. The article is easy-to-read (I read a lot of it on the train between Leiden and Den Haag) and it provides delightful observations, like the practice of supervisors reading newspapers and stories to the shop floor workers as entertainment.
  • The Straddler, David Ellerman in conversation with the Straddler, ‘Against the Renting of Persons’, Winter 2017, available online at: <http://www.thestraddler.com/201715/piece2.phpIn this illuminating interview, Ellerman’s main argument is that we have moved from a system where people can be bought and sold to one where their hours can be rented. This commodification of people conflates rational man with things.He draws a comparison between employment contracts and voluntary contracts of slavery, as existed in the past, primarily as they both constitute contracts of alienation rather than delegation. In other words, these contracts apportion key decision making powers completely to employers/owners  rather than being delegated selectively and conditionally. (Doesn’t matter if this is done voluntarily or not, so moving beyond discussion on coercion and consent) The basis of this factual and moral view of inalienability stems from the inalienability of conscience – that you cannot become less of a person even if you contract to do so. By extension, logically, you can’t fully alienate from yourself key decision making powers and responsibilities though the law previously enabled this in the context of slavery, marriage and employment and now does so only in the latter. This also entails the employer expropriating the lion’s share off the fruits of an employee’s labour (while also treating them as a distinct individual in the event that the employee becomes implicated in a crime or wrong doing!) Instead there should be a shift in the discourse towards a more democratic approach where these non absolute, selective powers are delegated conditionally within employee employer relations.This has to be done within member owned firms rather than as formally self employed persons as the latter will merely erode their hard fought protections with little or no benefit.
  • Marleen A. O’Connor, ‘Promoting Economic Justice in Plant Closings: Exploring the Fiduciary/Contract Law Distinction to Enforce Implicit Employment Agreements’, in Lawrence E. Mitchell (ed.) Progressive Corporate Law, Westview Press: Colorado, 1995, pp. 219-245.
    The thrust of O’Connor’s argument in this article is that director’s fiduciary duties should be read expansively not only to include the interests of shareholders, but also to encompass non-shareholder constituencies such as workers. This is especially in situations of seismic corporate change, such as plant closings and redundancies. Her reasoning is that workers have ‘implicit’ employment agreements with their employers, that in exchange for accepting lower pay at the start of their careers, they will enjoy secure tenure. The workers receive the training they need and the employer’s have a ‘safety valve’ in the form of being able to let inadequate workers go without incurring too significant an expense. These important motivational aspects are left unsaid from formal documents as they are not easily reducible to written terms, yet they merit serious consideration in the wake of mass redundancies as they risk the considerable labor investment made by employees with no possibility of future return. The fiduciary approach is superior to a contractual approach as it relies on trust stemming from property rights rather than contractual promise. As such it doesn’t require express terms and in fact can override contractual provisions that are contrary to it.The author has a skeptical view on the efficacy of stakeholder (a.k.a. constituency) statutes in holding directors to account for failing to uphold workers’ interests, despite their widespread adoption in US states. However, she concedes that famous cases like LOCAL 1330, UNITED STEEL WKRS. v. U. S. STEEL – which found that courts cannot reverse a plant shutdown decision made by a Board of Directors on the basis of un-profitability and that there is no property right to employment – may have been decided differently if a stakeholder statute had been in force at the time of the decision. [Contrast this with the Kamani Tubes Worker Cooperative discussed in an earlier blog post or the Bangladeshi worker recuperated factory that I will discuss in a future post]I particularly liked the farsightedness of this statement, made in the first footnote of the article: “…networks constitute the most efficient form of organization for today’s economic circumstances because they maximize both the flexibility of market transactions and the control associated with hierarchical organization. Fiduciary law’s moral mandate to act in the parties’joint interests may facilitate evolving business practices.” (p. 236). This feeds into her critique of conventional transaction cost economics that views networks to be between “markets and hierarchies” (p. 223ff). She contends that economic transactions do not only turn on promises and exchange and the transaction costs inherent in this but also on trust that is built overtime.  The importance of networked organizations seems to be a theme in the literature I’ve been reading recently, including in this essay on the Greek recuperated, self-managed soap factory Vio.me: https://roarmag.org/essays/worker-control-viome-greece/To establish whether an unconventional fiduciary relationship exists, the author’s review of state-level jurisprudence suggests that three trends emerge: “whether the interaction involves a high degree of trust, whether the relationship has continued for a long period, and whether one party is vulnerable because it relies on the other’s decisionmaking [sic] discretion” (p. 225). In essence, the third characteristic means that the features of arms-length, equal bargaining are absent and a considerable degree of control is vested in the stronger party. The weaker party relies on the stronger party’s expertise, with the hope that the latter will uphold the latter’s dignity and be compensated by the former’s improved performance.O’Connor concludes by positing that the US corporate governance paradigm needs to be reformed so as to incorporate employee participation committees modeled on works councils in Europe and directors’ fiduciary duties extending to employees. (On the neutral referee model briefly mentioned in this article, also see O’Connor’s ‘The Human Capital Era: Reconceptualizing Corporate Law to Facilitate Labor-Management Cooperation’, 78 Cornell Law Review 899 (1993) and Mashiko Aoki, ‘Toward an Economic Model of the Japanese Firm’, 28 Journal of Economic Literature 1 (1990).)
  • David Ellerman, ‘On Property Theory‘, Journal of Economic Issues, Vol. 48, No. 3, 2014, pp. 601-624.

    Labor produces Labor’s product (Q,–K,0), which is the sum of the de facto responsible actions conceived as a “commodity” (0,0,L), plus the whole product (Q,–K,–L). But Labor only appropriates (as first seller) the “labor commodity,” while the employer appropriates the whole product. (p. 621)

    Why do legal authorities  (passively) enable employers to (mis)appropriate the responsibilities and liabilities of employees actions and thereby appropriate the whole product resulting from said actions? This is the core question Ellerman seeks to explore. He argues that in reality employees only agree to cooperate with employers in certain activities but by dint of doing so, do not automatically assign to the employer responsibility (and liability) for their joint activities (p. 617) nor enjoyment of the whole product. However, legal authorities read this ‘transfer’ of responsibility and entitlement to the whole product into employment contracts and legitimize the status quo through their non-action in rectifying this appropriation. In a manner of speaking it is an example of the invisible (judge’s) hand at work. In contrast, if the employer-employee were participants in a joint criminal enterprise and the law became ‘visible’, they would both have been legally responsible and liable individually. They would bear the fruits and consequences of their own actions. On a philosophical level, the mis-imputation of responsibility in the employment contract is in violation of  ‘Hume’s conditions’ that transfers can only happen by consent and that promises [contracts] must be performed, as well as the basic Lockean principle that legal responsibility follows de facto responsibility. What is interesting though is that even if there is purported consent, Ellerman argues elsewhere that certain transactions and relationships cannot be consented to because, among other things, the inalienability of conscience.  As a consequence, Ellerman argues for the abolition of the conventional employment relationship altogether  and its substitution with a system where “production could only be organized on the basis of the people working in production (jointly) hiring or already owning the capital and other inputs they use in production” (p. 619). In other words, responsibility, as with membership, would solely rest on those who work in the firm.

  • Gary Gereffi, ‘Global Commodity Chains: New Forms of Coordination and Control Among Nations and Firms in International Industries’, Competition & Change, Vol. 4, 1996, pp. 427-439. 
    For people interested in global value/commodity chains, the work of Gereffi is canonical. He maps these chains and began to reveal their complexity. One of his most notable contributions is providing a theoretical framework for distinguishing between different types of commodity chain: producer-led chains and buyer-led chains. The qualification refers to which node in the chain has a concentration of coordinating power: (manufacturing) producer or (retail/marketing) buyer. “Whereas producer-driven chains refer to capital- and technology-intensive industries like automobiles, aircraft, or computers where transnational corporations or other large integrated industrial enterprises play the leading role, the main barriers to entry in labor-intensive, buyer-driven chains like apparel, footwear, or toys are at the design and marketing stages, which gives primary power to large retailers and branded marketers.” (p. 434) This website provides a graphic representation of this. Thus, Apple is an example of the former while Starbucks, Nike etc. are illustrations of the latter.
  • Boaventura de Sousa Santos, ‘Globalizations’, Theory, Culture & Society, Vol. 23, Nos. 2-3, 2007, pp. 393-399.
    I’ve been delving into transnational legal orders and transnational legal pluralism lately (November 2017) and in doing so, came across this short article. It serves as a good, quick introduction to the topic of hegemonic and counter-hegemonic globalization, before going into book-length treatments of those topics. When thinking about globalization, he reminds us that all ostensibly global conditions and entities had local origins somewhere else in the world (i.e. globalized localism). By that same token, globalization (of one set of local conditions or entities) entails the provincializing, the trivializing, the crowding out of another set of local conditions or entities (i.e. localized globalism). [pp. 396-397] This continues to provide a useful framework for conceptualizing more recent developments like the growth of gig economy enterprises. It can also be used to frame the transnational resistance (i.e. insurgent cosmopolitanism) to hegemonic globalization, for example the World Social Forum and solidarity movements like the Encuentros I mention elsewhere in this blog.
  • Stephen P. Garvey, ‘Agency and Insanity’, Buffalo Law Review, Vol. 66, 2018, pp. 123-191.
    I recently came across this article on the insanity defense and was intrigued by the author’s argument for understanding insanity as being predicated on ‘lost agency’. Reading it made me think of how the question of categorizing levels of artificial intelligence (AI) and determining its autonomous capacity will turn on AI’s capacity for ‘free will’, ‘rationality’ and ultimately, ‘agency’. Insanity is an intriguing phenomenon to consider while researching AI as it helps us understand whether a mistake or wrongful act is due to a problem inherent to its code or a (mental) disease/defect that becomes apparent from the AI’s self-learning process and activities. Studying insanity also highlights how central agency is to allocating liability. As Garvey argues, lost agency should be central to establishing an insanity defense and exculpating liability of the defendant, rather than loss of cognitive capacity and/or physical control stemming from a mental ailment. While under traditional theories of insanity, the question is whether the actor could have chosen otherwise than he/she did, under lost agency theory the issue is whether the actor experienced him/herself to be one doing the choosing at the time or not (p. 164). In other words, a sense of agency is lost when “the internal mechanism by which we gain a sense of agency fails to work as it should” (p. 170). If a question arises about the liability of (autonomous) AI, perhaps the follow-up question should be invited whether it had lost agency, due to the aforesaid (mental) disease/defect, or had retained a sense of agency. After all, as the author notes: “[b]lame and censure presuppose responsibility, responsibility presupposes agency, and agency presupposes a sense of agency” (p. 159).Moreover, humans who have been certified as insane may be precluded from liability for all their actions and as a corollary, prevented from holding several positions of responsibility, which may be erring on the side of caution but could be over-inclusive and reflect a simplified understanding of a particular mental condition. At the very least, a thought-provoking digression into behavioural science and law & psychiatry; a nice change from the usual law and economics material.
  • Søren Kierkegaard, Clancy Martin (tr.) From the Present Age.
    I particularly liked this passage: “A revolutionary age is an age of action; ours is the age of advertisement and publicity. Nothing ever happens but there is instantaneous publicity everywhere. In the present age a rebellion is of all things the most unthinkable. Such a manifestation of strength would seem preposterous to the shrewd intelligence of our time. On the other hand, a political virtuoso might accomplish something nearly as extraordinary. He might write a manifesto proposing a general assembly at which people should resolve upon a rebellion, and it would be so prudently written that even the censor would let it pass. At the meeting itself he would be able to create the impression that his audience had rebelled, after which they would all go quietly home – having enjoyed a very pleasant evening.”