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CEOs Death in India Alerts Multinationals to Workplace Issues

October 29, 2008
Related Topics: Managing International Operations, Workplace Violence, Safety and Workplace Violence, Workforce Planning, Featured Article

The September murder in India of a CEO by disgruntled employees may be the most extreme example of how employers in India struggle to manage their workforces during a time of global economic tensions. But in its aftermath, and after several other violent incidents involving international firms in India, employers there are growing more sensitive to workforce issues and layoffs.

Lalit Kishore Choudhary, 47, the CEO of the India unit of Italian automotive company Graziano Transmissioni, was beaten to death September 22 after 125 former employees entered the company’s factory in Greater Noida, a high-tech hub outside New Delhi. The company cited under-performance when it fired the workers in July.

   Graziano management was negotiating a deal to reinstate 110 of the 125 dismissed employees as workers gathered to protest a requirement that reinstated employees submit a letter of apology. Choudhary’s death reportedly was sparked when a security guard fired warning shots to disperse the crowd.

Authorities made numerous arrests, but the incident nonetheless sent shockwaves through an Indian business community worried that the murder would dampen enthusiasm for India by overseas investors.

Oscar Fernendes, labor minister in India’s Congress-led central government, said the incident should send a warning to other companies.

"Workers must be handled with compassion; they should not be pushed so hard that they resort to whatever happened in Greater Noida," he said.

Rajneesh Bawa, director of HR for Netherlands-based New Holland Tractors in India, says relations quickly deteriorate if there is no trust between workers and management.

"I know of several export-oriented companies which, because of the seasonality of their businesses, have to regularly balance their business needs with employee needs. Yet there is no resentment on either side," Bawa says.

The incident at Graziano comes at a time when violent protests led the country’s biggest conglomerate, the Tata Group, to pull out of the Indian state of West Bengal. Tata planned to introduce the world’s cheapest car, the Nano, late this year in the city of Singur before protests there pushed the company to move production elsewhere.

Tata halted work on the Nano because of increasingly violent protests by farmers demanding the return of some of the land on which the plant was built. The shutdown of the Singur Tata plant resulted in at least one suicide among the more than 13,000 farmers who sold their land—or had it taken from them by the government—to create the site for the factory.

On September 3, the day after the plant shut down, Sushen Santra, the father of two Tata factory workers, poisoned himself by drinking pesticide, according an account in the U.K. newspaper The Guardian. One of Santra’s sons, Uttam Santra, told reporters that his father killed himself after learning that his sons would no longer have the Tata factory jobs they were promised when he sold his farm.

South Korean steel giant Posco’s plan to build an $11.1 billion plant in the state of Orissa has been an ongoing target of violent protests, and in March 2007, protests in West Bengal turned deadly when police opened fire on farmers angry about a government plan to appropriate 10,000 acres of land for a special economic zone to build a petrochemical complex by Indonesia-based Salim Group. Fourteen protesters died and 70 more were wounded.

Graziano CEO Marcello Lamberto visited India shortly after Choudhary’s killing. The company’s India HR chief, L.K. Gupta, said the company will continue its India operations.

"Choudhary has brought this company to such heights. We cannot let his efforts go in vain," he said.

India’s labor laws recognize the need for corporate retrenchment, but Bawa says it should be done with a human touch.

"It cannot be a clinical operation," Bawa says. "Employers have to be more generous."

In the past, layoffs were uncommon in India. Family- and government-run industries were willing to take on bloated payrolls to provide the social stability of lifetime employment. Increased privatization and foreign investment, however, has ushered in a new era of Western-style management. And while many Indians have benefited from the boom, millions more have not, which has increased tensions over globalization.

To calm angry employees, Indian managers must explain layoffs as part of a broader company strategy, especially if the directive comes from an overseas headquarters, said the HR director of a multinational company who asked not to be identified.

"Choudhary may have been acting at the behest of his bosses in Italy, who would not have been aware of the realities in India; had local administration been more proactive, the incident could have been prevented," he says.

The Graziano Transmissioni case is rare, says Naresh Malhan of Manpower India.

"In the coming months, we may see more employers making do with the people they have, finding ways to contain costs and being cautious in their hiring decisions," Malhan says. "However, as the global economy gains traction, we will see Indian employers regain their confidence and be willing to add permanently to their payrolls."

—By Workforce Management staff with reporting from New Delhi

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