Hong Kong-listed companies cheat Chinese workers out of their hard-earned money while the Stock Exchange of Hong Kong Limited (the Exchange) turns a blind eye

The Hong Kong Confederation of Trade Unions (HKCTU) has set up a “Monitoring Database of Hong Kong Enterprises in China” three years ago, to acquire information through media, social media, and interviews with labour organizations and workers in China. This year, the “Monitoring Report on Collective Labour Disputes of Hong Kong Enterprises in China” (Monitoring Report) covers from May 2015 to June 2016.  It documents large-scale labour disputes in Hong Kong enterprises and their labour violations, and aims to monitor multinational brands and Hong Kong entrepreneurs. It also advocates the Hong Kong Government to better monitor Hong Kong-listed enterprises’ conducts in other countries / territories. Last year, the Monitoring Report (2015) disclosed that many Hong Kong enterprises failed to pay for workers’ social security contributions and consequently led to a wave of strikes. This year, the Monitoring Report tells us about how these Hong Kong enterprises use relocation, equity transfer, restructuring, and prolonged wages arrears to force workers into “voluntary resignation”, in order to avoid paying severance compensation as required by law. Almost 60% (59.3%) of the cases of collective labour disputes are related to missing severance compensation and some of them involve listed companies in Hong Kong. Likewise, wages arrears take place in 56.3% of all collective labour disputes cases.

Hong Kong-listed Royale Furniture Holdings Ltd. is suspected to send triad members to dispense workers and avoid paying severance compensation

Among the 32 cases of collective labour disputes in Hong Kong enterprises, almost 60% (19 cases) are caused by unpaid or missing severance compensation. Over 20% of them involved subsidiaries of Hong Kong-listed companies. Royale Furniture Holdings Limited (HKG: 1198) is one of them. During the National Day holidays in 2015, Signature Enterprise Company Limited (Guangzhou), a subsidiary of Royale Furniture Holdings Limited, moved machineries to another production site, about two hours drive from its Guangzhou plant, without informing its workers. Such a secret relocation is meant to avoid paying severance pay to workers.

Hiding plan of relocation from workers and accusing workers of “voluntary resignation”

According to an online platform which documents collective labour disputes, Signature Enterprise deployed triad members to threaten workers. Workers recalled that their employer offered them an extraordinary long holiday and when they returned to work (the morning of 8 October 2015), they found the factory gate had been locked and over 100 men were blocking their entrance. These men were all uniformly dressed in black T-shirts and camouflage pants. Workers were stopped when they walked forward to ask for a reason and three of them experienced minor injuries when a conflict broke out with these men.

Workers then came with a banner to protest. They reflected, “the employer never asked us about the relocation.” Then the enterprise posted a “Notice of Return to Work” some days later, which ordered workers to take a coach organized by the enterprise on 19 October, to travel to work in the new plant in Zengcheng, approximately two hours drive one way. Xiao Liu, a worker of Signature Enterprise, explained, “we are not willing to go there because our families are here, we can’t just go there and work.” He pointed to workers who guarded at the factory gate, “these workers have aging parents, babies and primary school aged children to take care of. It is unrealistic that the employer simply asks us to go over.” After Signature Enterprise’s relocation, Royale Furniture dismissed workers who did not go to work in the new plant, accusing them of “voluntary resignation” after five days of “failing to attend work”.

Lack of transparency, the Exchange’s neglect to monitor listed companies

Johnson Electrics (Guangdong) Limited is wholly owned by Hong Kong listed company Johnson Electrics (HKG: 0179). The plant ignores occupational safety, violates the local work safety regulations, fails to provide appropriate protective measures or training on working with chemicals. At least six workers contracted leukaemia, which may have been caused by prolonged exposure to toxic chemicals such as benzene and thinners. However, Johnson Electrics refused to pay for their medical expenses or their wages. When Zou Xiuhua, one of the six victims, demanded the employer to pay for his medical expenses he was told by the company: “we have so many workers with leukaemia in the enterprise, if I pay for your medical expenses, what should I do with other sick workers?”

Currently, at least four workers from Johnson Electrics have officially been diagnosed with occupational leukaemia, by the Hospital for Occupational Disease Prevention and Treatment. Despite this, Johnson Electrics adopts delaying tactics and refuses to pay the related compensations. For example, Zeng Shumei, a female worker who entered the factory in 2009, was diagnosed with acute myeloblastic leukaemia M2a in 2013. The Guangdong Provincial Hospital for Occupational Disease Prevention and Treatment also identified it as a case of occupational cancer. Yet, Johnson Electrics appealed and delayed the procedure in providing related information for an official diagnosis, which kept her case in limbo. Likewise, leukaemia victims were offered a meeting with Liang Yanfan, general manager of Johnson Electrics’ Human Resources Department in Shajing Plant in Shenzhen, but they were physically assaulted after the meeting. Workers came to protest in Hong Kong twice. Johnson Electrics “agreed” to meet again with workers but continued using delaying tactics once the media stopped following the case.

The HKCTU lodged a complaint at the Exchange and provided evidence of workers’ official diagnosis of occupational disease, accusing Johnson Electrics of violating Chinese labour legislations and failing to pay workers their legal compensation. However, the Exchange refused to meet, not even with the severely ill victims who travelled to Hong Kong. The exchange wrote to the HKCTU, calling the complaint insignificant to Johnson Electrics and refused to further process it. In fact, the Exchange has never disclosed its investigation procedure or evaluation criteria. With such a lack of transparency, how can the Exchange be trusted that it would uphold public interests and monitor listed company impartially?

Listed Companies’ Disclosure of Information: a laughing stock

In July 2015, the Exchange amended its policies on listed companies’ disclosure of information and released a consultation paper “Environmental, Social and Governance (ESG) Reporting Guide” (Reporting Guide). Amendments would then be applicable to the Listing Rules. Labour standards are included in the social aspect in the Reporting Guide. The Reporting Guide upgraded the disclosure of some aspects from “recommended disclosure” to “comply or explain”. During the consultation period, the HKCTU wrote to the Exchange and recommended “a set of clear disclosure guidelines and criteria” of labour standards for listed companies to comply with. A listed company has a responsibility to clearly inform their investors, employees and public about its labour standards and the compliance of labour protection, for the stakeholders to make informed evaluation of the impact of the company’s labour violations on themselves. The Exchange eventually demands listed companies to disclose “related policies” on labour rights and their compliance with labour legislations, but without the detailed records of the frequency of labour violations and related labour actions. For example, in Hutchison Whampoa Limited’s Annual Report 2014, the impact of Hong Kong Dockers’ Strike on its turnover was not spelled out. Though stakeholders might be aware of the labour action, they are not informed about the loss such an industrial action could lead to. As a fact, the amendments neither encourage listed companies to implement policies to protect workers, nor promote better governance to the public. They even fail to protect investors’ interests, as they lack details from the disclosure of information, if those self-proclaimed policies by the listed companies have been implemented or proven effective.  

This year’s Monitoring Report illustrates that in the midst of Guangdong’s economic transformation and as economic slowdown deepens in China, even Hong Kong listed companies would sacrifice workers’ basic legal rights and exploit them mercilessly. Labour conditions in small or medium-scale enterprises can only be more appalling. The cases described above also show that the Exchange connive listed companies, in both aspects of policy making and implementation. The Exchange’s lack of transparency is unhelpful in monitoring the listed companies’ compliance of corporate social responsibility and protecting the public’s right to know. As a result, the Exchange fails to provide concrete protection to both Chinese workers and investors.