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Directors Corporate Culture and the Role of Boards BAE Systems – building trust with organised labour

BAE Systems – building trust with organised labour

BAE Systems is a leading international defence, security and aerospace company headquartered in London with significant operations in the US, Australia and the Kingdom of Saudi Arabia. Total group sales were £17.9bn in 2015. The UK workforce numbers 33,800 out of a total group workforce of 82,500. Over many years it has built a relationship of trust with its UK trade unions based on a structured forum and open discussion. BAE Systems has not faced industrial action in the UK in the last 15 years.

Background

The company recognises a number of trade unions and has high levels of union membership. The unions operate together under the banner of the Confederation of Shipbuilding and Engineering Unions (CSEU), which brings together Unite, the GMB and Prospect. The unions have full time conveners (paid for by BAE Systems) in each business and site. Separately the company has a bargaining and consultation framework at group level.

The current relationship has evolved over many years and was at least in part a response to the acquisition by BAE Systems of defence and shipbuilding businesses where there was a tradition of poor and often confrontational industrial relations. A particular influence was British Aerospace’s merger with the defence manufacturing division of Marconi in 1999 when BAE Systems was created. This required the company to bring together two organisations with different union structures, terms and conditions.

Action

Both sides now describe their current relationship as one of trust. This is based on a culture of openness, a structure which allows potentially serious issues to be escalated and addressed before they become critical, and a recognition that, in many areas of public policy, the unions and management have common interests.
The framework in which this takes place is important because it allows the company to engage with unions at every level throughout the group, while still giving individual sites and businesses the freedom to conduct their own bargaining on wages and other specific local issues such as new work practices.

The basic element is the Corporate Consultative Committee that allows BAE Systems to engage with its own union officials at convener level. This has about 30 members and meets quarterly. It discusses issues of mutual interest to the unions and the group. Agenda items might include:
  • Ethical issues such as the operation of the Ethics Helpline, the embedding of the Code of Conduct, diversity and inclusion training and similar items which help the company embed its values and understand how they are viewed by the workforce.
  • Financial performance. This keeps the unions informed of developments at group level and helps set the context for management actions such as restructuring as and when they become necessary.
  • Political issues. This might include issues where both parties have a common interest and can work collectively to engage politicians on all sides of the spectrum.
Above this group sits a smaller group: the Corporate Consultative Committee Steering Group to which the 30 members of the Committee elect eight members and which is chaired by Andrew Smith, HR Director of Employee Relations. This meets monthly and the company membership varies depending on the subjects.

It is able to deal in more detail with sensitive issues from the full committee agenda and with specific issues, including those where the company needs to develop consistent UK-wide policies. Examples would be the arrangements for holiday pay following legislation requiring employers to include overtime and other extra payments in the calculation, and the reorganisation of pensions resulting from the abolition of contracting out.

One objective is therefore to ensure consistency of key policies at national level while leaving pay bargaining to individual businesses. The Committee and its steering group do not touch pay bargaining by mutual agreement, though, Mr Smith says, the information flows through the system do set the context for pay bargaining at individual business level. The committee structure also does not deal with disputes.

A separate group consists of national officers of the three unions involved together with the head of the CSEU, Hugh Scullion. These are the final level in any dispute escalation process and would become involved if the company were unable to reach agreement with its own union representatives or regional union officials.This group also meets regularly at both an informal and formal level with the company at very senior level, which may include BAE Systems chief executive Ian King and UK Group Managing Director Nigel Whitehead. The agenda for this group is more removed from the day-to-day-issues and more focused on strategic issues.
Union officials involved in the process say that some of the discussions are tough, including those on the holiday pay arrangements, but they readily acknowledge the benefit of what Mr Scullion calls their “very informed, very open relationship.”

“We are involved at a very high level, and consulted on all the main issues,” adds Azza Samms, who leads the unions’ conveners’ group.

Impact

The company’s approach is to be as open as possible with its union interlocutors and this is in turn valued by them. Also, the regular involvement of BAE Systems’ senior leadership matters. This has fostered a high level of personal trust. The senior union representatives know that, on critical issues, they can approach the leadership directly, though most potential problems are defused at an earlier stage.

Confidentiality is essential, and so far the record has been good. Both sides recognise the mutual advantage of the arrangements and neither want them to stop.  Breaches of confidence are extremely rare and dealt with firmly if they occur.  Though the company tries to be open with its interlocutors, it does not normally expect them to sign confidentiality agreements.

A key background factor that has helped build the relationship is the shared interest in the political debate over defence. The two sides do not normally lobby together, but they keep each other closely informed. Sometimes, as was the case with the Scottish independence referendum, the unions would have preferred the company to be more outspoken than it was in the early stages. However, both sides agree that the political background to the industry creates a foundation for good relations which might not always be easy to replicate elsewhere. 
 

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