For the first time ever, Russian workers are threatening to strike in a dispute union leaders directly blame on the tactics of the oligarch who controls the shareholding of Norilsk Nickel. Also for the first time, the unions are demanding that corporate transparency include the disclosure of the oligarch’s perquisites, including the salaries paid to senior management, stock options, bonuses tacked to movements in share prices, and other forms of compensation.
As the French novelist Gustave Flaubert once said, wealth is a “substitute for everything, even reputation.” But even Vladimir Potanin and Mikhail Prokhorov, the dominant shareholders of Norilsk Nickel, have started to understand that, for the share value and the creditworthiness of Norilsk Nickel to appreciate, their personal reputations or the briefings they provide selected international bankers and analysts are not enough.
On Monday, two trade unions of Norilsk Nickel’s Transpolar affiliate, which represent about 80 percent of Norilsk Nickel’s 62,000-member production force, said that “if the management of the company will continue to violate the collective agreement signed with the unions and fails to start negotiations with the trade unions over the three main demands that were posed, the unions may start strike action.”
Speaking at a press conference, union officials said their demands include indexation of salaries in accordance with Russia’s 14 percent inflation rate and maintaining longer vacations for the employees working in hazardous conditions.
The workers are also demanding that Norilsk Nickel management resume funding for the mine and workplace safety service responsible for job-safety conditions. Twenty-six people died in mine or smelter accidents at the company in the past two years, according to the unions.
The last major strike at Norilsk Nickel was in 1989, union sources say. Since then, however, threats of strikes, backed by the support of regional legislatures and the federal parliament, have forced the company to remove executives criticized by the unions; and to abandon announced plans for plant closures on the Kola peninsula.
Valery Melnikov, chairman of the Federation of Trade Unions of Norilsk Nickel, said “the strike [threat] is very real.” He sharply attacked Prokhorov, the company’s chief executive, who was one of the founding shareholders, along with Potanin, of the group that seized control of Norilsk Nickel in 1996. Potanin is generally labeled one of Russia’s oligarchs, and he describes Prokhorov as his closest business partner at Norilsk.
Prokhorov headed Unexim-bank until it defaulted on its obligations in 1998 and went bankrupt. He then took over Norilsk Nickel from Alexander Khloponin, who went on to become the governor of the Taimyr region and, late last year, Krasnoyarsk Krai.
According to Melnikov, Prokhorov has practically “destroyed the mechanisms for social partnership that existed when Khloponin was head of the company.
He has stated on numerous occasions that he doesn’t need a trade union at Norilsk Nickel, unless the unions take orders from management, and will report on what has been done afterwards.” Melnikov said Prokhorov is the first negative example at the company of “ice-cold managers who act without restraint.”
Melnikov added that, though in the past there were tense “situations at times between the trade unions and the management of the company, the team of Khloponin was wise enough to discuss the problems at the negotiating table.”
In addition to his union post, Melnikov is a deputy of the Krasnoyarsk legislative assembly and a potential candidate for mayor of Norilsk. Norilsk Nickel managers accuse him of bandying the strike threat to improve his election chances.
Melnikov said that with the election of Khloponin as governor of Krasnoyarsk and the preservation of control by Norilsk Nickel over Taimyr, “the region has turned into a preserve of Norilsk Nickel.”
Nikolai Kryuchkov, chairman of the union organization of Norilsk Nickel’s affiliate on the Kola peninsula, the Kola Mining and Metallurgical Company [KGMK], said: “Although we will not participate in the strike action, we are in solidarity with the demands of unions in Norilsk, especially concerning indexation of salaries.
I wouldn’t say that the situation in KGMK is better in general. But concerning the situation of the trade unions [in Kola] and the attitude towards them from the management of KGMK, it is better. At least the general director of KGMK discusses things with us.”
A report by Moscow-based investment bank Renaissance Capital issued last week said it expects “much more in terms of cost control to be achieved over the next few years.”
Cutting the labor force, the report said, “has been the biggest fundamental structural improvement to the cost base since privatization in 1996.” At that time, the total workforce was 129,000. By 2004, the report said, the company expects to be down to 52,000.
Melnikov said that while over the past several years the workforce has decreased, the productivity at Norilsk Nickel’s plants “increased by 2.3 times and is 14 times higher than average in Russia.”
According to Melnikov, the company plans “to keep only mining and concentration workers in the company, while the rest of the workers employed by the company will be transferred outside of the company, as it gets rid of non-core affiliates. Besides that, the unions are outraged by the introduction of censorship in the regional media, which prevents adequate reporting about the problems of the company.”
Mikhail Shinko, chairman of the united trade union committee of miners and deputy chairman of the Association of Trade Organizations, the second of Norilsk Nickel’s unions, said the current conflict has arisen “because the management of the company unilaterally has stopped observing the collective agreement and ignored decisions of the three trade-union and labor-collective conferences that were held last year.”
“The latest trade-union conference on Dec. 24 decided that the unions should start collective-dispute procedures,” he added.
“We are giving the company one last chance,” Shinko said. According to Melnikov, whether or not a strike action will start depends not on whether management starts negotiations with the trade union, but on whether any results will be reached.
According to Renaissance Capital, management is already expecting nickel output to fall from 223,000 metric tons in 2001 to 217,000 tons this year. This reflects a shift in the ore mined and in the nickel grade; copper output is planned to grow from 474,000 tons to 478,000 tons. The forecast for palladium output is for a rise from 2,949,000 ounces to 2,979,000 ounces.
As news of the strike threat hit the market, nickel jumped in price by $276 per metric ton, while platinum rose $9 an ounce and palladium $3 an ounce. If the price gains are sustained, Potanin and Prokhorov will be able to count an immediate gain of more than $50 million to the company’s sales revenues for this year.
While the wage bill for Norilsk Nickel isn’t clear, and a 14 percent wage increase for part of the workforce is far from agreed, it looks like the strike threat could make more money for Potanin and Prokhorov than they may have to give up in lost output and cost increases.