Cruel Outcomes: How weak corporate governance and internal controls in the palm oil industry allow abuse of foreign and local workers

Liberty Shared September 2020

This document does not seek to revisit or summarize previous
research and conclusions about abuse suffered by migrant workers
entering Malaysia to work on palm oil plantations. There are
many excellent reports and materials available that examine the
abuse of workers and the failures of companies to improve their
plantation management practices, such as Amnesty International’s
Trapped: The Exploitation of Migrant Workers in Malaysia, (2010);
Business and Human Rights S.I (; Fair Labour
Association’s Mapping Study on Seasonal Agriculture Workers and
Worker Feedback and Grievance Mechanisms in the Agricultural
Sector, (2018); Suisse Solidar’s Exploited and Illegalized: The Lives
of Palm Oil Migrant Workers in Sabah, (2019), and Earthworm
Foundation’s Insights Into Recruitment Costs and Practices Amongst
Small-Medium Sized Companies In The Palm Oil Industry In
Peninsular Malaysia, (2019).

This document argues that, firstly, despite over a decade of
reporting and research on abusive recruitment practices and
abusive working conditions on plantations and despite the
representations and statements set out in the increasingly
prolific human rights and sustainability corporate disclosure,
it is time to accept that a substantial proportion of the millions
of individuals arriving to offer their labour to plantations,
of whatever size, do so in a state of vulnerability caused
by the manner of their recruitment. Whether due to debt
arrangements, poverty, illegal status or deception, the palm oil
industry, particularly those who lead the industry, should and
must seek to alleviate and resolve these vulnerabilities and not
exacerbate and capitalize on them by allowing vulnerability to
become a lever for coercive and abusive labor management
practices by plantations managers, supervisors and forepeople.
Second, it seems clear that the ongoing industry-wide failure to
prevent abusive and coercive practices on plantations is caused
by deep structural issues grounded in a long history of terrible
labor practices begun in the industrial rubber agricultural
sector during the British administration of Malaya and largely
continued since then to today.

Third, evidence of the comprehensive and far-reaching work
needed to build and implement a governance framework to
remedy and rectify this situation, in other words to create
businesses and a business-operating environment that actually
offers vulnerable workers support to reduce and resolve their
vulnerabilities, rather than exploit them, appears sorely lacking.

Fourth, the implementation of corporate sustainability and
ethical practices is a desired end state, one that will be dynamic
and active. However, there is no chance at all of achieving the
creation of an organization that is sensitive to the wider social
and environmental issues without that company having robust,
sufficient and well implemented corporate governance, risk
management and internal controls (together organizational
corporate governance and controls). From the examination of
annual reports and sustainability statements, and considering
what has been learned from workers themselves, it is clear
that design and implementation of corporate governance,
risk management and internal controls and the design and
implementation of a sustainability agenda remain two parallel
lines of management activity. Never meeting, the development
of sustainability practices and the development of organizational
corporate governance and controls are largely considered
separately. This is very convenient for many corporations and
boards of directors as the arrangements keep the objectives of
sustainable practices away from corporate governance, which
has regulatory and legal requirements, and therefore avoids
creating joint and several obligations and liability on the board of
directors and senior executives.

Finally, it is time that the vast cornucopia of public disclosure
created in the name of sustainable and ethical practices is linked
clearly and transparently to implemented underlying organizational
corporate governance, risk management and internal controls and
the underlying laws and regulations that require such organizational
corporate governance and controls. The formulation and publication
of these policies, as expensive as the process of creation is, must
lead to identifiable ongoing, consistent and monitored corporate
procedures and practices that are enforced by the business – it is
these that must be clearly disclosed on a regular basis.

See full report (40 page PDF file)

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