The Labor Unions in The Netherlands: influential, but increasingly superfluous organizations clutching at straws; using the Pension Funds as their personal heritage.

During the last weeks, I have been analyzing the new Dutch pension arrangements for my company.

The article that I wrote about it: New pension agreement in The Netherlands[…] is an adequate summary of my and other people’s findings in this matter, although some additions could be made to it (I will write these some other time).

There is, however, one aspect that I already mentioned in the aforementioned article, but that I want to shed some extra light on through this new piece: the disproportionate and increasingly undeserved influence of the labor unions on the new pension agreement and the management of the pension funds in general.

The labor unions had a fairly stable member base over the last 40 years and the last couple of years this member base has been decreasing slightly. On the other hand, the active labor force has been growing over the last 40 years: from 4.8 mln people in 1970 to 7.6 mln people in 2010.

The result is a widening spread between the workers that are members of a union and those, who aren’t. In chart 1 (courtesy of CBS (Central Bureau of Statistics)), it is visible that only roughly 1 in 4 workers has been unionized in 2010. 

Besides that, the member base of the labor unions is aging rapidly, due to the fact that only 1 in 20 youngsters below 25, becomes a member of a labor union. In chart 2 (data courtesy of CBS), it is visible that 65% of the male and 48% of the female union members is above 44. Respectively only 4% (M) and 7% (F) of the union members are youngsters below 25. And it cannot be expected that, when these youngster are becoming 25 years or older, they will get a membership of the labor unions .

This chart reveals an obvious underrepresentation of youngsters in the labor unions. Although you could say that female union members are more equally spread over the age groups, the representation of females in the Dutch workforce itself is much lower. This is caused by the fact that Dutch women often stop working (fulltime), after they become children.

The results of this ageing population of the labor unions are:

·     Within 22 years, roughly 65% of their male and 48% of their female member base will retire.

·     The growth of younger members during these years, will be minimal ( is my prediction)

·    As a consequence the labor unions will be increasingly superfluous, but will have a disproportionate influence on collective labor agreements and the pension funds.

·    The pension funds are very much aware of this development and they are increasingly representing their 50+ member base at official events and meetings, at the expense of their younger members.

I quote from the aforementioned article of June 13^th:

Every aspect of this pension plan smells of the fact that the labor unions represent an aging and diminishing group of employees: the 50+ workers: 

·   The 50+ group (the grassroots of the labor unions) benefits the most from this pension plan.
·    The 45- group mainly pays for it, without any warranties, as this group was hardly represented by the unions, during the negotiations.

And if you wonder how far this influence of the labor unions goes, then read the pertinent snips of the official pension agreement (click on the PDF-file at this link: text in Dutch) between the labor unions, the government and the employer´s associations, accompanied by my comments.

When in this text is written `social partners`, you should read this as: representatives of the employer´s associations and the labor unions.

Our pension system can be maintained, when employers, as well as employees (social partners) and the government take up their responsibility for the system. For employers and employees, the official consultations on labor conditions are the place where the labor condition ´pension´ is discussed.

Read this as: we [the labor unions and the employer´s associations] decide on your pension, so if you are not a member of the unions, you are not represented and so you are scr*wed.

The main agreements on pensions are the following: the social partners want a future resistant pension system that is more resistant against change in life expectancy and developments on the financial markets, but delivers better opportunities for indexation. The fundamental features, like collectivity, solidarity and the mandatorily character should be kept.

Read here: We will make your pension future-proof (which we can’t), but at the same time we give all collected money away to the current and near-future retirees. We do this by calculating with too optimistic, expected yields on investments, which we will never earn in reality. However, in advance we will raise all payments to the near-future and current retirees, that are our grassroots. You pay for everybody else´s pension and there is no way you can escape from this.

It makes sense, that the social partners shape and fill in the contract at a decentralized level and consult with the pension fund executive board (the executive organization). The result should be a contract where ambition, premiums, investment policy and collective risk profile are fitting.

Read: We [the unions] do not only shape the big picture, but we will also do our share of micro-management at a decentralized level. We decide what everybody’s risk profile is and we will choose the best investments.

Social partners at companies and industries have thus a variety of possibilities for steering the balancing process of ambition, risk and security. There is a choice for nominal prudence, but also for acceptable risk.

Read: we decide what risk is acceptable for you and we could make a choice for careful investments (which we won’t do), but also for ‘walking at the edge’ in investing (which we will) and we will hand-out all possible proceeds in advance. If the piggy-bank is empty, when your pension is due, than you are on your own.

And exactly this is the reason that I want to abolish the Dutch labor unions from the collective labor agreements and from the boards of directors of the pension funds and pension insurances. These growingly obsolete and outdated people represent only a minority of the workers and the rest of the workers is scr*wed, as they can´t escape from the influence of these clubs.

If you agree with my conclusions, please send a tweet at @minpres (tweet account of Prime Minister Mark Rutte) with the following text:

@minpres The labor unions didn´t represent me rightfully in the 2010 pension agreement. Please stop this bad agreement before it becomes law

The ostrich view (part II). Dutch Public Prosecution acts like 2nd ostrich in Dutch corporate corruption cases: ‘see no evil… hear no evil…’

Yesterday I wrote in “the ostrich view…” about the behavior of Philips Healthcare in Best, concerning the bribery case of Philips Poland: looking the other way.

This morning it became clear that Philips Healthcare Headquarters is not the only party that puts its head in the sand concerning bribery and corporate corruption.

The Dutch financial newspaper “Het Financieele Dagblad” writes its frontpage story on the lackluster approach of Dutch Public Prosecution towards corporate corruption cases of Dutch companies and multinationals. Here are the pertinent snips of this article:

“Bribery remains unpunished” (link in Dutch)

In The Netherlands, there is a lack of political will to prosecute bribery and corruption cases of Dutch companies abroad. This is stated by some prominent criminal lawyers. During the last ten years, no Dutch company has been brought to trial for committing bribery and corruption abroad. And that in spite of the fact, that since 2001, Public Prosecution has the legal right to prosecute such felonies.

According to financial crime-lawyer and deputy judge Joost Italianer, the prosecution of international bribery is lagging heavily, because the government lets economic interests of companies prevail on maintaining the law. “The Netherlands is a trading nation. The government is not prioritizing prosecution in bribery cases concerning foreign authorities. Therefore Public Prosecution (PP) lacks funds and time to investigate such cases”, according to Italianer

PP confirms that it is authorized to prosecute corporate corruption, since The Netherlands signed the anti-corruption treaty in 2001. According to PP, ‘it happens in limited numbers that PP investigates foreign corruption cases’. But the cases are hard to investigate, according to a spokesman of the Justice Department. The fraud is taking place abroad and parties will remain silent.

Concerning the bribery case of Philips Healthcare in Poland, PP states that prosecution of Philips Healthcare in The Netherlands is not an issue currently, as prosecution already takes place in Poland. The fact that Healthcare headquarters was aware of this fraud and didn’t act on it, doesn’t change this decision.

At the end of May, international organizationTransparancy Internationa (TI)l published a grim report on the Dutch prosecutions of international bribery. According to TI, there should be more manpower for the Dutch PP to act more decisively on this kind of fraud.

There are also other voices in The Netherlands: Criminal lawyer Brendan Newitt is aware of the fact that these cases have no priority in The Netherlands, but asks aloud if more priority for these cases is desirable. ‘It is not the right thing to do for Dutch companies, to prosecute very strictly. It is a fact that in many countries slush money is used as a means of doing business. On top of that: before 2001, it was allowed to deduct this slush money from the taxable amount’.

“Yes daddy, I stole some apples from the grocery store; John and Cathy did it too, so I thought I couldn’t stay behind”?! “Your right, son. Keep up the good work”.
This was absolutely not a conversation at the residence of the Brendan Newitt-family and I must object strongly against people thinking so.

But isn’t it strange that this kind of fraudulent behavior is trivialized by criminal lawyers? And isn’t it strange that Dutch Public Prosecution is assuming the ostrich position in case of corporate corruption of Dutch companies? Isn’t this behavior obstructing the ‘level playing field’ that American and European officials are always pursuing?

In the first article in this series, I told the story of my father’s company in the eighties, that was only able to do business in the Middle East when enormous amounts of slush money was paid:

I remember my father – an accountant for a large, Dutch building company –  saying about doing business in the Middle East (in the 1980’s): there are two ways of doing business with the people there.

1. You make an offer for a project, worth €35 mln – f.i. building a new museum -  by charging your principal the €35 mln fair and square… and you won’t get the assignment.

2. You make an offer for the same project, but you charge your principal €70 mln and return €35 mln in bribes to your principal, his family and whoever it may concern… and you get the assigment.

My father was an honest man and I’m sure he was disgusted that his company needed to do business this way. But having high moral standards is a luxury that not every company can afford. And therefore I suspect that almost EVERY company that does business in the Middle East, needs to deal with bribing people to get assignments.

And it is my honest opinion that Dutch and international companies should do everything to avoid ‘bribery of officials’ and other corrupt behavior in order to gain contracts. Because, if Dutch companies don’t stop bribing, why should companies in other countries do so. And Dutch prosecution? They should get out of their lazy beds and start acting on this kind of criminal cases.

The ostrich view: Philips knew of bribery in Poland, but decided to look the other way.

On May 18^th, I wrote an article on the accusations of bribery that were made against employers of Philips Healthcare in Poland. And I wrote how hard it is to prevent this kind of bribery, when the company and so many people depend on the successes of your tenders. And although, due to legal reasons, I didn’t dare to predict yet that the Philips headoffice knew of this bribery scandal, I didn’t hold this for impossible at all.

Here is a large fragment of this article:

Employees of Philips Poland were accused of bribing hospital officials.

And Philips Poland? Did they know it? And did the headoffice of Philips in The Netherlands know? Your guess is as good as mine and I’m certainly not going to make accusations in their direction!

But look at it objectively: X-Ray machines, radiation treatment machines, CT-Scanners and MRI-scanners are extremely expensive machines with price ranges between €100,000 and €2.5 mln. I took these prices from a dissertation on the purchase of a CT-scanner / PET-CT scanner from 2007.

The development costs for these machines are extremely high and the safety conditions and conditions for approbation by the international Health authorities are very, very stringent. This means that the producers of these machines, like GE Healthcare, Philips, Hewlett-Packard and Siemens, are operating in a very small and inaccessible market, where the margings are extremely high. Every machine that your company sells extra, means a machine less for your competitors.

Selling 20 extra CT-scanners or 10 extra PET-CT scanners per year means an extra turnover of €25 mln for your company. And the only thing you have to do for it, is giving a thick envelope with contents to the guys in the hospital that pull the shots. See it as a “special marketing investment”.

Today a follow-up on this story was printed in the Dutch financial newspaper, Het Financieele Dagblad (www.fd.nl). This story confirmed my initial thoughts on the presumed knowledge of this fraud at the headoffices of Philips in Poland and The Netherlands.

Philips knew of fraud in Poland (link in Dutch)

Philips in The Netherlands knew that its employees paid bribes in Poland. This is proved by internal documents, coming from the European headoffice of Philips Healthcare in Best (The Netherlands), that are in possession of the Polish department of prosecution. Het Financieele Dagblad has had access to these documents.

Philips denies any comments, when asked, as long the internal investigation of the Polish corruption case is not finished.

The Philips headoffice in Best got on a regular basis information from Poland, that public tenders were ‘rigged’.

From internal documents the following can be concluded:  Philips employees in Poland adviced local hospital direktors to set up the technical demands for public tenders in such a way that the competion didn’t stand a chance

On September 23, 2005, Jan Zasadzinski, accountmanager for Central and Eastern Poland writes:”We have an 80% chance to get six Duo-projects. We rigged the tender specifications throughout the whole year”.

The explicit mentioning of ‘rigged’ tenders doesn’t cause any astonishment or disapproval in The Netherlands, according to the mails returned to Poland. There is only annoyment that the Polish customers want to reserve the machines in such a short notice.

Peter van de Ven, senior director direct countries, writes:’As a consequence of these ridiculous times of delivery that are demanded, we already have to book an order if we want to meet the deadlines. That means booking an order before the tender is officially opened. This is clearly not a procedure that I am in favour of’.

In spite of this reservations, he approves of the order in order ‘not to miss this enormous opportunity’.

The bribes that were paid at this tender, are clearly visible in the price calculations that were approved of by Philips in The Netherlands.

Although Philips itself is not subpoenaed in Poland, the company risks a high penalty in the United States, when the American supervisor SEC concludes that the corruption in Poland was more than just a local incident.

The conclusion of my first article in this series was: You can be sure that this kind of corruption will be there to stay for as long as a few people decide on such large investments.

With this statement, I didn’t want to approve of these practices. It is unfair, dishonest and even straightforward corruption what Philips Healthcare did in Poland. Whether it is ‘the ostrich view’ of the Philips Healthcare headoffice or deliberate policy of the brand, I don’t know. But I wouldn’t be surprised if this is not only common practice at Philips, but also at the other suppliers of medical equipment. You can read my motivation in the excerpt of my first article.

Bribery cases like this, could lead to the situation that not the best medical equipment is chosen by hospitals, but just the brand that offers the largest bribes. Especially with medical equipment, this could lead to hospitals purchasing equipment of questionnable quality, that might even be flawed. That might cost human lives in the end.

Therefore I am very glad that Polish prosecution is seemingly investigating this case to the bottom. Because although Philips Healthcare is a Dutch company and a lot of jobs are depending from the outcome of this investigation, there should be no room for corruption in the medical world.

And I’m afraid that this Polish bribery case might only be the tip of the iceberg.