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CASE STUDY
Merger Blues
Company A merged with Company B as part of an international merger. Both companies are in the
same business. The decision to merge was made by the boards of the companies in the capital of one
of the European countries. Neither the local management nor the union in India had any say in the
matter. Company A sells its products directly through its own salespersons and its countrywide
network of branches/depots. Company B sells its products through a countrywide wholesale/retail
distributor network. After the merger, it was decided to do away with the system of direct selling and
close the branches/depots of Company A and the redundant workforce—mostly sales and accounting
personnel—through a voluntary separation scheme. While Company A has three unions—one each
for the factory staff, office staff, and the sales personnel, Company B has two unions—one for the
factory and the other for both office and sales staff. Union office bearers are elected once a year in
Company A and once in two years in Company B. Relative to Company B, Company A has superior
technology and a more skilled workforce, but the workforce in Company A is paid less than the
workforce in Company B. Collective agreements are signed once every four years in Company A with
the factory workers, union and not the other union. The practice is to maintain a semblance of parity
with the other
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categories of workers as well so that the office staff and sales personnel do not feel deprived or
cheated because their pay revision is done unilaterally by the management from time to time. In
Company B collective agreements are signed with both unions, once every three years. Company A
has a higher market share than Company B, but Company B's profits are higher than Company A's.
This is because, though wages have been higher, Company B's overheads were lower.
The management wanted there to be one union for the workers in both factories for the purposes of
collective bargaining. It did not want a collective bargaining agent for the other two groups of
workers, that is, office and sales staff, in the merged company. With this objective, it wanted to
restructure the workforce composition such that some of the functions were outsourced and for others
promote a significant proportion of the staff as officers. In Company A there had been continuity in
union leadership (particularly the factory workers union), but in Company B union leadership had
changed three times in the past 10 years. Elections in Company B's union were based on a promise of
higher pay and better benefits. Though the company merged, the unions did not, because due to
several historical factors and complexities the members of the respective unions in companies were
reluctant to unite. Instead they wanted to form into a federation for coordinating their collective
bargaining and other activities. The unions were stuck with the diversity described above. The
workforce in Company A felt relatively deprived after the merger because they lost their identity or
some lost their jobs (about 30%) and got less pay despite being more skilled than the workforce in
Company B.
Questions
1. Discuss the issues before the management and the unions and suggest how they can be tackled.
2. Highlight the issues relating to union structure arising out of the company merger of companies A
and B.