Coles, Wesfarmers underpayments point to widespread governance failure

This week, another two Australian corporations announced the underpayment of their employees: Coles and Wesfarmers.

In both the Coles and Wesfarmers case, as in the Woolworths case last year, companies have failed to monitor employee overtime and ensure that workers’ salaries are sufficient to cover all of the hours that they work.

Again and again we see payroll systems and procedures that fail to ensure legal compliance. This points to a governance culture that devalues employees and their time by failing to account for additional hours worked over and above their regular salaries.

Some employer groups have deflected governance concerns, to instead squabble over the correct terminology to describe wage non-compliance. In arguing over whether conduct should be described as “wage theft” or “underpayments”, peak bodies fail to read community sentiment, and risk underestimating the potential for reputational damage and loss of staff morale, and their longer term impacts on company performance.

Investors must consider that wage underpayments may be proxies for broader governance failures. If companies are unable to fulfil their legal and moral responsibilities to their immediate workforce, what other compliance failures may be present in their business and broader supply chains?

This responsibility is particularly acute for the trustees and investment managers of super funds whose members have been caught up in these underpayment scandals. They must ensure that their members’ entitlements are paid in full, and that companies take steps to improve their governance procedures and preserve the long term performance of the company.