Will G4S finally change its treatment of workers?

The exit of Norway’s £850bn wealth fund over human rights concerns could force the British firm to examine its operations – especially if others follow suit, writes James Moore

G4S has a decidedly spotty record on the subject of migrants (Getty)

The world’s largest sovereign wealth fund pulling out of G4S on ethics grounds is a gut punch for a company that has taken a great deal of flak over the past few years, usually with good reason.

Norway’s £850bn fund has divested its holdings (it had 2.3 per cent of the company at the end of 2018) and says it will no longer hold the shares because of the “unacceptable risk that the company contributes to, or is responsible, for serious or systematic human rights violations”.

The fund’s ethics council said the decision was based on an assessment of the company’s operations in Qatar and the United Emirates, where many of the employees are migrant workers who paid a fee to join.

“When the workers arrive in the Gulf, they must spend a significant part of their salary to pay off this debt, and therefore have little chance of leaving. Many also received far lower wages than agreed, and in the Emirates, the workers got their passport confiscated.”

It’s significant that G4S hasn’t sought to deny the issues raised by the committee. Instead it said in response that it had carried out an investigation and is now “making good progress on our action plan to reinforce our high standards in relation to employee recruitment and welfare provisions in the Middle East”. This includes the appointment of a full time migrant worker co-ordinator.

G4S has good reason to take the issue very seriously. This is not a good look for a company that has had a decidedly spotty record on the subject of migrants.

Undercover footage from the BBC’s Panorama programme showed officials mocking, abusing and assaulting detainees at the Brook House detention facility for migrants run by the company on these shores in 2017. G4S says conditions have since improved.

There are, of course, clear moral imperatives to address issues like the ones raised by the Norwegian fund. However, those are in practice usually trumped by financial ones in the business arena.

The important point about the Norwegians’ announcement is that it makes the treatment of migrant workers a financial issue. Other investors clearly took note: the shares fell in response to the announcement. That’s a very welcome development.

The Norwegian sovereign wealth fund is the bluest of blue-chip investors with capital to burn and a rather longer term time horizon than some investors I could name. Its name is one companies like to have on their shareholder registers.

Its voice is thus heard loudly in the world’s boardrooms. By taking a stance like this it thus has the power to effect real change, perhaps more than almost anyone else.

Does it use that power often enough? Well, now, that’s open to debate. It is notable that the former CEO of the fund broke a decade long silence in May to raise his concerns over the governance, organisation and risk taking of the organisation.

One of the arguments made by Knut Kjaer, in an interview with the FT, was that the fund, once a leader in areas such as ethical investing, had been passed by other investors, particularly with respect to matters related to climate change.

Its intervention with respect to G4S is nonetheless very welcome. It has pushed the company to respond. Others may now quietly review their operations in the named countries too.

As for the G4S action plan, if the Norwegians make their way back onto its roster of shareholders at some point in the future, we’ll know if it’s been effective.