Analysis of James Hardie Case Study: HRM Module, University, 2019

This case study analyzes James Hardie Industries' asbestos liabilities, focusing on the company's history, restructuring, and the resulting legal and ethical issues. The analysis examines the role of trade unions, particularly the Australian Council of Trade Unions (ACTU), in corporate campaigning to ensure compensation for asbestos victims. It explores the issues surrounding the company's restructuring, which aimed to shield it from asbestos-related liabilities, and the subsequent legal battles and investigations. The case study investigates the options available to address these issues, including management and union approaches, and the implications of the company's actions on its stakeholders, including victims, employees, and shareholders. The analysis further provides recommendations to address the issues identified, emphasizing the importance of corporate responsibility, ethical decision-making, and the impact of globalization on industrial relations.

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Introduction
Hardie industries plc Jan. Is an industrial construction materials firm based in Ireland which
is a specialty business in fiber cement products listed on the Australian stock exchange?
James Hardie produces and develops technology, materials, and processes for the
manufacture of construction materials. Hardie has also been running an R&D facility
dedicated solely to fiber cement manufacturing for over 20 years. Working with asbestos-
containing products–including the construction material known as fibro or fibrositis–has
resulted in people developing multiple pleural disorders, including asbestosis and malignant
mesothelioma. In May 2012, the Australian High Court ruled that seven former non-
executive directors of James Hardie had deceived bourses on the compensation fund for
asbestos victims. James Hardie emigrated from Linlithgow, Scotland, to Australia in 1888
and established an enterprise importing oils and animal hides. Andrew Reid, from Linlithgow
too, came and was a full partner in 1895 to join Hardie in Melbourne. After Hardie retired in
1911, his half-sales firm was sold to Reid. In 1951 the first Australian stock listed became
James Hardie Industries Ltd. For the most part of the 20th century, James Hardie was the
leading producer in Australia in the production of asbestos concrete sheets and associated
building products that used the material for reinforcement by asbestos.
Discussion
The investors of the group voted unanimity in December 2001 to restructure and move the
company as a parent company in the Netherlands. This was part of a strategy to free the firm
from the stigmata of its asbestos liabilities (Ahammad, Glaister and Gomes, 2019). The
agreement to make James Hardie an Irish Firm of Societies Europe, on 19 February 2010 and
James Hardie Industries NV became James Hardie Industries SE, were transferring their
corporate domicile from the Netherlands to Ireland.

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In 1978, the symptoms in the former workers of mine started to emerge from pleural
defects and other asbestos-related conditions. The first page of the West Australian story,
reporter Catherine Martin, won a Walkley Prize and created nine reports detailing the effect
on staff and family members. On 12 June 1982 Martin was elected to the Order of Australia
for journalism services (Doz, 2019).
In 2002 the claims made to the NSW Dust Diseases Tribunal by more than 50 percent
had been made against firms belonging to the James Hardie family, while further companies
had been involved in similar asbestos activities, most notably CSR Limited (Beer, 2017).
This was because of the scope of mining and manufacturing activity that James Hardie had
over his long history of service. The total number of past and future asbestos-related claims
made against James Hardie is estimated. Bernie Banton AM has been remembered by the
many asbestos-relating survivors, who have worked after work with James Hardie, for their
legal and political fight for damages. Asbestosis, pleural mesothelioma, and asbestos-related
pleural illnesses (ARPD) were present in Bernie Banton, which forced him to wear an oxygen
tank everywhere he was. James Hardie has been compensating the survivors since the 1980s
with their subsidiaries. Although there were previous reports, the explosion of the 1980s led
James Hardie to realize that asbestos had been known to be harmful (Gunz and van der Laan,
2010).
In 1978 the company started to label its products with warning labels indicating that t
he inhalation of the stain could lead to cancer, and in march 1987 James Hardie stopped all o
perations in the manufacture of asbestos. As concern increased over the serious negative effec
ts of asbestos on the health side of the population in the mid-1980s. James Hardie maintained,
however, that it had made every possible effort to protect workers (Hardie, n.d.).

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In the last decade of the Commonwealth, the Australian trade union movement has
long been active during social issues and has a minimum' living wage' law of 1907 (which
remains part and parcel of the system). Australia's corporate movement has its roots in what
was referred to as the Green Bans of the early seventies. The design of housing and the
preservation of historically and architecturally important buildings in Sydney's central
business district was significantly overridden in response to increasingly speculative trade
developments. The BLF argued that all work carried out should be of social benefit and of
ecologically good nature "(Monday, 1988, as quoted in Burgmann, 2003). The BLF had the
right to intervene in the decision-making procedure. This altruism is despite the possible
negative impact of this mindset on the work of BLF leaders. The first ban was on Sydney's
last open bushland. The BLF, in alliance with local residents, continued without help from
local government officials or the Prime Minister of the NSW to black forbid the work on the
site and on pickets. Originally the developers AV Jennings tried to carry out non-union work.
The NSW government ordered a judicial investigation into the matter on 12 February
2004. James Hardie and his management were heavily criticized. In addition, it was found
that James Hardie's actuarial estimates with an estimated A$ 286 million liability were not
satisfactory as they used a financial model that forecasts the valuation of Amaca and Amaba
investment, the statistics were subject to a number of non-specified criteria and failed to take
account the impact of separating Amaca and Amab (Holland and Pyman, 2011).
After the investigation results, James Hardie started talks with the government and
trade unions with a view to creating a kind of scheme for compensating deserving victims of
the products of James Hardie. James Hardie decided on December 2004 to pay compensation
by a charitable compensation fund for the suffering victims of its goods (Hoch and Dulebohn,
2013). The fund details were legally determined by June 2005, but progress stalled and the
company refused to disclose the date of the deal. Other disputes over fiscal deductibility of

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donations to the voluntary fund were further retarded between the company and the federal
government (Dulebohn and Johnson, 2013).
State governments, union leaders and victims put huge pressure on the Federal
Government to eradicate the tax problem. Sexton submits that the Federal Government has
agreed to these terms in order to avoid payment being delayed. Approval of the model by
James Hardie investors marked the final step in giving the mutual fund a legal framework.
99.6% of shareholders voted for the scheme in February 2007, and the scheme commenced
operations afterward (Moerman and van der Laan, 2015).
During the 2004 inquiry, authorities considered bringing civil and criminal
proceedings against the CEO and other senior executives for making false statements
regarding the MRCF's liquidity. In February 2007, the Australian Securities and Investment
Commission (ASIC) charged all representatives of the 2001 board and some senior
management with a number of C infringements. On the basis of the ability of James Hardie to
fund claims in 2009 the New South Supreme Court found Meredith Hellicar as well as
Michael Brown, Michael Gilfillan, Martin Koffel, Dan O'Brien, Greg Terry, and Peter
Wilcox as former presidents (ROSNER, 2017). Five years were also prohibited from sitting
on the Commission. Former CEO Peter Macdonald was suspended for 15 years and fined
350,000 US dollars for his role in creating and publishing the MCRF. The former CEOs,
except for Macdonald, withdrew the appeal against the decision, and in 2010 the NSW Court
of Appeal upheld the ruling against the directors. In August 2019, in a court lawsuit against
James Hardie, a DIY handyman from Adelaide, Australia named Mathew Werfel won $3
million. When pulling down fences and renovating two homes between 1990 and 2000,
Werfel was exposed to asbestos and was diagnosed with testicular cancer in 2017 (Solaiman,
2013). The new products from James Hardie no longer contain asbestos, but Werfel's lawyer

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claimed that the company should have done more to alert the public about the existence of
asbestos in its old products that were used in old homes.
In the mid-19th century, the asbestos industry started in Italy. Combining new
discoveries in Australia, South Africa, and the former Soviet Union with new asbestos
markets and applications, the industry has grown on a global scale. World War II's
emergence sparked an era of boom for the industry that began after 1945. Scientific evidence
from the 1930s has gradually established the link between asbestos and a number of diseases
like mesothelioma. Indeed, asbestos-related lung cancer was made a compensable disease by
the German government in 1943. However, in a period of unprecedented demand for
asbestos, this evidence emerged. During this time, the working conditions of those involved
in mining or manufacturing in the United States, Canada, South Africa, and Australia were
little improved.
This was largely due to the industry's ability to circumvent lawsuits, legislation and p
ublic concern through a variety of tactics described by (Thacker, 2012) as:
• Removing evidence of risk;
• Intimidating clinical researchers;
• Interfering with research;
• Generating favorable publicity; and
• Concealment
This approach proved highly effective until the 1970s when the asbestos industry was
clearly linked to a number of cancers through overwhelming evidence, studies and the
recovery of internal documents. Despite this, as the following case points out, the industry

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remained defiant in its guilt avoidance. However, during the time he worked for JHIL, the
campaign figurehead in Australia, Mr. Bernie Banton, had his medical records hidden from
him. The reports clearly showed the damage he was experiencing from working with asbestos
(Tunsupon and Yampikulsakul, 2016).
The case study focuses on an international corporate movement led by ACTU to
ensure that victims and their families obtained due compensation following an off-shore
corporate restructuring that culminated in the relocation of corporate headquarters and assets
worth more than AUD$1.9 billion in October 2001 from Australia to the Netherlands (Webb,
2007). Subsequently this reform revealed a gap in insurance payouts to victims with minimal
pecuniary obligation or penalty. As such, JHIL's organizational restructuring was largely
viewed as a way of hiding behind the' corporate veil' by trade unions and asbestos victims
organizations. By contrast, in the Netherlands, JHIL cited a better tax regime as the rationale
for restructuring. It is also important to note that the Netherlands is a state with which
Australia has no international treaty; that is, victims are unable to make claims of damages in
a Dutch court.
In February 2001, JHIL produced an asset worth AUD$293 million in the Medical
Research Compensation Fund (MRCF) to fund compensation payments to asbestos victims
and their families.
Soon afterward, approval by the NSW Supreme Court for a' Scheme of Arrangement'
led to the establishment of JHIL's new parent company (James Hardie Industries NV) based
in the Netherlands. Despite assurances from lawyers representing JHIL that the deal would
not affect Australian asbestos victims seeking compensation, the Netherlands-based JHIL
corporation secretly canceled shares worth AUD$1.9 billion (set aside for compensation) in
March 2003 without consulting the court or the stock exchange; placed property and

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compensation payments from the plaintiff Liability for asbestos claims is also covered by
Australian-based companies
The Jackson Inquiry With the MRCF's public statement on December 2003 that it
faced a significant shortage in revenue and could not finance victim compensation payments,
the NSW Special Commission of Inquiry was set up in February 2004 to investigate JHIL's
underfunding of its asbestos liabilities. David Jackson QC has been appointed to investigate
the connection between the lack of funding and global restructuring (Mullins, 2008).
Throughout the Jackson Inquiry, ACTU played a central role. Together with unions
and support groups against asbestos, ACTU and MRCF made a joint request to the Jackson
Inquiry. The key points of this submission were: a refusal to support tort law amendments
that limited the rights of asbestos victims to compensation; a call for JHIL to provide the
MRCF with unconditional funds to ensure that the foundation stayed solvent and continued to
pay the claims of asbestos victims; support for the creation of a JHIL Special Prosecutor to
seek justice for JHIL (Meisenkothen and Finkelstein, 2013).
JHIL made a public promise to negotiate with the ACTU on their duty was to provide
ongoing financial compensation to asbestos victims and their families. A groundbreaking
AUD$1.5 million' Heads of Agreement' was signed in December 2004 between ACTU,
Unions At the height of the September 2004 union movement, JHIL made a public pledge to
negotiate with ACTU. In December 2004, ACTU, Unions concluded a landmark AUD$1.5
million ' Heads of Agreement' (Knowles and Haigh, 2006).
The Heads of Agreement was intended to provide the basis for a legally binding'
Principal Agreement' to be reached by June 2005, but that JHIL investors would have to vote
on and agree. The Heads of Agreement provided for: an unrestricted funding agreement
without restrictions on total compensation or payments to victims; (Hills, 2005) the

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establishment of a special reason fund to accept JHIL funds and make payments to claimants;
the provision of an initial cash' buffer' equal to two years of claims plus the payment of
another year of claims in advance (approx. AUD$250 million); payment of an initial cash'
buffer' equal to two years of claims plus payment of a further year of claims in advance
(approx. AUD$250 million); additional annual payments from JHIL based on an annual
actuarial estimate of asbestos claims; an annual payment cap set at 35 percent of JHIL's free
cash flow; a guaranteed 40-year funding agreement with an annual asbestos claims limit;
After the deal, the NSW government called for the lifting of all boycotts on JHIL goods, and
the company's shares grew by more than 7% upon the deal declared public. (Francesco, 2013)
Conclusion/Argument
The organization and management of the campaign represent the framework put forward by
Tilley (1978) in terms of building the oppositional mobilization process in the analysis of the
corporate campaign against JHIL. In terms of interest, it was clear that a large coalition was
formed between local and international trade unions, asbestos support organizations and state
governments using a multi-scalar approach, with a common view that the employer–JHIL –
had behaved in a manner that was unfair, unethical and violated human rights
Also influential was the addition of the MRCF to the campaign. In terms of
opportunity, or the campaign's cost-benefits, the main theme was the coalition's unfailing
public determination to support JHIL and victims ' moral rights at all costs. Combet's public
comments in the press both throughout the inquiry and after its conclusion retained this
theme:' If no resolution is reached, we can expect full-scale manufacturing, legal and
legislative attack. Investors and their investors would do well to recognize that morality is
inevitably going to go wrong.

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