It is another hot and humid day today in Guinea, West Africa. Looking at more rough diamonds today, hoping to buy. Changed $1200 into Guinea Francs, last time I was here, the exchange rate was 6000 Francs to the dollar. Now it is 7000 Francs to the dollar. I needed a bag to carry it and it took 15 minutes to count. It is what it is.
There is a class battle going on in the diamond and commodities industry and in many businesses in this country and throughout the world. It is not taking place on the battlefield, but it has its casualties nonetheless. In this fight, the question of fairness is the fundamental point. The answers one hears on this subject are controversial, highly emotional, and dependent on how people view themselves and their place or position in the world.
As a rough diamond gemologist, I have formed my opinions based on my experience and my beliefs. However, it is not my opinion I am interested in, it is yours. I would like to examine one question of fairness and ask for your comments in order to bring clarity to this important issue.
For most people, it seems counter intuitive that someone who fails at his job should receive large sums from a company when he is fired. They would ask why we should pay failed executives their golden parachutes and why it is fair for top management to make outrages sums of money while the lower level workers make far less.
We may think it is insane for companies to pay failed CEOs millions of dollars even though they have failed to perform their duties profitably. This is especially true when these executives have caused the companies they managed to lose money. Additionally, when we hear the ever-growing disparity between the compensation of top executives and the wages of the lower level workers we may see this practice as intrinsically unfair.
One point of view is that it is extremely fair. Let’s look at the failed CEO first. When a publicly traded company or any large company seeks to hire top management they must first find someone with a proven success record. In addition, the candidate must have the education, skills, experience, intelligence, wisdom, intuition, social and economic acumen, leadership skills, business and political connections to successfully overcome the obstacles that can hinder a company’s growth or put it out of
One must honestly ask the question; how many people possess these attributes and have the ability to run a major company? Of those who possess this ability, how many are looking to leave the company they are currently running to go to a new company? The answer is; not many. This is why when a board of directors is looking for a new leader they have to offer their candidate enough incentive for them to come on board.
Top people are top people because they possess the above mentioned skills and qualities. This means they are very smart and very good at determining their value and have excellent negotiation skills. For this reason, when they consider going to a new company, they first determine what they will be giving up when they leave their present position. When they negotiate their contracts they take this and other important factors into consideration.
That is why boards are forced to pay tremendous salaries and to provide golden parachutes. Without stock options, parachutes and large salaries they cannot attract and maintain top talent. Once the board approves a contract, they have a legal obligation to fulfill it. If they signed a contract without a penalty for
failure, then it is the fault of the board. The CEO may succeed or fail, but regardless of the outcome, it is the board of directors who must determine the contents of the contract and it is the board that must approve the contract with the new CEO or other top executives.
So it is the board that is responsible for the large remunerations. And it is the board who must shoulder the responsibility when a CEO fails. It is their duty to take action to fire a poor manager. The CEO negotiated a great contract for himself. That is what he is supposed to do. The board does what it must. When it all goes the right way, people make money and jobs are created. When it goes the wrong way, companies go under and jobs are lost.
This system is fair because everyone who enters into the contract is a well-educated, experienced businessperson and feels what they are doing is best for the company. This is why it is fair for the CEO to receive the pay and benefits he receives. He negotiated his contract and the board approved it. If the stock holders are not happy, they can vote the board out and appoint a new board. That is how it works.
To address the issue of top management pay to those of lower level workers, let us consider the basic law of supply and demand. There are hundreds of millions of people qualified to be a janitor or can dig for
diamonds in a stream. Because of this, the pay is low. Obviously, there are many people to fill the shoes of these workers. The CEO who can run a major company has little competition and therefore his market value is high. This holds true for movie stars, sports heroes and anyone else who can do something that few others can do.
People have a market value. A market value is just that, a value based on the number of workers available and by the wages people are willing to accept to do a particular job or task. If you make minimum wage, it is because that is what you are willing to accept for the work you are performing. You may be forced to take the job because of circumstances and conditions. You may have skills, education and experience that deserve greater compensation. Unfortunately, these factors are irrelevant. What is relevant and important is what you are willing to accept as payment.
There is no argument from thoughtful people that all of us should be treated with respect and dignity. If you are not being treated properly, find another job. If you are not happy with your market value, do not complain; change yourself so you will be worth more in the market.
I recently wrote an article, Diamond Industry: Child Exploiter or Savior? In this article, I detail the use of child labor in the diamond industry. For those interested, it expands on the question of fairness in the labor market.
In my recent article on the Kimberley Process, a lady made a comment about the abuse of small children in India in the diamond (cutting) manufacturing industry. (“Kimberley Process: The Fairy Tale Your Mother Never Told.”) This was interesting to me because abuse and opportunity often exist side by side. Not only is this true in the diamond industry, but throughout the entire world in nearly every business, culture and society.
Currently and historically, people have been exploited and abused to generate income and profit for unscrupulous diamond mine owners. Until recently, people were forced at gunpoint to work in the diamond mines, fields and rivers in conflict riddled countries. It is obvious to all that this kind of abuse is wrong and cannot be tolerated in a civilized world. There are some wonderful articles and essays written on the Blood Diamond subject. This is not one of them.
In this article, I would ask the reader to examine a less coercive form of exploitation. I would like to talk about the working of children in the labor force, and of the extremely low wages paid to children, in the mining and polishing of diamonds. Many in the West cannot understand how parents, governments, and societies in Africa, Asia and parts of South America can allow children to be taken out of school and forced to work. Often these children work as many hours and as hard as adults do.
Unfortunately, people in the West have short and convenient memories. It was not so long ago that our predecessors had their children working alongside because they felt they had no choice. This was common in the Western world, especially in agrarian societies. Additionally, society saw this phenomenon as a useful tool in teaching skills and life values to the young. Furthermore, education was not relegated to schools only. In the past, few people went to college. Most skills were learned in the workplace and apprenticeship was common.
Children were sent to apprentice with knowledgeable and skilled artisans and their education was within their chosen trade. The families and children were grateful for the opportunity, and the company was happy to have an inexpensive work force that could be trained in the company’s ways, skills and culture.
The parents received the small wages that the children earned and the family benefited. Sometimes, the wages of the children made the difference between hunger and sufficient food for the family. As the children grew and developed in their understanding and skills, their wages increased and they were assured of making a decent living. Not only did the individual benefit, the whole family and their descendents benefited by the family having increased wealth and status in their community.
Today the world has not changed for billions of people. They are no different from the people of previous generations whose opportunities were severely limited .Even today, the education for their children is either non-existent or sorely lacking. In addition, for many, if their children do not enter into an apprenticeship or go to work in the diamond mining industry, they will literally starve or face hunger often.
Is it fair? Fairness is irrelevant, this is life in the real world. Often in life, our choices seem to be dictated. Such is the case with the majority of the children. The question never is; should the children go to work? No, the question is; are they treated with respect and care?
According to the great Chinese sage Lao Tzu, “When the Superior is not respected and the Subordinate is not cared for, disaster will follow.” This warning from nearly 3000 years ago still holds true today. The children must go to work. The families have no choice. Wise companies take good care of the children. Shortsighted companies abuse and exploit the children. Is it moral to have young children working? Ask anyone who has ever faced real hunger. An empty stomach, has its own morality.
One further point I would like to add. Some people, no matter how fortunate they are, and no matter how many opportunities they have, may rarely, if ever achieve success. Others, though they come from humble beginnings and have little opportunity may nevertheless succeed. If you are employed, even in the ditches of Africa, you have a chance to learn, grow and pull yourself up. Your chance may be small, but you have an opportunity simply because you have a job. Give a man a handout and you take away his dignity. Give him a job, and you give him dignity and respect.
Life is unfair. According to Vasistha, an ancient Indian sage, we experience pleasure and pain on account of the passage of time and the circumstances in which we find ourselves. The children workers have a chance in life to be successful. Perhaps the children who do not find jobs are the real victims?
During a particularly bloody time in Africa, some well-meaning, but naïve individuals decided they would put a stop to the purchase, sales and transportation of diamonds that originated in conflict countries. They, along with the not-so altruistic major diamond mining conglomerates worked out a system in which source governments would issue certificates of compliance to certify their diamonds were of non-conflict origin.
When the world was informed of this new method to protect the unfortunate souls who were victims of these war torn countries, people rejoiced and the good people at the UN and other benevolent organizations patted themselves on the back for a job well done.
Unfortunately, from almost day one, the Kimberley Process was a very sad joke. Diamonds continued to flow from conflict countries. At first, it was circumvented within the diamond manufacturing industry. There were mining companies and their customers who put profits ahead of the well-being of those who were being tortured and killed. They simply shipped the diamonds to non-conflict countries and had the Kimberley Certificates issued in those countries. This worked well for a time. Soon however, this became publicly known and a few diamond companies paid a price in reputation and in lost income. To be honest, I do not remember if anyone was ever punished or paid any fines when they were caught. Additionally, people have short memories and these diamond companies continued to do business as usual.
Because of the exposure diamond companies faced, they became more sophisticated in circumventing the Kimberley System. As an example, some small African companies and or individuals would smuggle goods out of country ‘A’ into country ‘B’. They would make an agreement with a mine owner in country
‘B’ and mix their goods with the mine goods and would then certify the goods as having originated from a particular mine in country ‘B’. Even today, many goods are taken from one country and certified in another.
It is interesting to note, that some governments do not discourage this practice because they receive the benefit of collecting the taxes on any diamonds that they stamp as Kimberley approved. This is one heck of an incentive to close their eyes. There are a number of other ways to get Kimberley certificates from countries other than the source country. However, it is not the purpose of this article to expose these methods.
The only country today where there are rumors (fact?) of forced labor is Zimbabwe. The U.S.and some European nations have sanctions against Zimbabwe and as I wrote in my previous blog posting ‘Zimbabwe Diamonds: “To Buy or Not to Buy.” American companies cannot legally work with Zimbabwe diamonds. Because the Zimbabwe government is allowed to issue Kimberley certificates, many countries are buying and shipping Zimbabwe goods.
This has created a dilemma for Charmian Gooch of Global Witness, the watchdog of the Kimberley Process who recently resigned in protest to Zimbabwe having the right to issue Kimberley certificates. In his defense, it does go against the intent, if not the law of the Kimberley Process agreement. For those of us in the industry, we have known the Kimberley Process was useless except as feel-good propaganda. Is it any wonder that so many countries and companies feel no guilt in circumventing the process?
From a December 2011 article, it was stated that the withdrawal of the Global Witness watchdog group from the Kimberley Process certification program, which is governed by diamond-trading nations, highlights growing problems in the system set up in 2003 to stop sales of rough diamonds from African war zones. (Sandra Nyaira | Washington)
Further, Charmian Gooch is quoted as saying; "Nearly nine years after the Kimberley Process was launched, the sad truth is that most consumers still cannot be sure where their diamonds come from, nor whether they are financing armed violence or abusive regimes," He further states that Global Witness of London has become an accomplice to diamond laundering —whereby dirty diamonds are mixed in with clean gems.
If the head of Global Witness believes the Kimberly Process is useless, the question must be asked”; is it time to end the Kimberley Process requirements?”
Louis Pearl G.G.
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