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References

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HUNGARIAN REPORT
Agnes SIMONYI (ELTE University, Budapest)

A. Social and Economic Context of Corporate Social Responsibility in Hungary



A.1 A New Approach of CSR in Hungary

In the context of the so called “transition countries” like Hungary several interesting developments of corporate social responsibility can be observed since the beginning of the 90-ies. The former “socialist companies”, the almost exclusively public employers were part of the centrally planned paternalistic system of social provisions. Independently from their market positions and revenues they had a social and cultural infrastructure (consisting of nurseries and holiday-resort places, libraries and sport sites, health services, etc.) and provisions (from canteens to transport support, special credits to housing, etc.) that were granted by mandatory “social funds” independent from the profits. The social and cultural infrastructure of large firms had important role in supplying social and cultural services in their localities (towns or districts).


With the social and economic transformation in CEE transition countries company welfare systems were thought to disappear because of increasing labour cost sensitivity of the new market economies and among the circumstances of decreasing labour demand. Indeed during the early 90-ies “transformation crisis” many employers (transformed into market actors) have sold off buildings and sites of their social infrastructure and did away with financing firm level social services.

At the same time such new engagements of social responsibility emerged on the field of employment. The former socialist firms who assured the full employment of the centralised plan economies have transformed into market actors and together with the new private employers they became interested in restructuring and rationalisation of labour under the market pressure of the economic transformation. Employers (private, public or mixed) were liberated from their employment obligations for the interest of modernisation, restructuring and competitiveness. At the same time regulated procedures of lay-off, labour market institutions and programs (following EU models) were set up by the 1991 Employment Act. Employers have the obligation to give notice of lay-off to unions and to the local labour market organisations. They have to assure compensation (fixed in collective agreements where unions exist) and negotiate with unions and with the work’s council (where these actors of labour relations exist) all possible solutions how to reduce their personnel. Negotiations how to assure re-training and new jobs to the superfluous employees within the firm or on the local labour market are also part of the employers responsibility in larger firms with regular and institutional labour relations. Since 1993 tripartite institutions – involving employer and union representatives - decide about the distribution of a special employment fund on national as well as on regional level in order to solve local labour market tensions and to assure reintegration to work of the unemployed.

Before the economic transformation one of the main objectives of the market transformation was to separate the economic and social role of the firms and to make a clear division between public welfare responsibilities and human resource policies of employers. Beside this political context there were heavy economic constraints as well. During the mid-90-ies the following developments limited the Hungarian companies to invest financial as well as human resources in such fields as community and environmental development, as social infrastructure or as human development plans:


  • The serious economic crisis that accompanied the transformation in the CEE countries during the early 90-ies was not favorable to social, community or human investments on company level,

  • The transformation from a centrally planed “socialist” economy to a market economy offered the possibilities to the firms’ management to get rid of excessive social spending obligatory in the former planning system of the so called “socialist firms”,

  • At the same time the governments responsible for the social and economic transformation set up central funds and programs to handle the social and labour market consequences of the economic transformation,

  • The privatization and the decentralization of companies have also reduced in the 90-ies the financial means and the social infrastructure of the firms,

  • At the same time those foreign investors (and privatizing actors) who were seeking low cost economies were also less committed to the corporate social responsibility approach.

Since the mid-90-ies, the move from an all-inclusive social responsibility to a profit-oriented voluntary social responsibility could have been observed. At the same time the Employment Act and Labour Law regulates procedures of social dialogue on employment conditions. Following the stabilization of the economy, the attention of the new market actors has gradually turned towards the importance of social and human investments:



  • Foreign investors who made important long-term investments (contrary to those seeking only low cost labour or “buying only markets”) imported their models of corporate social responsibility and adopted their human resource patterns in their Hungarian firms,

  • Local Hungarian firms in stabilized market positions have also transformed their former “welfare model” compatible with the new market conditions or introduced gradually certain elements of corporate social responsibility.

Since the mid-1990-ies spending on vocational training, on adult education and on re-qualification increased especially in the competitive sectors. In a recent research in Hungary, together with vocational training, the setting up of company pension and health funds proved to be good strategies to stabilise and obtain stronger commitment of their employees.29


Firm based social policy is a challenging field of CSR where employment and social protection strategies meet directly. The long-term security and stability of the workforce is complementary in competitive firms with the objectives of higher internal flexibility, higher commitment of employees to their firms. This stimulates employers mainly in larger firms with strong positions on competitive markets to introduce social provisions to increase engagement of their employees.

The issue is delicate for several reasons. First, former public or socially owned enterprises might still have the burden of social provisions that diminish their resources for technical modernisation, make them less attractive for privatisation and may hinder the mobility of their labour force to eventually more competitive spheres. Second, most business entities in Hungary are actually micro firms and small enterprises at the early phase of their start up. Their expected gains are to be reinvested in technical equipment and business infrastructure as preconditions of their stability and further job creation. Investments in upgrading their labour force and in increasing the quality of human resources should be realised by education, training and employment policy means as basic support for small firm development. In the long run of course – especially if qualified and committed labour remains scarce – profitable firms might start to build up their internal labour markets by the means of social provisions.

At the same time, social and cultural services, wider than the workplace and offered to the localities of the firms might contribute to the attractiveness of the employer on the local labour market. Large companies, representing the most important employers of their towns and regions – if they succeeded to stabilise their market positions - continue to show social and cultural engagement in their closer or wider environment. Such firms, like the steel holding DUNAFERR, like the chemical works TVK maintain sport infrastructure for the local population and contribute to the cultural spending in their localities. Other national companies, like the telecommunication firm MATAV and the petrochemical concern MOL sponsor important cultural events and institutions (like orchestras, concerts, publications, expositions, etc.).

A.2 Firm Level Social Provisions and Human Resource Strategies of Employers



Workplace benefits in Hungary belong to different types. There are statutory benefits, such as the payment of contribution to the public pension and health fund, and meal subsidy. Another type of benefit was if not statutory, at least very wide spread in the former system. Some of them – for instance work cloths for managers and uniform for blue-collar workers – are still widely used. The transport support or the subsidized holidays have dwindled. Public transport has become very expensive, and under conditions of high unemployment the employers in the early 90-ies did not feel the need to subsidize commuters. In developing regions and in the capital however firms are supporting the transportation of their employees most often through their own vehicles. A third type of social provisions, especially in large firms is represented by the support of continuous adult learning and professional training.

In a recent survey (ILO-PSS 2002) the highest entitlement was found in connection with health contribution (83 %), with pension contribution (78 %) and with meals subsidy (77 %). Still large groups of 68 % are entitled for working clothes contributions and for special health services (61 %). 37-37 % of the respondents said to have received contributions to transport costs and had the right to severance payment in case of dismissal. Only 29 % said to be eligible for holiday allowance and very few were entitled to contributions to the schooling of their children (12 %) and to housing subsidy (7 %).
In case of pension and health fund contributions, meal subsidies and transport alliances as well as special medical services were paid to more than 90 % of those eligible. The payments of clothing contributions and contributions to children’s schooling were covered also for the majority of the eligible (between 80 and 90 %). Holiday allowances, housing contributions were paid already to a minority between 30 and 40 %. Severance payments are paid only to those dismissed, so that only 12 % of the eligible had received it.

A.3 Work Safety and Health

Work safety and health at workplace are important fields where the social responsibility of firms can be observed in frame of their human resource strategies. Health conditions of a population have consequences in employment chances. Disabilities and frequent illnesses hinder labour market participation. In Hungary the high disability retirement rate in the 90-ies in part was a consequence of former bad and unhealthy working conditions, but it was a solution to reduce labour on the labour market. Wide scale absence from work because of sickness cause problems in work organisations and endangers efficiency. Prevention and the improving of the health status of the people, as part of the social protection system should be considered as major contributions in the long run to raise the level of human resources for economic activities. On the other hand working conditions have direct impact on the health risks of people. National level occupational health and safety regulation and firm level human resource strategies may intervene to assure more healthy working conditions, safer work environment through labour regulations and through the institutions of intensive social dialogue. Reducing the risks of occupational illnesses and work related injuries, employment policy can favourably influence health conditions and spending. The interest of employers in prevention and in health provisions is expressed well by firm based health insurance schemes.

According to the mentioned ILO-PSS survey the overwhelming majority (92 %) of the respondents said to have work-safety regulation at their workplaces. Two third of the respondents were employed at workplaces where separate safety departments exist. Work related injuries occurred in the year preceding the survey in 2,3 % and work related sicknesses in 4,7 % of the respondents. (Despite the universal health insurance system 6 % of them said however not receiving sickness allowance during the time of these absences.) These figures of the ILO-PSS survey can be compared to relatively high perception of health risks at workplaces that were found by the survey of the European Foundation for Improvement of Living and Working Conditions30. In their 2001 survey 35 % of the respondents said to have his/her health at risk in work. 33% said experience backache and 31 % overall fatigue in work. Muscular pains in neck and shoulder were declared by a quarter of the respondents. Due to actual and foreseen health problems half of them declared to be unable or willing to do the same job at the age of 60.
In the stabilised pole of the employment system, most of the large employers established in the past few years their health insurance systems that offer access to regular preventive health services as well as some forms of additional support for the time of illnesses. The Hungarian telecommunication company, MATAV, the petrochemical concern, MOL, the Hungarian Railway Company, MAV, the steel works of DUNAFERR show best practices in this respect. These and other companies have at the same time created their firm based special –additional - pension fund schemes also as part of their human resource and welfare strategies.

A.4 Social Dialogue in Hungary - Labour Relations in Transformation

Since 1989 the pluralist and democratic political system and the market economy based on private ownership opened the way to set up the autonomous system of labour relations. This general tendency in Hungary, like in the whole of the Central East European region, followed such universal norms and standards as the ILO Conventions and Recommendations and created mechanisms of collective bargaining corresponding to the social dimension of the European Union too.

In all countries of the region the very first laws of 1989 and of the early 90-ies assure the rights to employees` free association in independent unions, the right of unions to collective actions, among them to strikes and the right to collective bargaining. On the other hand these rights mean obligations for employers to negotiate on different levels with unions. The new labour relations systems in the CEE countries have brought about the pluralisation of unions and of employer organizations also. At the same time the membership of unions has radically diminished (to 20-50 %) though remained still at high levels compared to Western Europe. The different sectors of the economy according to branches, ownership and size however show great variety as to the functioning of collective bargaining and as to the coverage of collective agreements. The coverage is larger in those branches where only a few employers of mostly big firms are dominating the sectors and where unions maintained or recreated after the transformation and privatization their positions (like in energetics, in the chemical industry, in siderurgy or in public administration).
The legislation is promoting collective bargaining, however it is more precise in the description of its content and of the representativity of the actors than laying down the means how to stimulate the partners, first of all the employers to sign and respect the collective agreements. Sanctions are very weak or inexisting as to the non-respect of labour legislation or collective agreements by the employer side, especially in the new private sector (Casale, 1997, Mouranche, 1998) Employment security, wage minimums, health and safety regulation are fields where the standards agreed are not always and completely respected.

National level institutions of collective bargaining were also set up in the form of tripartite councils between the social partners and the governments to discuss and coordinate their stands concerning economic and social issues and to make joint proposals in the new democratic parliaments on wages, inflation or on a wide range of social welfare issues (from pension and health funds to vocational training, from family support to taxation). On this level the social partners, the unions and the employers are embodied by those considered to be representative. The principle of representativity and its measurement were and remained very much discussed by the social actors. In Hungary actually union representativity is measured by the results of the works` councils firm based elections. Employers’ representativity through different organisations has also raised problems.

Certain views hold that the centralized tripartite negotiations are not favourable to the development of branch level actions and agreements. The centralized agreements integrate mechanically the branches and leave open some margins of actions on firm level. This has two consequences as to the labour relations systems: 1.the government remains a main actor on national level bargaining and 2. the importance of firm level agreements (either through the „classical” bargaining between unions and employers or through the participative models of works` councils) have a more and more important role giving this way a heterogenous and fragmented character to these new, still transforming labour relations systems.
In this sense the reluctance of the new private sector and its employers to be engaged in higher level collective bargaining cannot be simplified as a negativistic or negatioinist approach, but must be interpreted as a sign that the actual structure of bargaining is often ill matched with the economic and human resource strategy of the firms. In many cases individual or even collective informal bargaining might be more promissing for important employee groups too and not only more flexible, but even more stable for their firms.

The different issues of labour relations in the radical transformation period cannot be easily identified with those in the already well functioning market economies as the dynamics of the processes are rather different: not the „routine” functioning of business, but the creation of business itself, the creation of the partners is on the agenda of social and economic legislation. The partners of the unions cannot be unambigously defined in the very wide and complex problems that lie well beyond the responsibility of employers. In the intensive codification process of the early 90-ies, in the social dialogue concerning the social and economic consequences of setting up the new market economies, dealing with welfare issues, the main partner of unions were and remained the governments. This fact is reflected in the creation and functioning of the national level tripartite organs. In Hungary, like in other countries of the region, there was the clear political intention behind to integrate unions in the transformation process and neutralizing them in the conflictous issues of economic austerity, mass lay offs, etc. for the sake of social peace. (Héthy, 1994, 1995) It should be mentioned that agreements between employers and the government on business contributions, payroll taxes, health contributions, taxes, etc. were also negotiated and agreed upon in these tripartite councils. Meanwhile the same tripartite forum was offered to unions and employers as „classical” collective bargaining institution in such business related issues as wage or working time arrangements between these two partners

At the same time there is a distance between national and local level where the lack of branch level bargaining is noticeable. As a general tendency in Hungary, like in the CEE countries, similar to the international trend, enterprise level collective bargaining has been growing in importance. At first glance this trend seems to be the result of similar processes rather than the transformation of labour relations. In the mature capitalist countries of the EU that development is attributed to the effects of globalization that requires more flexibility and higher performance from the individual entreprise or form the network of firms. The newly shaped labour relations system and business world of the CEE countries was even more sensible to the same factors. The tendency towards the declining influence of the national and branch level collective bargaining at the same time is also due to several particular features that were strongly interrelated in this region at the end of the 90-ies:


  • low organizational capacity of trade unions due to rivalry that results the lack of organizational comprehensiveness among their confederations,

  • overemphasis on the external (national level political) legitimacy and less attention paid to the continous search for internal legitimacy by members, both of unions and employer organizations,

  • difficulties in indentifying the partners of collective bargaining, especially on employers` side on national and on branch level,

  • mistrust or „jealousy” of new political forces (the political parties) in the emerging democracies in the region (with the exception of Poland) to control all segments of the political arena, thus labour relations too,
  • heterogenous business structure in the make, with diversified market and human ressource strategies: small and micro firms becoming dominant employers in the CEE region where face-to-face relations favour informal bargaining instead of insitutionalized collective negotiations, multinational firms carrying out direct investments representing „union-unfriendly attitude” while combining organizational and labour market flexibility based on individualized contracts,


  • „dual structure” of firm level labour relations, like in Hungary and in Croatia may also challenge in short run the role of unions and collective bargaining through them. In Hungary locally elected works` councils31, as organs of employee participation are often used, especially in foreign owned firms as a substitute to trade unions and partners in bargaining.

In Hungary the qualitative analysis of firm level labour relations showed different particular features in the 90-ies.32 Relationship between unions and management can be characterized by „mutual understanding and cooperation” according to Martin and others (1998). Aro-Repo (1997) found partnership as the most important feature of management-union relations in Hungary. The significant role of „informality” in the social relations of the firms and the pluralistic structure of communication channels were showed also by the above study (Martin and others, 1998) These features are considered as facilitators of new human resource practices favouring individualized instead of collective employment relations in the Hungarian firms in comparison to other post-socialist firms in the CEE region.

At the same time most of the authors33 dealing with labour relations in the CEE region underline that social and economic conditions are not favourable to collective actions of unions. The insiders-outsiders polarization is strong. The circumstances of mass unemployment and inactivity are creating a divergence of interests between employee groups. Employee groups in relatively stable jobs have strong interests to defend and improve their firms` market positions in dramatic economic situations. Others, in less privileged situations or in weak labour market positions are afraid of loosing their jobs. The phenomenon of „double loyalty” (Makó-Simonyi, 1997) can be explained not only by the strong cultural patterns of former dependence and „inertia” (Mouranche 1998), but also by the considerable engagement of employees in keeping their firms alive and support their transformation and/or privatization. On the other hand certain employer groups, especially in the new private firms are setting obstacles to union presence to hinder the organization of collective actions too.

Since the mid-90-ies the issues of firm level bargaining in Hungary are widening in those sectors of employment (mostly in public and mixed, big firms) where collective agreements are concluded. Professional training, firm based social benefits and the development of the firms’ social infrastructure have gained importance in micro level negotiations of Hungarian unions. Not only local unions, but the elected works councils are paying more attention during negotiations not only to wages, but to all aspects of the human resource and social policies of their employers. This seems to be an important change respect to the „wage concentrated” interest and „distributive strategies” of the unions and reflects their growing awareness of the importance of such public goods like vocational training, social and health infrastructure, environmental investments and their lasting effects on labour market and public welfare.


A.5 Manifestations of CSR

In Hungary there are certain experiences already about how firms’ management think of corporate social responsibility even if the term itself cannot be discovered in discourses. Neither our interviews, nor articles on human resource strategies could not found mentioning it.34 The following fields can be considered as manifestations of it:




  • The firm based social welfare policies,

  • The health and safety conditions and regulations at the work places,

  • The state of labour relations and of social dialogue at the work places,

  • The engagement of the management and the financial means mobilized to handle the social costs of technological and organizational restructuring,
  • The training activities of the companies and their investments in life long learning,


  • The investments in career planning within the firms

  • The investments in community development and on cultural fields.

In Hungary some cases of “good practices” could have been observed. The companies selected for our field research MATAV (Hungarian Telecommunication Company) MOL (Hungarian Petrochemical Company) have undergone privatization and transformation and faced the tensions of reducing their level of employment and restructuring their workforce. At the same time they introduced new institutions of social dialogue and of human resource management. They are also known about their engagement in community development activities and about their spending on cultural as well as on sport activities. The case studies were prepared during March-June 2002.


B. The Hungarian Case Studies
Two of the largest Hungarian firms were selected for case studies to analyze the components and the social, economic and labour market conditions of the best practices of corporate social responsibility in Hungary. MOL is a petrochemical, MATAV is a telecommunication company. Both of them have undergone radical structural and technical transformations in the early 90-ies and have successfully stabilized their market positions after privatization. They were selected for the study being well known about their support to cultural, health, sport and to other public institutions. Having high level internal welfare infrastructure and social benefits was also a reason to be considered as best practices of CRS. Though the personnel of these two companies have been considerably reduced no sharp social conflicts arose in and around these firms and this fact also merits to be investigated. Both firms have established labour relations and intensive social dialogue on company issues

Following the guidelines of the CSR project the following areas of corporate activities were investigated in the above two cases as signs and reflections of social responsibility:



  • the firm based social welfare policy as social commitment of the management towards the firms’ employees,

  • the employment policy of the firms showing the human resource strategies of the management and their means to deal with employment and employability,

  • the investments of the firms in community development and on cultural fields

  • and the institutions and intensity of social dialogue within the firms and with other stakeholders.



B.1 The case of MOL35




B.1.1 About the firm

MOL is the leading petrochemical group in Central Europe and according to its turnover the largest firm in Hungary. With some 9 thousand employees of the company and with some 5 thousand employees in the subsidiaries the group was among the largest employers of the country36. MOL Rt. (where Rt. means share company or joint stock company) has been formed in 1991 from the national petrochemical public trust (OKGT). The shares of the Hungarian state were sold on the stock market in three waves and the actual part of the state is only 25 %. Foreign institutional investors own 52,8 % of the shares, 16,4 % is belonging to different funds. 4,9 % is in the hands of Hungarian institutional while 0,5 % of Hungarian private investors. The company itself has 0,3 % of the shares.

The company started a dynamic regional strategy when it bought a share in the Slovakian petrochemical company (Slovnaft) whose majority is to be bought in 2003. There are intensive negotiations about the participation of MOL in the privatization of the Polish PKN and the Croatian INA petrochemical companies too. In Rumania in frame of green field investments MOL started to build up its own fuel station network. The company has cooperation agreements in research and in production with Russian partners too.

Actually the company has three main units that cover the whole country and the foreign units: the “upstream unit” contain all mining activities, while manufacturing, supply and trade is concentrated in the “downstream unit”. The third unit is composed of the functional divisions of the company.

B.1.2 The employment strategy of the firm

The employment strategy of the firm had two basic targets in the 90-ies: the rationalization of labour utilization and stabilizing as well as grading up the remaining personnel. The reduction of the personnel as well as the development of its internal social provisions was negotiated with the unions and in frame of the works’ council.

MOL started its internal restructuring in the early 90-ies when several activities – not related directly to its technological process and certain internal services (travelling, housing, resort houses for example) were decentralized in subsidiary companies later sold partly or entirely. This move has to be distinguished from the company’s outsourcing strategy that means contracting with already existing firms taking over former internally realized activities. This happened in the case of its book keeping system that has been “outsourced” to the Accenture Company well known on the international market.

The radical rationalization of employment has been started in 1996 at the company. At the same time the build up of human resource strategy and of an internal labour market has been also started with a new and flexible system of firm based social benefits since 1997. Actually the employees may choose from different benefits for 360 thousand forints for a year. (This sum is somewhat more than 5 times the monthly national minimum wage was in 2001.)

1. Table: The number of employees in the company and in the group


Date

(end of the years)



MOL Rt.

Subsidiaries

MOL group

1991

22 067







1997

14 059

5 685

19 744

2000

10 796

5 761

16 557

2001

9 390

4 863

14 253

2001 (planned)

7 195

4 213

11 408

2. Table: The spending of the company on its main social benefits and services (individually chosen by employees) in frame of a “cafeteria” system (in million Hft)



Main items

1997

1999

2001

Meals

569 (17,70 %)

599 (16,53 %)

220 (5,95 %)

Voluntary pension contribution

908 (28,24 %)


932 (25,72 %)


793 (21,46 %)



Voluntary health fund contribution

136 (4,23 %)


396 (10,93 %)


962 (26,03 %)



Support of mass sport

0 (0 %)

70 (1,93 %)

571 (15,45 %)



Fuel discount

1003 (31,20 %)

872 (24,07 %)

527 (14,26 %)


All spending

3.215

3,623

3.561

It can be immediately seen from the above two tables that while the number of employees has been halved between 1997 and 2001, the level of social spending of the company has even increased in the same period. Calculating with the level of inflation around 10 % in these years, the real value of social spending per capita is actually higher than before. The structure of social benefits shows also a considerable change that is due in the new “cafeteria system” to the individual calculations and preferences of the employees. The more popular and thus increasing contribution of the firm to a voluntary health fund and to additional health services is due to the worsening level of public health services and growing insecurities of the public health insurance system.

The creation of an internal labour market requires the production of skills and competencies necessary for the functioning of the firm. MOL has a developed training system as well that contains the possibilities of life-long learning to its employees. It is partly based on agreements and cooperation with institutions on all levels of professional education and training, and partly on the internal training units. The knowledge base and the professional “space” are extremely important for such a company (with the level of technological development in its branch, with the ambitions of a leading regional role and among fierce competition on its world market). The outstanding spending on professional and scientific aims (see: table 3) is expressing well this need and objective too.

The interviewed managers emphasized that the employment aim is not a “guaranteed life time carrier”, but the “life time employability”. The development of training programs is considered as the means to upgrade the labour force of the company.

B.1.3 Responsibility towards its social environment

MOL is very visibly sponsoring several educational, professional, cultural and environmental activities.


3. Table: Social and cultural spending in 2001 (in million Hfts)


Fields

Spending

Scientific-Professional activities (Museums, Associations)

53,69 million



Health (Hospitals, Clinics, Foundations)

25,85 million

Social care (Foundations and Help Actions)

25,35 million

Public Security

11,35 million

Environments (Associations, National Parks, Actions)

9,5 million

Culture (Opera House, Orchestras, Concerts, Festivals, Publications, Museums, etc)

2 million

Education (Schools, Foundations, Courses)


2, 7 million



B.1.4 Social dialogue within the firm

The company has an articulated system of bargaining and participation. Two of the larger traditional federations and a smaller one has units at the MOL group. One of the big ones belongs to the Miners’ Union Federation, the other is a Union of the Chemical Sector. The third, smaller union (with 10 % of the votes during the works’ council elections in 2001) is a new one especially established in the petrochemical industry. According to the Hungarian labour and employment laws (following the German model of the double structure of labour relations) the Works’ Councils are also functioning as institutions of employee participation. The main divisions of the company have their works’ councils (altogether: 7) that are coordinated on firm level by the Central Works’ Council. The unions are negotiating and signing the collective agreements with the management, while the works’ councils are informed about and participate in discussions of different issues of company decisions. The 2002 Collective Agreement at the MOL Rt is assuring in all areas higher levels of benefits than the national standards. The employees are electing according to the Hungarian Labour Law “work and safety representatives” also. These representatives are forming “work and safety commissions” on division level and on company level the Central Work and Safety Commission is established of their delegates. These commissions control working conditions and examine accidents at the workplaces.

The employer voluntary handles all employment rationalization steps at the company as “mass-layoffs” regulated by more severe norms (higher severance pays, re-training obligations, obligatory job-offers, etc.). Severance pays are assured even when the employment relation is continued at a subsidiary or at an outsourcing form. An early retirement scheme for the elder generation of employees is also stimulating withdrawal from work. Former employees of the company are favored as subcontractors. This attitude - considered “socially responsible” by the firm’s management - was favorable all along the 90-ies to reduce the personnel without conflicts.

Special commissions of placement and of employment rationalization are set up at MOL according to the Employment Act to take decisions about employment reduction and carry them out. Unions’ and works’ council representatives as well as management representatives are forming these committees not only on the level of the divisions to handle the rationalization process, but on lower level work groups communicate directly with the employees and to deal with all individual cases.
The cases of employment rationalization might require the transfer of the employee to the subsidiary company or to the subcontractor with severance pay, or, it might need the mobility within the firm. MOL has an internal placement system that may offer re-training and financial support (to housing and to restart at another locality). In localities where MOL is the only employer, the company cooperates closely with the public labour market services to support the reintegration of the laid-off personnel.
In the beginning of 2000 the management and the unions concluded an employment policy agreement that is controlled quarterly since then. Our interviewees from among the managers and from among the employee representatives agreed that the severance pays and the early retirement schemes are more attractive for many people than to accept of internal and/or regional mobility within the firm. The support offered by the management to such changes cannot balance the - supposed or real - insecurities generated by such changes for many employees who prefer the definitive solutions of severance pays and early retirement.

B.1.5 The perception of CSR activities as such

The high level management of the firm is familiar with the expression of CSR, though up till know they prefer to deal with the issue under the terminology of “value system of the company” or “philosophy of the firm”. These values and this philosophy is laid down in different documents, like in a publication on the “Ethical Engagement of the MOL – 2002” or in a publication entitled “The MOL Rt. and the Society 2001”. The Director General of the company mentioned 4 dimensions of corporate responsibility.

The company has a responsibility towards:


  • the shareholders, to ensure profits,

  • its clients and customers to offer valuable goods and services,

  • its employees to assure employment conditions for their career plans as well as for their financial aims,

  • the outside community, the society.”37

Similar statements can be found in the different company documents, but defined as values and philosophy and not as CSR. The documents presenting the above value were diffused all over the firm through its home page and in printed version, however the management is very critical about the results. According to them at lower levels of the company the employees are less acquainted with the “messages of the new company culture”.

The above philosophy and the responsibilities formulated by the Director General showed the double engagement of the firm, not only towards the direct shareholders but towards the stakeholders as well. Mentioning the customers and the community reflects a management strategy based on the involvement of stakeholders whose attitude towards the firm may assure not only positive market acceptance of its goods and services, but labour, knowledge, investment possibilities, favorable social and professional relations. This might be labeled as “social marketing”, but in the period of a series of radical social and economic changes – like in Central Eastern Europe – such a CSR is probably a strategy to assure a certain level of security in certain segments of the company’s social environment. The CSR as an approach to rationalize, to build up and develop its internal labour market is a rational human resource strategy. At the same time CSR of the MOL towards external stakeholders expresses not only the direct interest to cultivate good community and professional relations. Different civil organizations exercise intensive public pressure on such affluent economic actors, like MOL, to find financial support for social-care, for health, for cultural and for other public needs that have become endangered by the CEE transformations.


B.2 The case of MATAV38




B.2.1 About the firm

MATAV is the leading telecommunication firm in Hungary. Its birth goes back to 1990, to the separation of the telecommunication branch from its mother firm, the Hungarian Post. The separated though still public firm was first transformed in 1993 into a joint stock company owned exclusively by the state. Very soon, at the end of 1993 Deutsche Telekom and the American Ameritech International obtained – through their joint firm, MagyarCom - a 30 % share in MATAV. In 1995 the German-American owners increased their share to 67 %, that later, in 1997 diminished to 59,50 %. The state in 1999 sold its part with the exception of the decisive “golden share”. In 2000 the Americans withdrew from MagyarCom, that is, since then the 59,49 % of MATAV is belonging only to the exclusive owner of MagyarCom, that is to Deutsche Telekom.


MATAV has a monopolistic position in traditional telephone services after having obtained concession rights from the state. Through this type of service MATAV covers 72 % of the population. One third of its turnover however is deriving already from the competitive markets of mobile phones and other telecommunication services.
Following the privatization and considerable capital investments the firm went through a dynamic technological development. Not only the shortage of telephone lines has disappeared in a few years, but the telecommunication system went through automation and almost 80 % of the centers is digital already.

B.2.2 Employment and human resource strategy

Since the transformation and establishment of MATAV employment has been reduced and at the same time rationalized. In 1995 the firm had more than 17 thousand employees. This number has been reduced by some 30 % to 12 thousand in 2000. Since then the personnel has been further diminished by another 20 % to the actual 9.200. At the same time the number of employees in the subsidiary companies remained unchanged, around 4.500 between 1996 and 2002.

In frame of this process the number of unskilled and semi-skilled employees was diminished not only numerically, even their share within the firms’ labour force has been reduced. Actually the majority of the employees have high or middle level education. At the same time the average age of the MATAV employees is rather low, only 37 years. However the average time spent by employees in MATAV’s employment is 11 years, that shows a rather high stability of the employment relations after the radical restructuring. In frame of restructuring employment at the firm especially operative tasks and internal services were reduced. At the same time the share of marketing is increasing.
4. Table: Change in the number and structure of employees at MATAV


  1. 2001

15.879 9.298

Fields of activity

Marketing 429 936

Main technological units 8.041 5.000

Operators 2.100 861

Suuportive services 5.300 2.500
While reducing drastically though without sharp and public conflicts employment, MATAV assures wages above the national average. In 1995 half of the employees had lower wages than the national average. In 1999 those earning under this level represented only 10 % of the MATAV employees. The share of those who were under the company average has also decreased from the 70 % in 1995 to 66 % in 1999. The upward move of wages is based on an individual evaluation system that permits to go beyond the job categories.

The firm has a developed system of internal training and retraining offered to the employees concerned by organizational and technological changes. The Collective Agreement laid down the rule that new jobs opened within the firm should be offered to former or actual employees of the firm.


B.2.3 Outsourcing strategy at MATAV

Outsourcing is the main instrument of reducing and rationalizing employment at the firm. Their aim is to transfer supportive services to subcontractors and the guard the main technological. The main steps of outsourcing were the following:


Transfer of activities to subcontractors:

1996 - construction of the telephone network


1997 - central maintenance of building and equipment

1998 - car drivers

1999 - real estate of the firm

2000 - PC maintenance

2001 - call centers and maintenance of old centers.

The contracts between MATAV and the subcontracting company taking over the personnel assure for 1 year the validity of the MATAV collective agreement. In some cases the subcontractors accept even for 3 years the employment conditions according to this agreement. The employees have the right in their new firms to the same wage increase than at MATAV. The subcontracting firms and the subsidiaries may use the social infrastructure of MATAV as well, but they (together with employees) often prefer to pay in cash social provisions.

Even beside these favorable conditions employees are not enthusiastic about outsourcing. According to our interviewees small firms are considered less stable than big ones. However even the firm’s management is reviewing its outsourcing strategy. “Cost efficiency is sensible to outsourcing and in certain activities subcontracting is becoming more expensive.”39

A special outsourcing program is preparing the employees who receive training and consultative services through a subsidiary company (STAV Rt) of the firm. In three major cities this company assures individual labour market services to employees who are to transferred or out-placed.

B.2.4 Social dialogue at MATAV

At firm level bargaining the employees are represented by MATAV section of the Hungarian Telecommunication Branch Union (that integrated in 1995 two unions belonging to two different federations). This unified union at the beginning was opposing the firms’ privatization by foreign capital, but the dynamic development financed by external resources convinced them. Employment security and wage increases are continuously kept on their agenda. To assure employee participation according to the law, MATAV has set up works’ councils as well at all levels. Its Central Works’ Council is closely cooperating with the trade union. Unions membership is decreasing with the level of employment: it was 10 thousand when the number of employees was 17 thousand in 1995, and it fall to 7 thousand in 2000 at the employment level of 12 thousand. Actually union membership is still around 50 %.

Keeping the actual employment level has become one of the main demands of the unions at the firm in 2002. An agreement was concluded with the management that the personnel would not be reduced with more than 3 % this year. The management would offer outsourcing possibilities to its employees if restructuring would endanger employment. Both unions and management are regarding distance work as a possibility to keep employment level stable however at lower costs. In perspective the unions consider the 35-hours working week as a solution against further lay-off. To avoid sharp conflicts in case of employment reductions, the Collective Agreement of MATAV assures high-level severance payment and good conditions to early retirement.

Unions and the Works’ Council had a leading role and a cooperative contribution in employment rationalization. They were participating in the working commissions dealing with the outsourcing of the different activities. They supported solutions with the lowest level of layoffs. (In the cases of the call centers for example the unions rejected the centralization. Instead of one Budapest center three service centers were established keeping more jobs even in the “outsourced” form.)

The union is playing an active part in introducing and widening distance work (or: telework) at the company. At MATAV distance work is considered as a means to maintain and even to create jobs while reducing their costs. In this field the MATAV union had consultations with the German DPG. This support was said to be useful offering several practical proposals how to organize and integrate distance work in frameworks of the company.


B.2.5 The concept of CSR at MATAV

The term “Corporate Social Responsibility” is not used at the firm. Managers associate it with the firm level welfare policy. In this field MATAV has a wide and complex social network.

The firm assures a higher level of several social benefits (meals, travelling and housing support, resort possibilities, social aid, children’s education support, etc.) than regulated by the law. But the most considerable part of social spending was put on an insurance- based system in MATAV. A very interesting initiative of the firm was the creation of two Insurance Funds, the firm based Pension Fund and a similar Health Fund since the early 90-ies. These funds, called the Dimension Group, have grown to become important insurance institutions on national level too. It offers different insurance possibilities and services not only to the employees of MATAV, but to external partners too. Actually the Dimension Group has more than 80 thousand partnership contracts and some 60 employers are supporting through them their employees. The pension and health insurance services obtained through this institution - collecting employee and employer contributions – become popular among the employees. The employees have set up their Voluntary Aid and Insurance Association to attract additional employee and employer resources. According to union representatives this Association has contributed to a 7-10 % decrease of union membership. The insurance system composed of Funds, and Associations are considered responsible for vanishing solidarity and security through union activities and for emphasizing individual and market based solutions of security instead of collective forms.

The development of this social network is a long-term strategy of the firm’s management. They reject the “cafeteria system of provisions” based on the choice of employees and the in-cash provisions too. The social infrastructure and the provisions should be established on a stable basis in their view. Individual choices of provisions – according to the management - hinder planning on this field and would destroy the regular functioning of a complex social infrastructure composed of canteens, resort houses, training centers. Provisions in cash might seem to be advantageous for the employees in given moments, but the social and cultural infrastructure of the firm cannot function if it is dependent on short-term considerations.


B.2.6 External social responsibilities of MATAV

Community support and financial aid to different cultural, health, sport, etc. organizations reflect very visibly MATAV’s wider social responsibility. On charity programs the firm spent some 60 millions Hfts in 2000. In the same year MATAV supported by 50 million Hfts the Hungarian olympic team. It financed also mass sport activities and handicapped young people’s sports. The firm has several foundations to support the education of telecommunication experts. Beside outstanding concerts, theaters and expositions also sponsored by MATAV, cultural activities in small localities can also count on the firm.



The wider SR of the firm might have an impact on the customers of such a competitive market than that of the telecommunications. In this sense the sponsoring activities of MATAV can be considered as “social marketing”, that leads to similar “social marketing” by the side of the other participants of “telephonia”.
C. Conclusions
1.According to the Hungarian experiences of the CSR research, the term of Corporate Social Responsibility is not present in managerial discourses and in firm documents. However concepts concerning wider social responsibilities of the firms with a different terminology are known among Hungarian managers.
2.In the case studies (MOL and MATAV) and analyzing other research experiences in other Hungarian firms mainly three fields of action can be identified as practices of CSR: 1. the enterprise welfare policies, 2. the engagement of management in firm level social dialogue on working conditions and on re-structuring and 3. the financial engagement of firms in social, cultural, environmental or other local development activities.

3.Cases of “good practices” show that firm based social welfare is closely connected to Human Resource Management of the firms. In competitive and stable large companies (like MOL and MATAV in our study) the development of their social infrastructure and their social provisions is part of their policy to build up their internal labour markets to assure the required quality, engagement and responsibility of their employees. Their training infrastructure and spending on training is also part of their socially responsible engagement to assure the employability of their work force. In these cases management acts in cooperation with trade unions and works’ councils and collective agreements are concluded according to labour and employment laws.

4.In small firms “good practices” - known from the sociological literature 40- show a paternalistic approach of entrepreneurs towards their employees. At small firms in the lack of unions and formalized labour relations, when entrepreneurs and employees are interested in lasting cooperation, social dialogue concerning working conditions and social provisions is based on informal relations and bargaining. “Good practices” of the engagement of small entrepreneurs in local social and cultural activities can be also found when small development is based on local networks of economic, political and cultural actors.
5.Employment rationalization and lay-off are regulated by laws conform to EU norms in Hungary and cases of “good practices” showed that the intensive social dialogue on firm level helped the re-structuring and the privatization of the companies as well as finding good solutions for the redundant workers. The existence of labour representation and of the institutions of employee participation (works’ councils) play an important role in formulating and realizing the Social Responsibility of the firm in their employment policies. “Good practices” of MOL and MATAV showed that in such solutions of re-structuring, like out-sourcing and decentralization intensive and institutionalized social dialogue were helpful. Socially responsible Hungarian firms in such cases influence sub-contractors to keep social norms and provisions for their former employees.

6.The existence of good labour relations and the procedures that assure the functioning of unions and works’ councils conform to legislation, seemed to be fundamental indicators of CSR. This is especially the case in Hungary where radical social changes and economic re-structuring went on in the 90-ies. “Good practices” (of MOL and MATAV) show that former ideological norms of socialist firms can be successfully replaced by the concept of “social responsibility” of new market actors in frame of competitive economic strategies.



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