Cruel Outcomes: How weak corporate governance and internal controls in the palm oil industry allow abuse of foreign and local workers

Cruel Outcomes: How weak corporate governance and internal controls in the palm oil industry allow abuse of foreign and local workers

Cruel Outcomes: How weak corporate governance and internal controls in the palm oil industry allow abuse of foreign and local workers

Industry Failings

This document does not seek to revisit or summarise previous research and conclusions about abuse suffered by migrant workers entering Malaysia to work on palm oil plantations. There are many excellent reports and materials available that examine the abuse of workers and the failures of companies to improve their plantation management practices, such as Amnesty International’s Trapped: The Exploitation of Migrant Workers in Malaysia, (2010)1 ; Business and Human Rights S.L (; Fair Labour Association’s Mapping Study on Seasonal Agriculture Workers and Worker Feedback and Grievance Mechanisms in the Agricultural Sector, (2018)2 ; Suisse Solidar’s Exploited and Illegalised: The Lives of Palm Oil Migrant Workers in Sabah, (2019)3 , and Earthworm Foundation’s Insights Into Recruitment Costs and Practices Amongst Small-Medium Sized Companies In The Palm Oil Industry In Peninsular Malaysia, (2019)4 .

This document argues that, firstly, despite over a decade of reporting and research on abusive recruitment practices and abusive working conditions on plantations and despite the representations and statements set out in the increasingly prolific human rights and sustainability corporate disclosure, it is time to accept that a substantial proportion of the millions of individuals arriving to offer their labour to plantations, of whatever size, do so in a state of vulnerability caused by the manner of their recruitment. Whether due to debt arrangements, poverty, illegal status or deception, the palm oil industry, particularly those who lead the industry, should and must seek to alleviate and resolve these vulnerabilities and not exacerbate and capitalise on them by allowing vulnerability to become a lever for coercive and abusive labour management practices by plantations managers, supervisors and forepeople.

Second, it seems clear that the ongoing industry-wide failure to prevent abusive and coercive practices on plantations is caused by deep structural issues grounded in a long history of terrible labour practices begun in the industrial rubber agricultural sector during the British administration of Malaya and largely continued since then to today.

Third, evidence of the comprehensive and far-reaching work needed to build and implement a governance framework to remedy and rectify this situation, in other words to create businesses and a business-operating environment that actually offers vulnerable workers support to reduce and resolve their vulnerabilities, rather than exploit them, appears sorely lacking.

Fourth, the implementation of corporate sustainability and ethical practices is a desired end state, one that will be dynamic and active. However, there is no chance at all of achieving the creation of an organisation that is sensitive to the wider social and environmental issues without that company having robust, sufficient and well implemented corporate governance, risk management and internal controls (together organisational corporate governance and controls). From the examination of annual reports and sustainability statements, and considering what has been learned from workers themselves, it is clear that design and implementation of corporate governance, risk management and internal controls and the design and implementation of a sustainability agenda remain two parallel lines of management activity. Never meeting, the development of sustainability practices and the development of organisational corporate governance and controls are largely considered separately. This is very convenient for many corporations and boards of directors as the arrangements keep the objectives of sustainable practices away from corporate governance, which has regulatory and legal requirements, and therefore avoids creating joint and several obligations and liability on the board of directors and senior executives.

Finally, it is time that the vast cornucopia of public disclosure created in the name of sustainable and ethical practices is linked clearly and transparently to implemented underlying organisational corporate governance, risk management and internal controls and the underlying laws and regulations that require such organisational corporate governance and controls. The formulation and publication of these policies, as expensive as the process of creation is, must lead to identifiable ongoing, consistent and monitored corporate procedures and practices that are enforced by the business – it is these that must be clearly disclosed on a regular basis.

Ultimately, the sections of annual reports dedicated to organisational corporate governance and internal controls should set out plantation management of labour and the mechanisms of controlling relevant third party relationships, i.e. recruitment agents. It should be clear how the aims of the sustainability and ethical practices are to be achieved within the organisational corporate governance, risk management and controls. The failure to implement sufficient and robust corporate governance, risk management and internal controls allows the abuse suffered by migrant workers to be compounded once on the plantation and the abuse of future migrants by recruitment agents to continue.

Effective and sufficient corporate governance, risk management and internal controls should create standard management and operational policies, procedures and practices in regard to the management of plantations, the current lack of such practices adds a further dimension to the arguments about the weakness and insufficiency of management in the palm oil industry to provide adequate protection for vulnerable workers on plantations.


Before considering the methods of recruitment of individuals to the palm oil industry, which can be divided into four categories, it is important to recognise that there are issues for both local and migrant workers. Regardless though of whether the worker is a local or a migrant there are two common stages to consider.

First – the recruitment journey The first stage is the introduction of the work opportunity and the movement of an individual to a situation in which they can be hired (i.e. form a contractual relationship to work on a plantation in return for payment, directly or indirectly, by that plantation). Palm oil plantation businesses may or may not currently seek to have control over the manner of a worker’s journey but they can exert substantial influence over the treatment of the people introduced to them for hiring and they can provide support to workers to remedy and resolve vulnerability.

Second – contracting and onboarding into the plantation workforce The second stage, the hiring stage, is very much in the plantation’s control. It is well documented that recruitment agents regularly provide a contract to individuals in their home country but too often a worker ends up with two or more contracts, if indeed they have one at all. Whether mega business or smallholder, the governance of any business includes the power to control the formation of contractual relationships. Like any business, plantation businesses have the unilateral power to determine how they relate to and how they form relationships with their employees and contracted workers. Contracting and onboarding is the process of entering into a legal relationship so the plantation benefits from a worker’s labour and in return it provides compensation (such as a wage, safe accommodation, facilities, insurance, medical care and protective equipment) to the worker. A part of that compensation is the onboarding process which includes setting up the administration for their compensation/payment, setting up medical care and provision for accommodation, and the creation of a lawful and conducive, not coercive, work environment. It also includes access to effective grievance mechanisms and ensuring that the work place is safe and secure. For smallholders, who might be much less profitable, the expense of improving governance is likely challenging and they may well be uninterested but there is little excuse for the large and mega businesses. These are the industry leaders and they have the operating capital, or they can go to the market and raise the capital, to invest in the development of the necessary organisational corporate governance and controls. It will be costly to create and implement the needed governance to ensure a safe working environment and to mitigate vulnerabilities arising from workers’ journeys to recruitment and to ensure there is a proper contracting and onboarding process that does not create a situation of forced labour.

These two stages should be separate and distinct and where they do and must interface or integrate then the governance and controls should be in place to prevent the workers’ vulnerabilities, particularly those arising from the first stage, being further abused.

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