Ethics called into question at P&O Ferries after ‘brutal’ mass sackings

The move – which has been called an ESG “nightmare” – has put the company’s ethics into question, while some argue it will be suffering from reputational damage for years to come.

According to Freetrade analyst Gemma Boothroyd, the mass redundancies have “taken things from bad to worse” for the already struggling shipping operator as management sought to cut costs.

“Plenty of Covid-hit businesses have shown a lot more tact over the past two years,” she said.

Since the sackings, allegations have circulated that P&O Ferries has sought to replace the existing staff with cheap labour.

Russell Jarvis, partner in the financial services team at law firm Shakespeare Martineau, said: “From an ESG perspective, the entire situation is a nightmare. The new crew reportedly being paid less than £2 per hour certainly will not help things.”

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P&O Ferries chief executive Peter Hebblethwaite was grilled by MPs on Thursday (24 March) over the legality of the dismissals. 

Darren Jones, chair of the House of Commons business committee, asked the CEO if the company was in such a mess because he did not know what he was doing, or whether Hebblethwaite was “just a shameless criminal”. 

Hebblethwaite admitted that the decision to sack the 800 employees without consulting unions broke the law. He accepted that rebuilding the company will be a tough job, but it will now be “competitive”. 

According to Hebblethwaite, the new average hourly rate ranges from “about £5.50 to about £6, depending on exchange rate”.

Beyond the national outrage, the company’s investment case is unlikely to be impacted as it is owned by Dubai-based DP World, Jarvis argued. 

The ferry industry has been a bad buy for a while now. P&O Ferries has been losing vast amounts of money in recent times, with annual losses of £100m covered by its parent company.

“Brexit has meant that importing and exporting activity has been reduced and the pandemic has led to fewer people travelling, and often flying is the cheaper option,” Jarvis said.

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Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, noted how DP World has “deep pockets” but “clearly is not willing to keep subsidising” P&O Ferries.

Callous

“However, the way management has carried out this drastic round of cost cutting has caused deep reputational damage,” she said.

“Brutally sacking 800 workers with long careers at the company on the spot, with coachloads of cheaper agency workers waiting dockside to replace them, was a callous move.  

“No company wants its name plastered all over the news for all the wrong reasons, and it will be a long time before the scars begin to heal.”

While P&O ferries suffers reputational damage, DP World remains “largely unaffected, staying at arm’s length from its subsidiaries”, Jarvis explained. 

“Unfortunately, this is part of the problem,” he said. “If none of the blame is put on the parent company, this concerning management style will continue without consequence for those at the top.” 

Freetrade’s Boothroyd said: “The firm’s move is not only ethically questionable, it is also a PR nightmare… While historically, the market forgets about a company’s distasteful behaviour eventually, it is no guarantee. P&O may have dug itself into an even deeper mess than before.

“Increasing investor appetite for ESG-compliant firms could even mean P&O’s decision haunts it for years to come.”

Social impact

According to Boothroyd, there is “no doubt” P&O’s mass sacking “fails to consider the greater social impact” on its community and workforce.

“From a governance perspective, its code of conduct and values will surely be called into question as well. So, if P&O is waiting for an ESG gold star, it should not hold its breath.

“More companies will be trying to get back on their feet as Covid-related government support weans out. P&O is not a role model for how to do that. These companies need to use better judgement and see the bigger picture, otherwise, they might be digging their graves even faster.”

Hargreaves Lansdown’s Streeter highlighted how “senses are now highly acute” to ESG issues among many investors, particularly regarding how workers are treated.

“The supply chain scandal at Boohoo served as a reminder about how investors should not be complacent about the oversight of labour conditions.”

Nevertheless, social resolutions at AGMs garnered just 15% of majority support from 65 of the world’s largest asset managers in 2021, according to campaign group ShareAction’s latest Voting Matters report.

James Alexander, CEO of the UK Sustainable Investment and Finance Association, said: “Companies’ treatment of their workforce and more broadly ‘human capital’ represent key environmental, social and governance issues that sustainable investors will not simply ignore in their engagement activity with companies.”

Since the mass redundancies, P&O has offered payouts of up to £170,000 for fired employees, but Hebblethwaite – who has said he earns £325,000 a year – admitted before MPs that very few actually fall into this category.

Streeter said: “It is becoming increasingly important for companies to focus on higher ethical standards, not just to help retain trade and win new customers but also to keep the investor community on side.”