Maruti Suzuki, the Indian subsidiary of Suzuki Motor of Japan, has been in the news for the past several months because of a continuing workers’ agitation. The strike is now over. But the way it was settled raises several important issues

The problem arose at Maruti’s plant in Manesar (near Delhi). Workers went on strike October 7, demanding the reinstatement of employees who were suspended during previous agitations and the establishment of an independent workers’ union. The agitation was all set to accelerate with the Maruti management subsequently suspending home-grown leader Sonu Gujjar and 29 others. “We will fight to the end,” the 24-year-old Gujjar told economic daily BusinessLine a few days after he was suspended. The Indian press characterized Gujjar as the “shy hero” of Manesar and portrayed him as a young Arthur battling the dragons.

Then, on Friday came reports that Gujjar and his suspended colleagues had a few days earlier taken severance checks from the Maruti management and resigned. “Sonu Gujjar, suspended workers at Maruti grab check and quit,” reported NDTV. The Times of India is calling the defections a “bribery controversy” and others are characterizing Gujjar and the other workers as traitors. The settlement amounts reportedly range from $20,000 to $80,000, with Gujjar at the top end. In India, these are significant amounts for what is claimed to be a voluntary retirement payout, especially as most of the 30 had been with the company for only four years.

On Monday, there were reports that workers planned to register a new union and take the agitation forward. But the implications of the payouts go far beyond one car plant and one company. The national trade unions have long protested against what they see as heavy-handed labor policies by the management of multinational firms. Now they have a real-life, Indian example. The Maruti deal has gotten even progressive politicians and industrialists thinking twice about how much flexibility should be given to company management in dealing with labor strife.

“It’s unfortunate that a few leaders have accepted money and fallen prey to the practices of multinational companies,” A.D. Nagpal, general secretary of the Hind Mazdoor Sabha, told the Times of India. “Although it is an isolated incident, the damaging repercussions will hurt the [trade union] movement for a long time.”

The second fallout relates to corporate governance. In India, even large shareholders have generally not interfered with the managements of companies in which they own equity. They normally sell their stake and quit the company rather than raise contentious issues. In the Maruti incident, in mid-October Nirmal Bang Institutional Equities organized a conference call with Gujjar. Several analysts and shareholders participated. This was a first for India.

Now other investors are questioning the deal with the so-called “Manesar 30.” “Of course, there is a corporate governance issue in what Maruti has done. No doubt about that. It was totally unbecoming of such a large company,” Anil Singhvi of Institutional Investors Advisory Services, which works with shareholders on governance issues, told economic daily Business Standard. “It is one of the most badly handled situations in the recent past.”

The Manesar 30 have some supporters, however. Mint, a business daily, argued: “Some 1,200 workers went on strike at Manesar. Of these 1,200, it was 30 who bore the brunt. They were suspended and, at one point, their jobs appeared to be under threat. Effectively, they spearheaded the campaign while the others were free-riding.”

In addition, Maruti leadership was facing significant hits to the company’s bottom line due to the strike. The several rounds of labor agitation have resulted in loss of production of 51,000 to 83,000 vehicles, amounting to $330 million to $470 million, according to different estimates. The company couldn’t afford to continue with those losses for too long, observers note.

Ritu Tripathi, an assistant professor of organizational behavior and human resources management at the Indian Institute of Management in Bangalore, lists two lessons others can take from the situation: the need for strong and open communication channels between workers and their organizations, and the importance of transparency in all policies and procedures. Pointing out that unions themselves often become hubs of politics, Tripathi says that workers must be able to see “procedural justice.” “Research has proved that whenever workers perceive that procedural justice is high, they are more committed towards their organizations.”