‘FIRM FIGHTING MULTIPLE FIRES’ AS SHARE PRICE DIVES 30% SINCE JANUARY 2022
Is FDM Group in financial trouble? News reaches Graduate Fog that the IT outsourcing giant – at one point worth £1bn – is suffering serious operational problems which are impacting their share price.
This decline in the firm’s fortunes appears to be thanks to a series of setbacks – most recently our ‘Stop Exit Fees Now’ campaign. We he have been drawing attention to FDM’s controversial policy of charging graduates up to £15,000 in ‘exit fees’ if they leave FDM in less than two years, and calling on clients such as HSBC and the Department for Work and Pensions to explain why they are still working with a supplier that treats their young employees like this.
Industry insiders watching our campaign closely tipped us off last week that FDM Group’s share price has nose-dived by 30% since the start of 2022, saying it was the result of FDM ‘fighting multiple fires’:
What is causing this? The biggest big factor in the downturn in FDM’s value seems to be a legal decision in March 2021 by the Ontario Labour Relations Board in Canada to side with four FDM workers who took FDM to court over fees similar to those charged to departing FDMers in the UK. Graduate Fog understands this has had massive knock-on effects on FDM’s North America operation, which covers the US and Canada.
What did the ruling say? Under Canada’s Employment Standards Act, temporary work agencies (which is what FDM is viewed as, over there) are prohibited from charging workers a fee in connection with them becoming an employee of the agency and in connection with them being assigned work through the agency. After the ruling, John No, staff lawyer with Parkdale Community Legal Services, which represented three of the workers, said:
“In addition to being an unconscionable provision in an employment agreement, FDM’s enforcement of the $30,000 charge is in clear violation of the Employment Standards Act. If temporary work agencies want to find ways to retain employees, they should be doing so by maintaining proper working conditions and not by bonding them with a threat of a penalty.”
This will sound painfully familiar to the 1,000 graduates that FDM is though to hire in the UK ever year. Reflecting on the combined causes of FDM’s current financial woes, one UK insider told Graduate Fog:
“I believe it is due to a few things. Firstly the successful Ontario ruling on their use of training bonds – which went against FDM, and in favour of their students. Secondly their dwindling numbers in the US. And, lastly, the emergence of so many rival RTD [recruit, train, deploy] companies, including the emergence of those who don’t charge exit fees”.
Which bring us to our ‘Stop Exit Fees Now’ campaign. Pressure is building on clients such as HSBC and the Department for Work and Pensions to explain why they are still working with a supplier that treats their young employees this poorly – and how that fits with their commitments to diversity and inclusion, social mobility and mental health.
Meanwhile, other FDM clients are moving to get on the right side of this scandal while there is still time – such as Virgin Media O2, who told us last week ‘We recognise the concern about employee exit fees: no one on our [own] graduate training programme is subject to such charges. We are discussing the practice directly with FDM.’
And existing clients aren’t FDM’s only problem. We have also heard that potential new clients are cancelling sales meetings, keen to steer clear after seeing our reporting on Graduate Fog. We understand that last week’s story about the Department of Work and Pensions had a particularly big impact – as employers realised how vulnerable they are to bad publicity, and are thinking more carefully before using FDM.
For such a small website, powered by just one campaigner, Tanya de Grunwald, can Graduate Fog really have had an impact on FDM’s share price? Yes, says a source:
“I’m sure of it. Investors will always track negative sentiment. It’s hard to know at what level, but you’ll have had an impact.”
Said another insider:
“Big brands’ pledges on diversity and inclusion suddenly look very thin, when asked why they are using suppliers like FDM. The important questions you have asked – about why they are working with a supplier that treats young people are difficult for existing clients to answer – and denying they are responsible for a supplier’s conduct sounds incredibly feeble.
“Similarly, any organisation considering starting a new relationship with FDM is likely to be put off by the stench of bad publicity. So, is Graduate Fog’s campaign starting to bite FDM commercially? Yes, definitely.”