Javier Chércoles and Social Order

Ironically, on Christmas Eve the Wall Street Journal published a report on how the Bangladesh garment workers who were killed or injured in the Dhaka building collapse are going to be compensated.

"The Man Who Places a Dollar Value on Bangladesh Factory Workers" explores the tough job assigned to Javier Chércoles.

In April of last year the Rana Plaza factory building collapsed and killed more than 1,100 people. Building owners ignored safety warnings. Factory supervisors locked doors to keep an anxious work force from leaving before the collapse, which led to a much higher mortality rate than if the doors had remained open.

The incident serves as a stark reminder that much of the world does not adhere to the same human rights standards that have evolved here in the United States and other developed countries with workers' compensation systems dating a hundred years in experience and operation.

It's easy to malign workers' compensation - heck, I did it yesterday in my blistering critique of Return To Work.

And it's just as easy to ignore the very real fact that there isn't a whole lot better operating in the rest of the world where the products we consume are manufactured.

Mr. Chércoles got his start in the compensation valuation process in 2005 when he was head of corporate social responsibility for Zara parent Inditex SA, and learned that a Dhaka factory making its sweaters had collapsed killing 64 people and injuring another 200.

It took 6 years for Mr. Chércoles to settle all of the claims, and on average each widow received a little over $6,000 US dollars. And according to the story, a third of the widows disappeared after receiving their lump-sum compensation. It is suspected the women were killed for their money.

This motivated Mr. Chércoles to get a Ph.D. at Spain's ESADE, examining the consequences of factory collapses on their communities.

The workers around the Rana Plaza factory live in slums and poverty, with barely enough means to feed themselves let alone progress in life. The loss of just one family member's income can mean the difference between life and death for the other family members.

After Rana Plaza collapsed Mr. Chércoles was contacted by one of the factory merchants to figure out how to make things as good as possible for these families - because Bangladesh doesn't have workers' compensation and very little other social laws.

Mr. Chércoles came up with a 3 part system for determining compensation, the first 2 parts of which are very familiar to us in workers' compensation: 

1) gather basic biographical points, such as the worker's age, income, and if he or she was the family's sole breadwinner, and use mortality tables from European insurance schemes to determine damages; 

2) get a medical exam for survivors, to determine the impact of the injuries on their future ability to work using a scale of injury assessments developed after the Spanish Civil War much like the AMA Guides for determining impairment; 

3) he developed a vulnerability index based on a survey taken by widows and survivors - 220 questions addressing relations with in-laws, how often the women attend religious ceremonies or whether they wear bangles, etc. - meant to determine how vulnerable a compensation recipient may be subject to abuse or death by others seeking to take their money.

Mr. Chércoles told the WSJ that he hopes his algorithms will serve as a blueprint for future disaster compensation. "You have to consider what will happen next," he says.

How fortunate are we in the United States to already have in place a system for disaster compensation such that most of the argument in our country is about how fast doctors get paid, or whether a rating agency should take over a state's rate making system.

We forget how evolved workers' compensation is in this country (and others). There are age old questions and problems to solve that will be timeless, and subject to endless debate.

But as Bangladesh shows, there are many other places where such social order isn't observed.