Working Conditions around the World
Much of this chapter has focused on the employment relationship, and the legal and ethical norms governing it, in the United States. Workplace institutions differ dramatically around the world. Laws and practices that establish fair wages, acceptable working conditions, and employee rights vary greatly from region to region. As illustrated by the opening example of this chapter that described a Nike contract factory in China, these differences pose a challenge to multinational corporations. By whose standards should these companies operate?
Recent headlines have turned the public’s attention to the problem of sweatshops, factories where employees, sometimes including children, are forced to work long hours at low wages, often under unsafe working conditions. Several well-known companies in addition to Nike, including Wal-Mart, Disney, and McDonald’s, have been criticized for tolerating abhorrent working conditions in their overseas factories or those of their contractors. In recent years, student groups have pressured companies by rallying to prevent their colleges and universities from buying school-logo athletic gear, clothing, and other products made under sweatshop conditions.
Fair Labor Standards
The term labor standards refers to the conditions under which a company’s employees—or the employees of its suppliers, subcontractors, or others in its commercial chain—work. Some believe that labor standards should be universal; that is, companies should conform to common norms across all their operations worldwide. Such universal rules are sometimes called fair labor standards. For example, such standards might include a ban on all child labor, establishment of maximum work hours per week, or a commitment to pay a wage above a certain level. Others think that what is fair varies across cultures and economies, and it is often difficult to set standards that are workable in all settings. For example, in some cultures child labor is more acceptable (or economically necessary) than others. A wage that would be utterly inadequate in one economic setting might seem princely in another. In some countries, unions are legal and common; in others, they are illegal or actively discouraged.
In the face of growing concerns over working conditions overseas, a debate has developed over how best to establish fair labor standards for multinational corporations. Several approaches have emerged.
Voluntary corporate codes of conduct, described in detail in Chapters 6 and 7, can include labor standards that companies expect their own plants and those of their contractors to follow. One of the first companies to develop such standards was Levi Strauss, a U.S. apparel maker. After the company was accused of using an unethical contractor in Saipan, the company reviewed its procedures and adopted a wide-ranging set of guidelines for its overseas manufacturing. Reebok, Boeing, DaimlerChrysler, and other companies have followed suit.
Nongovernmental organizations (NGOs) labor codes have also been attempted. For example, the Council on Economic Priorities has developed a set of workplace rules called Social Accountability 8000, or SA 8000. Modeled after the quality initiative of the International Organization for Standardization, ISO 9000, SA 8000 establishes criteria for companies to meet in order to receive a “good working condition” certification. Other groups, including the International Labour Organization, the Caux Roundtable, and the United Nations, have also worked to define common standards to which companies can voluntarily subscribe. These efforts are further described in Chapter 7.
Yet a third approach is for industrywide labor codes. Groups of companies, sometimes with participation of government officials, NGOs, and worker and consumer representatives, define industrywide standards that they can all agree to.
In 2004, for instance, three leading high-tech companies—HP, IBM, and Dell—released a common Electronic Industry Code of Conduct, establishing a uniform set of labor, health and safety, and environmental standards for their global supply chains.35 Cisco Systems, Microsoft, and several other companies later endorsed the effort. Supporters said a common code would likely improve supplier compliance and lower the costs of training and monitoring. Another similar effort in the clothing and footwear industries, called the Apparel Industry Partnership, is described in the case study on Nike, at the end of the book.
Whatever the approach, certain common questions emerge in any attempt to define and enforce fair labor standards. These questions include the following.
• What wage level is fair? Some argue that market forces should set wages, as long as they do not fall below the level established by local minimum wage laws. Others argue that multinational corporations have a moral obligation to pay workers enough to achieve a decent family standard of living; still others feel that they should pay workers a fair share of the sale price of the product or of the company’s profit.
• Should standards apply just to the firm’s own employees, or to all workers who have a hand in making its products? Some say that while the responsibility of a firm to its own employees is clear, its responsibility to the employees of its subcontractors is indirect and therefore of lower importance.
• How should fair labor standards best be enforced? Adherence to fair labor standards, unlike national labor laws, for example, is strictly voluntary. Companies can adopt their own code, or agree to one of the NGO or industry codes. But who is to say that they, and their contractors, are actually living up to these rules? In response to this concern, a debate has emerged over how best to monitor and enforce fair labor standards. Some have advocated hiring outside accounting firms, academic experts, or advocacy organizations to conduct independent audits to determine if a code’s standards are being met. The efforts of one company, Mattel, to devise a verifiable procedure for monitoring its code of conduct in overseas factories are profiled in Exhibit 18.D.
As businesses have become more and more global, as shown in Chapter 7, companies have faced the challenge of operating simultaneously in many countries that differ widely in their working conditions. For these companies, abiding by government regulations and local cultural traditions in their overseas manufacturing may not be enough. Many business leaders have realized that subscribing to fair labor standards that commit to common norms of fairness, respect, and dignity for all their workers is an effective strategy for enhancing their corporate reputations, as well as meeting the complex global challenges of corporate social responsibility.