Virtue Out of Necessity: Policing vs. Pedagogy in the Improvement of Labor Conditions of Global Supply Chains. Richard M. Locke

Transcription

1 Virtue Out of Necessity: Policing vs. Pedagogy in the Improvement of Labor Conditions of Global Supply Chains Richard M. Locke

2 Road Map Broader Project Goals Paper 1: Does Monitoring Improve Labor Standards: Lessons from Nike Richard Locke, Fei Qin, Alberto Brause Paper 2: Improving Work Conditions in a Global Supply Chain Richard Locke and Monica Romis Paper 3: Virtue Out of Necessity Richard Locke, Matthew Amengual, Akshay Mangla, Fei Qin, Jonathan Rose, Gustavo Setrini, and Yanbo Wang.

3 Motivation Globalization of production has provoked fierce debate over labor standards Child labor, excessive work hours, hazardous working conditions, poor wages rampant in 3 rd world factories In absence of functioning international organizations capable of promoting global justice and/or nation-states willing or able to enforce domestic labor codes, codes of conduct and other forms of private voluntary regulation have become dominant method MNCs and NGOs address problems with labor standards Does Monitoring Work? If not, what does?

4 Paper #1: "Does Monitoring Improve Labor Standards? Lessons from Nike" Factory Conditions Vary Across Sectors & Countries First M-Audit Scores across all factories (Nov to Jan. 2005) Histogram: First Maudit score Density Maudit score Density kdensity maudit Number of Observations: 575 Average M-Audit Score: 65% Similar patterns of variation within sectors (footwear, apparel, equipment) and within countries.

5 Paper #1: "Does Monitoring Improve Labor Standards? Lessons from Nike" Are Things Getting Better? A) Change in M-Audit Scores Mean Standard Deviation First M-audit Score Second M-audit Score Third M-audit Score

6 Paper #1: "Does Monitoring Improve Labor Standards? Lessons from Nike" Are Things Getting Better? CR rating A B C D

7 Paper #1: "Does Monitoring Improve Labor Standards? Lessons from Nike" Are Things Getting Better? B) Change in Compliance Rating Inspections Change in CR Rating Freq. Percent -3 (Down by 3 degrees) (Down by 2 degrees) (Down by 1 degree) (No change) (Up by 1 degree) (Up by 2 degrees) (Up by 3 degrees) Total Note: A is 4, B is 3, C is 2, and D is 1, and the change in CR rating is the score in the most recent audit minus the score from the earliest audit, ranging from 3 to 3. For example, if a factory has a score C in the earliest audit and a score A in the most recent audit, then it has a change of +2.

8 Paper #2: Improving Work Conditions in a Global Supply Chain Workplace Characteristics Plant A Plant B Average Weekly Wage $ USD $ USD Team Work Yes No Job Description Multi-Tasks Single Task Job Rotation Yes No Worker Participation in Work-Related Decisions Nationality Overtime Yes No Managers Mexican Chinese Supervisors Mexican Chinese Production Workers Mexican Mostly Mexican Voluntary and Within Limit Mandatory and Over Limit

9 Paper #2: Improving Work Conditions in a Global Supply Chain Comparison of Production Systems Plant A Plant B Total # of Workers in one line or cell T-Shirts per Day per line or cell Daily Wage per Worker (Fixed Salary + Bonuses) $ USD $ USD T-Shirts per Worker Cost per T-Shirt $ 0.11 USD $ 0.18 USD

10 Paper #2: Improving Work Conditions in a Global Supply Chain Comparison between Old and New System of Production in Plant A Old System (module) New System (cell) Total # of Workers 10 6 T-Shirts per Day per module or cell Productivity per Worker Average Weekly Salary $ USD $ USD

11 Paper #3: Virtue out of Necessity" Case: Philips Van Heusen Major Apparel Co. (Largest Dress Shirt Co in World) 2005 Annual Report: Total Revenue: $ 1.9 billion Gross Profit: $ 900 million Product sourced from over 1,300 factories in 68 countries Accredited by FLA in 2005 Seen as Leader in CSR Movement

12 Paper #3: Virtue out of Necessity" Research Data Analysis of Internal Compliance Reports Field Research: 260+ interviews in Bangladesh, China, Dominican Republic, Honduras, India, and U.S. Factory Visits. Shadow Audits

13 Paper #3: Virtue out of Necessity" PVH s Internal Compliance Database has: Human Rights Status Number Percentage Approved % Follow-Up Required 118 9% In Progress % Not Approved % Total 1, % In addition, there are 1,226 inactive factories.

14 Paper #3: Virtue out of Necessity" How to Explain Mismatch Between Company Rhetoric / Reputation & Reality of It s Supply Base? Not Lack of Will, Moral Fiber, Resources Problems are Inherent in Traditional Compliance Model

15 Paper #3: Virtue out of Necessity" Traditional Compliance Model Asymmetric Power Relations Between Global Buyers & Suppliers Importance of Audit-Based Data Incentives Lots of debate over the Model. How to make it more transparent, accountable, rigorous

16 Paper #3: Virtue out of Necessity" Traditional Model of Code of Conduct / Compliance - Brands Exit Factories External Pressures from NGOs, etc Global Brands Codes of Conduct Monitoring / Factory Audits + Improved Working Conditions

17 Paper #3: Virtue out of Necessity" Theoretical & Empirical Weaknesses Ambiguous Power Relations Unclear (Perverse) Incentives Impossible to Generate Accurate Information As a Result, Ritual of Compliance Factories Moving In & Out of Compliance Not Tackling Root Causes of Labor Issues

18 Paper #3: Virtue out of Necessity" Yet, we do see improvements among factories. Why? An alternative, pedagogical approach based on: Repeated Interactions Stable Relationships Persuasion / Education Self-Interest / Trust

19 Paper #3: Virtue out of Necessity" Illustration Rapid Replenishment / OT in Honduras Health & Safety in Dominican Republic

20 Paper #3: Virtue out of Necessity" Conclusions