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1 Book Review by Klaus Meyer Original published in Journal of International Business Studies, 36 (3), 2005, p Rising above Sweatshops: Innovative Approaches to Global Labor Challenges, edited by Laura Hartman, Denis Arnold and Richard E. Wokutch New York: Praeger, 2003 In a world of organizationally disaggregated but global supply chains, the responsibility of consumers and upstream distributors for the lower end of their product chain has increasingly captured the minds of the interested public as well as corporate executives. Multinational enterprises are under pressure to increase the labor, health and environmental standards in not only their operations abroad, but in the operations of their suppliers and sub-suppliers. However, there is no clear guidance for well-meaning managers what constitutes good labor practice and how it should be implemented. Hartman, Arnold and Wokutch aim to fill this gap and present the state of the art of the scholarly debate on international labor issue and provide case studies of companies that have taken innovative initiatives that may serve as best practice for others wishing to raise their labor standards, and thus their corporate reputation. The focus of the book is on actions initiated at corporate headquarters, and on global management practices that may amend the conditions faced by those at the bottom of the supply chain. The editors have succeeded in tying together the current state of the debate, and providing ideas and management tools for corporate executives. Following the editors introduction, Jill Murray sets the stage with an excellent summary of the key arguments in the sweatshop debate, and the evolution of the debate in recent years. This chapter on its own provides a good introductory reading for students of international business at any level. Chapter 3 is supposed to discuss the economic context, yet Jonathan London limits himself to the interesting but somewhat narrow issue industrial relations in developing countries. At the stage, I would have liked a critical discussion of two propositions frequently advanced by economists: managers social responsibility is to serve shareholders which eventually will be best for all, and sweatshops are good for economic development see how Taiwan and Korea progressed over the past 30 years. In consequence, economists would often take an instrumental view of ethics, i.e. higher labor standards are good if they directly (e.g. via increased productivity) or indirectly (e.g. via reputation effects) benefit the company s share value. The contributors to this volume take a different moral starting point. Therefore a critical reflection over these arguments would have been in place. Denis Arnold develops the moral viewpoint shared by the contributors to this volume in chapter 4. He takes a normative view, arguing that managers have a moral responsibilities beyond profits: the primary moral obligation of a manager of a business enterprise is to serve the interests of his or her employer by helping to produce and sell a product or service. This is not, however, the only obligation of a manager. Managers must balance this obligation with other obligation such as respect

2 for the law and respect for core moral norms. Managers must balance their legitimate obligation to the owners of the business with equally legitimate obligations to other stakeholders (p.79, emphases by the reviewer). Such normative views are becoming increasingly common as for instance the United National Social and Economic Council holds MNE responsible for promoting and securing the human rights (UN 2003). In promoting his notion of a moral manager, Arnold points to the long-term benefits that morally innovative managers may accrue: MNEs that demonstrate respect for the rights of workers can be expected to have an influence on the local norms governing labor practices because they will be setting the standards. Correspondingly, morally innovative MNEs and their suppliers can be expected to enjoy the most productive and loyal indigenous workers since they will be ranked among the most desirable employers (p. 95). I would moreover expect that morally responsible managers would personally benefit from enhanced standing in society beyond the business community, especially in the host country, and in some religious belief systems in their expected afterlife. The philosophical discussion by Arnold becomes more specific in the next two chapters. Michael Santoro in chapter 5 discusses the benefits of cooperative and confrontational relationships between non-governmental organizations (NGOs) and MNE. Is influence best asserted on the barricades, or by speaking on the board? Necessarily there is always some ambiguity in this relationship, yet Santoro argues that some degree of cooperation would be ultimately beneficial for the workers whose welfare is the prime concern of the entire debate. I have one terminological concern on this and later chapters, and that is the aggregation of different types of NGOs. Industry associations fall under the definition NGO, as do idealistic student organizations or consumer rights activists. I would prefer if authors were more explicit who is creating and supporting a given NGO. An industry association may serve a useful role in raising standards by collusion of the relevant firms as in the example of the Pro-Child Institute discussed by French and Wokutch in chapter 11. However this does not make it a charity, it still serves the first and foremost the (long-term) interest of the member firms. In chapter 6, Waddock and Bodwell outline principles of management that may help corporations develop an integrated approach to managing labor issues as well as broader issues of corporate social responsibility. Under the title of total responsibility management, they outline three mutually reinforcing processes that MNEs are advised to set in motion: (1) inspiration or vision setting and leadership commitment processes; (2) integration of the vision and values into strategy, human resource, and operating practices; and (3) innovation processes, which involve establishing indicators that measure responsibility performance and provide a basis for improvements, remediation where necessary, and learning (p. 119, emphases in the original). In focusing on management processes, the authors key concern is that creating a code of conduct is insufficient and the main challenge is accepting responsibility down the chain and introducing all the management systems necessary to make adherence to the code possible (p. 134). The subsequent case studies use these three processes to structure part of their analysis.

3 Part 2 of the book contains case studies of corporate initiatives to improve labor practices in developing countries. They cover MNEs (Nike, adidas-salomon, Levi Strauss, Dow Chemicals, Chiquita) as well as in industry initiative in Brazil (Pro- Child Institute) and the training programs by the International Labor Organization (ILO). The objective of these case studies is to serve as best-practice example that other firms may adopt. They serve this purpose in that they provide many ideas and some pointers to likely obstacles firms may encounter and how to handle them. However, from a researcher s perspective, herein also lies that main weakness of the research agenda of this book. The main source of information in some case chapters exclusively is the top management of the corporation or organization concerned. Thus, the case studies to a large extend tell the story as management would like it to be told. With few exceptions, the authors spend little or no time on field research in the plants affected by new labor practices, nor did they systematically interview critical observers of the industry. This gives a very one-sides perspective on many of the issues discussed. Conveniently overlooked are for instance awkward experiences of the past, as all case companies (may be except Dow Chemicals whom I do not know) have been target of major NGO campaigns. The initiatives reported in the book developed, at least initially, as defense against allegations (right or wrong) of abuse in their supply chains. This interaction between NGOs and the MNEs has been important for the strategic changes by the firms, and future research may investigate this interdependence more carefully. The initiatives reported in the book are laudable, and they can be expected to deliver results. However, it would have been desirable to obtain more information on the performance of these initiatives. How did the changed corporate responsibility practices affect workers in the sweatshops, in the local communities, and in the host economies at large? Specific data are provided for example in French and Wokutch s discussion of the Pro-Child Institute. They report that changes in child labor regulation increased the share of children not working, but it also increased the share working in services rather then manufacturing where law enforcement is more difficult (p ). Data such as these are difficult to obtain, among other reasons because a lot of child labor takes place in the informal sector. Yet it is an important area for future research. Of the case studies, I found the adidas-salomon case by Hartman, Wokutch and French most instructive, for two reasons. Firstly, the company provided data not only on favorable auditing reports of its suppliers, but also on internal studies that outline the problems encountered in different countries (p , 205). On this basis, the chapter then discusses initiatives taken, and obstacles encountered, aiming to address these issues. This kind of information is particularly interesting for others to learn from, and future research may want to use such internal auditing reports as starting points. Secondly, the authors actually visited the factories in Vietnam, Thailand and Brazil and report on their insights, which is unfortunately rather uncommon among academic management scholars. The adidas-salomon case also reports an initiative to raise labor standards in local firms. At several places in this book it is mentioned that labor standards are typically considerably worse in local firms then in those firms working with or for MNEs. On a recent trip to Vietnam, I encountered teenagers working at many places, well outside

4 the reach of multinationals: children selling goods in the streets, serving at small restaurants, or contributing in family-run cottage industries. The economic development and labor standards debate should thus take a broader perspective. To the end, adidas-salomon became involved in an interesting initiative to train local firm managers in labor management practices in Vietnam. While providing a wealth of information and ideas, the book suffers from one major problem: ethnocentrism. A collective of USA and Australian researchers is discussing what would be good for people in places like Brazil, Thailand and Vietnam. There seems to have been very little interaction with the labor forces concerned, and I have found no reference to interviews with local observers or interest groups. There are no references to scholarly work conducted by local scholars, nor do the authors seem to interviewed local experts. In my own work (on different topics), I found local researchers always very helpful in interpreting what is happening in countries like Vietnam, and it would be appropriate to acknowledge such contributions. As a result of the ethnocentric perspective, there is very little reflection over the fact that ethical standards are based in culture, and cultures vary. There has been a convergence towards common standards as encoded in international conventions. But one should be aware that these conventions reflect, among other views, the interests of labor unions in North America and Europe wishing to limit competition. It cannot be taken for granted that these standards are also what local ethical standards would demand. It is reasonable to argue that product sold in, for example, the USA should be produced according to minimum standards reflecting a social consensus in the USA. However, how about products made for local markets, or for third countries such as Japan or Taiwan where labor rights in other countries are much less of a political issue? Ethicists may want to reflect over this issue. This leads me to a complex issue that muddles the debate further. Many shoes made in Vietnam are actually produced in Taiwanese and Korean owned firms, that act as subcontractors to well known international brands. Whose standards should apply, the host country s, the foreign investor s, or the customer s? Hartman and Wokutch touch upon this issue in their discussion on the case of Nike (p ). However, it is framed it as a cross-cultural conflict between (typically male) Taiwanese or Korean managers with their (mainly female) Vietnamese employees. Nike introduced training methods that apparently improved the cross-cultural communication, which thus helped both the local workers and the supplier firm. However, the issue is more complex as Nike is introducing only one set of values that are relevant here why should they dominate? Why should a Taiwanese manager, who experienced sweatshops in his own country when he was a child, take a more generous approach towards labor issues then he experienced in his youth? In the increasingly complex supply chains in Asia, such trilateral relationships are increasingly common and merit research focused on issues arising specifically in such relationships. These critical remarks should do not deflect from the basic fact that Hartman, Arnold and Wokutch have done a great job in advancing the debate on sweatshop. In particular, their book should be of great help to corporate executives wishing to advance their corporate social responsibility because of its many practical examples. It may also serve as a textbook for a course on labor issue if it is combined with papers critical of the initiatives taken by MNEs, and by papers outlining the

5 neoclassical economics arguments. Moreover, as I have tried to point out in this review, the book also raises many issues for future research. References: United Nations Social and Economic Council, Norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights, United Nations. (web-document: Aug2003.html, accessed ).