Corporate Responsibility and Labour Rights

Codes of Conduct in the Global Economy

Ruth Pearson, Gill Seyfang, Rhys Jenkins, Rhys Jenkins, Ruth Pearson, Gill Seyfang

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781136568893
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The emergence of voluntary corporate codes of conduct since the early 1990s is both a manifestation of and a response to the process of globalization. They have been part of a more general shift away from state regulation of transnational corporations towards corporate self-regulation in the areas of labour and environmental standards and human rights. This work provides a critical perspective on the growth and significance of corporate codes with a particular focus on working conditions and labour rights. It brings together work by academics, practitioners and activists.

Chapter 1

Introduction

Rhys Jenkins, Ruth Pearson and Gill Seyfang

THE RISE OF VOLUNTARY CODES OF CONDUCT

Since the early 1990s there has been a spectacular growth of voluntary corporate codes of conduct dealing with labour conditions. This has been part of a more general shift away from state regulation of transnational corporations (TNCs) towards an emphasis on corporate self-regulation in the areas of labour and environmental standards and human rights. Instead of the social and environmental impacts of big business being seen as a matter primarily for governments to deal with, they are now regarded as matters of corporate responsibility for which companies themselves, or their business associations, should set standards.

The emergence of voluntary corporate codes is both a manifestation of, and a response to, the process of globalization. During the first three post-war decades, developing countries were involved in the world economy primarily as producers of raw materials and as markets for manufactured goods. Transnational corporations’ activities were mainly in the extractive sector (mining and oil) and increasingly in manufacturing production for the local market. The post-independence period in many developing countries saw the state play an active role in the economy and the promotion of import substituting industrialization.

After an initial period when foreign direct investment (FDI) was welcomed, many countries became increasingly critical of the activities of TNCs. Because the prevailing climate was generally favourable towards state intervention, and because TNC activity was largely nationally based,¹ the main response to the problems created by TNCs was national state regulation. In the late 1960s and 1970s some 22 developing countries passed legislation controlling TNC activities (Hepple, 1999). There were also numerous cases of nationalization of foreign corporations, which reached a peak in the mid-1970s (Jenkins, 1999).

It was in this context that a number of international efforts to establish codes of conduct for the activities of TNCs emerged in the 1970s. The most comprehensive of these was the UN Draft Code of Conduct on TNCs which was developed by the UN Centre on Transnational Corporations (UNCTC) set up in 1974. Several specialized UN agencies also developed codes covering particular aspects of TNC behaviour. These included the International Labour Organization's (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (1977) and the United Nations Conference on Trade and Development's (UNCTAD) proposed codes on Restrictive Business Practices and on the Transfer of Technology.

These international codes were seen as supporting the efforts of developing-country governments to regulate TNCs at the national level. They emerged from a perception that the growth of giant international companies posed a threat to the sovereignty of small, poor states and were an attempt to redress the balance between the growing power of TNCs and the nation states, particularly in the South.²

The continuing process of globalization and the political changes of the 1980s led to a shift away from the social democratic and Keynesian interventionism of the post-war period in the North, and from import substituting industrialization and statism in the South. The emphasis on monetarist policies and increased integration of international markets for goods and finance, the massive privatization of state assets and the shift in developing countries to trade liberalization and export promotion, all served to redefine the economic role of the state. These trends were reflected in government policies towards TNCs, which shifted dramatically from regulation of their activities to intense competition to attract FDI.

It is against this background that the emergence of voluntary corporate codes of conduct in the 1990s has to be understood. A number of changes in the global economy contributed to the growing interest in corporate social responsibility (CSR) and codes of conduct. The growth of global ‘value chains’, in which Northern buyers control a web of suppliers in the South, has led to calls for them to take responsibility not only for aspects such as quality and delivery dates but also for working conditions and environmental impacts.³ At the same time the increased significance of brands and corporate reputation makes leading companies particularly vulnerable to bad publicity (Klein, 2000). Changing public attitudes are also an important part of the context in which corporate codes of conduct have been adopted. Companies in the North can no longer ignore the impact of their activities on the environment with impunity. The developments in global communications which have enabled corporations to control production activities on an ever widening scale have also facilitated the international transmission of information about working conditions in their overseas suppliers, contributing to increased public awareness and facilitating campaigning activities.

Experience suggests that the adoption of corporate codes of conduct is often a response to bad publicity as a result of previous activities. Prior to the recent wave of codes, there was an earlier phase of intense corporate activity around codes, particularly in the United States, in the late 1970s. These were a response to the negative publicity received by TNCs, as a result of the ITT scandal and revelations about bribery and questionable payments by many leading US companies (Kline, 1985, pp23-5). Ninety per cent of the codes studied by Kline were formulated after the Securities and Exchange Commission began to investigate questionable payments, and the passage by the US Congress of the Foreign Corrupt Practices Act of 1977 gave further impetus to this movement (Kline, 1985, p103). By the mid-1980s, however, public pressure for the adoption of codes had decreased (Kline, 1985, p108).

The second wave of corporate codes, which emerged in the early 1990s, focused on labour conditions. As with the first wave in the 1970s, the new trend for companies to adopt codes was prompted by scandals about corporate practices. Levi Strauss, with its Business Partner Terms of Engagement adopted in 1992, was one of the first companies to establish this type of code, after its overseas contractors were accused of treating their workers as indentured slaves. The mid-1990s saw further revelations concerning the use of sweatshops and child labour by leading US brands such as Gap, Kathie Lee Gifford, Nike, Disney and others. The period 1995–1996 has been described as ‘the Year of the Sweatshop’ in the United States as activists campaigned around these issues and highlighted the practices of the market leaders (Klein, 2000, pp327–9).

The efforts at state regulation of TNCs in the 1970s and the international codes of conduct designed to support these efforts were primarily initiatives which emanated from the South, and particularly from Southern governments. In contrast, the support for voluntary corporate codes since the 1990s has come largely from the North. Here international trade union organizations, development non-governmental organizations (NGOs), human rights organizations and the corporate sector itself have all contributed to the demand for some form of code of conduct for international business.

THE CODES DEBATE

The various stakeholders in the coalitions which have promoted voluntary codes of conduct have, inevitably, different motivations.⁴ Transnational corporations, quite understandably, have responded to political and consumer pressure primarily from the perspective of defending their reputations and thus their market position, only latterly incorporating a generalized concern for social responsibility into their corporate portfolios. Consumer groups have extended their concern for information on and inputs into what is sold in Western markets to a related responsibility for the conditions and quality of the workforce involved in production. Development NGOs have responded to the global reach of production and information by extending their remit from micro interventions and macro development assistance – much of which was implemented in parallel to labour markets – to a direct relationship with workers in the global workplace. Trade unions, faced with the reality that global production implies deregulated, flexible and often informal labour, are exploring new opportunities to protect working conditions and support minimum labour standards. Women's groups, in both the South and the North, have had a longstanding concern with issues surrounding workplace conditions since research in the 1970s revealed that over 80 per cent of the workforce in consumer export industries was female.

Given this range of players and motives, how are we to evaluate the current development of voluntary codes of conduct? As the title of a recent study asks, are they a Workers’ Tool or PR Ploy? (Wick, 2001). The positive view is that codes represent a wide range of players positioned in very different locations in the global production system, and thus offer an opportunity for initiatives which will be successful in driving up expectations and standards, because of their broad base of support. Some analysts argue that their development represents the positive multi-dimensional aspects of globalization which provide access to information allowing the global consumer and political subject to connect with issues and individuals previously too remote to feature on their horizon. Moreover, it has breathed new life into international organizations such as the ILO, which were founded on models of work rooted in single nations and assuming formal workforces, which were becoming ineffective in an increasingly informalized and unregulated workforce. Moreover the articulation of universal labour standards for the whole of a globalized production system chimes harmoniously with the current political practice of utilizing human rights treaties and discourse to argue for social and economic as well as political and civil rights – that is to couch development aspirations in human rights discourse.

However, it also has to be acknowledged that, to date, their record of achievement, as opposed to rhetoric, is strictly limited. The analysis of codes in this volume and elsewhere (Kolk et al, 1999; Seyfang, 1999) indicates that those which are most likely to reflect the real concerns and conditions of workers in world market factories are more likely to have been drawn up by labour advocates, pressure groups and NGOs and least likely to have been developed or to be owned by individual companies or industry organizations. The research findings that are available indicate that even the well-publicized codes from major retail brands in leisurewear or garments are honoured more frequently in the breach than in compliance, in spite of the development of a new ‘industry’ of monitors and verifiers, and the dissemination of international standards such as SA 8000 (NLC, 2000).

Many codes of conduct declare an adherence to some or all of the ILO's core labour standards on child labour, forced labour, non-discrimination, freedom of association and collective bargaining. In doing so, they legislate for the workforce in a way that often makes workers the objects of regulation rather than partners or political subjects in determining what is appropriate in their context. For, in spite of the desirability of a broad base of stakeholders in drawing up voluntary codes, the central paradox of ‘cheap labour’ engaged in transnational production chains is the desperate need of the workers to preserve their employment opportunities. In such situations it is imperative that the workforce is in a position to determine what the core labour standards should be for that particular workforce in that particular company/factory/country, rather than have it pre-determined by an international body. This implies that international actors (TNCs, international trade unions and NGOs) need to subordinate their notion of ‘universal’ labour rights to the careful appraisal of local organizations (women's groups, workers’ councils, trade unions, etc) whose strategic judgement about which issues to foreground may well determine whether the workers concerned are able to retain their jobs as well as progress their grievances.

There is a danger that voluntary codes are seen as a substitute for self-organization by workers and that they may even be implemented by companies in parallel with efforts to prevent workers joining trade unions (see Chapter 13 by Dubinsky). In the case of Sri Lanka, workers have been dismissed for attempting to organize trade unions in factories supplying major brand names, many of which have codes of conduct (see Chapter 11 by Dent).

This is not to say that voluntary codes of conduct cannot provide an important arena for developing the framework for a more positive regime of labour relations under the new conditions of global production and trade. One of the problems in advancing this agenda is both the internationalization of norms of de-protection for labour under international trade regulations, and the separation of negotiations about international trade and investment conditions (within, for example, the World Trade Organization – WTO) from those governing labour conditions and rewards, dealt with by the ILO. Voluntary codes of conduct which cover a range of labour related issues and conditions in which transnational investors and traders are major stakeholders could become a useful negotiating platform for breaking down the artificial and injurious separation between the (de)regulation of international capital and labour.

Critics of the voluntaristic turn in labour regulation represented by corporate codes of conduct rightly raise the objection that voluntary regulation serves both as a substitute for statutory regulation (by governments and international bodies) and at the same time legitimizes the absence of statutory regulations by governments and international bodies. However this question also needs to be seen in historical context. Given the currently dominant view that globalization, defined in terms of free trade and flexible labour, offers the most positive avenue out of poverty and exclusion for developing countries, there is at present no clear platform for the re-regulation of labour nor for the strengthening of the power of labour organizations. The growth of the current global networks of voluntary codes of conduct involve major companies in forms of linkage and cooperation even while they are major competitors in the global market. If for example Nike, Reebok and Timberland all contract with the same Korean- or Taiwanese-owned footwear producer operating in mainland China or Indonesia, both company and sectoral codes of conduct provide a framework which could counteract the competitive ‘race to the bottom’ tactics, and lock key suppliers into a commitment to raise rather than lower labour standards.⁵

The contributions in this volume indicate that there are a number of evolving and unresolved questions about how to take codes of conduct forward in the interests of those they purport to represent. Representation of workers, and particularly of women workers, is an important issue which several chapters discuss (particularly those by Pearson and Seyfang, Shaw and Hale, and Prieto, Hadjipateras and Turner). The content of codes and the priorities given to different issues in different contexts is problematic within a general acceptance that codes should be based on universalistic and generalized practice.

A related issue is the complexity of global supply chains and the difficulties of applying a single uniform code to workers involved in different stages of production and/or working under different relations of production. Brill's chapter (Chapter 9 ) on homeworkers raises the significance of home-based workers’ involvement in global supply chains and the dangers of either ignoring their involvement or of limiting codes to provisions which cannot apply to them, such as the abolition of piece work, provision for minimum shifts and restrictions on overtime.

The...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Contents
• Acronyms and Abbreviations
• List of figures, tables and boxes
• Contributors
• Preface
• Chapter 1 Introduction
• Part One: Codes of Conduct and Global Deregulation
• Chapter 2 The political economy of codes of conduct
• Chapter 3 Labour rights/corporate responsibilities: the role of ILO labour standards
• Chapter 4 ‘I'll tell you what I want …': women workers and codes of conduct
• Chapter 5 Mapping codes through the value chain: from researcher to detective
• Part Two: Codes of Conduct – Perspectives from Stakeholders in Global Production Chains
• Chapter 6 Beyond codes: lessons from the Pentland experience
• Chapter 7 The international trade union movement and the new codes of conduct
• Chapter 8 The emperor's new clothes: what codes mean for workers in the garment industry
• Chapter 9 Can codes of conduct help home-based workers?
• Chapter 10 ‘Made in China': rules and regulations versus corporate codes of conduct in the toy sector
• Chapter 11 The contradictions in codes: the Sri-Lankan experience
• Chapter 12 The potential of codes as part of women's organizations' strategies for promoting the rights of women workers: a Central America perspective
• Chapter 13 The fox guarding the chicken coop: garment industry monitoring in Los Angeles
• Chapter 14 Working with codes: perspectives from the Clean Clothes Campaign
• Chapter 15 ETI: a multi-stakeholder approach
• Chapter 16 Monitoring the monitors: a critique of corporate third-party labour monitoring
• Chapter 17 Code monitoring in the informal Fair Trade sector: the experience of Oxfam GB
• Useful web sites
• Index