Is treating workers fairly something a company should do because it is right or because it is the company’s best interest, or both, or neither? Henry Ford doubled the pay of his workers because he was able to (profits were high), and he said it was an easy decision because it helped his workers to buy his Model T. But could this consequentialist logic be turned aroundto justify Wal-Mart paying its workers less, so that they can’t afford to shop anywhere but Wal-Mart?
What standards of workplace and community responsibility should be accepted? Should you as an executive recommend your company go for an easy-to-meet standard that doesn’t cost much but is also not worth very much, or should you try to go for a more challenging standard that has high credibility and might bring some side benefits (cost savings, marketing advantages) to the company? Would it be too costly to go for the higher standard?
How wide a variation in workplace standards is acceptable?In a global economy in which the culture where goods are manufactured may be very different from the one in which they are sold? How significant are reputational risks in your consumer market raised by your activities in the producer location? Is this a risk only for companies, or is there a national risk? Should the U.S. Government have a policy on corporate social responsibility? Why not just regulate business? Workplace and consumer-protection practices, and government regulation, have often evolved in the aftermath of scandal and tragedy.
How should your company respond to variations among countries in legal enforcement? Developing countries have great differences in their legal systems, their level of law enforcement and the culture of compliance. How does a multinational company best operate in this environment to minimize negative exposure to its brand(s)?
Should corporate giving be strategically related to brand-building or in the long run is it better to make it independent? For example, pharmaceutical companies are expected to improve people’s health—should corporate charity in this industry therefore focus on medical education and public health programs? The argument for this is that they possess the appropriate expertise and can provide medical products and services at cost. But what if doing so might have the effect of undercutting their market demand fro their goods and services? Do desperately poor people in Africa have an inalienable right to medicines at a price they can afford, for widespread, life-threatening illnesses? If so, who is responsible for responding to this right?
How much does CSR contribute to actual brand sales? Polls show that consumers and investors say they care about CSR and will choose products to buy and companies to invest in with an eye on their social records. But do significant numbers of consumers and investors actually behave as they say they will? If they do act on the social records of companies, how reliable are the records they use?
What is the most effective way to focus attention on a company’s CSR efforts for brand-building? Should CSR information be in a separate CSR report or incorporated in the annual report? If included in the annual report, how much space should be devoted to CSR? How easily can consumers identify corporate behavior at the point of purchase? Are investors able to find out about CSR records at the point when they buy a security?
What CSR activities bring value to the financial bottom line? What CSR activities bring value to the company independent of the brand value to consumers and investors? For example, does the activity increase productivity, reduce costs, improve quality, create more loyal employees, and improve management? Can CSR policies and measures help select business partners that are well-managed, reliable, and ethical?
Who can best influence workplace standards in developing countries? In industrialized countries, consumers, socially responsible investors, NGOs and the media may advocate CSR. In developing countries, CSR practices are often the product of customer supply-chain demands, but sometimes also domestic demand and CSR leadership. How does the source of demand for CSR affect producer response?
Can low-cost retailers continue to focus almost exclusively on price in the supply chain? Can a company like Wal-Mart, the world’s largest retailer, address negative NGO campaigns primarily by attention to environmental issues, without responding to workplace issues?
In the 19th and early 20th centuries, industrialization created sweatshop conditions in Europe and the United States. Improvement was gradual, through a long process of public education, passage and enforcement of regulations, union organizing, the gradual emergence of a culture of compliance and the development of human resources and other management systems. Public concern and reform started in Europe in the mid-19th century. U.S. concern was ignited by Jacob A. Riis’s book, How the Other Half Lives (1890) and Lewis W. Hine’s photos of children working in mines, textile mills, and factories. A critical event in U.S. labor history was the Triangle Shirtwaist fire on March 25, 1911.The disaster occurred on Greene Street, east of Washington Square, in what is now NYU’s Brown Building, next door to where the NYU Law School was then. In 1909 the Triangle workers were engaged in a strike for better working conditions and NYU Law School students like Inez Milholland helped them. The Triangle factory was on the top two floors and 146 young girls died largely because the fire exits were locked.The fire led within four years to 36 new worker-safety regulations in NY City and NY State. A staffer of the NY State Factory Investigating Commission, Frances Perkins, was brought by FDR in March 1933 to Washington as U.S. Secretary of Labor, the first-ever female Cabinet member. Secretary Perkins introduced many New Deal labor laws including Social Security. As public attention was drawn to labor issues, unions strengthened and a range of state and municipal laws in the North required payment for overtime and restricted child labor. But conditions remained largely unregulated, segregated, and dire in the South, where unionization proved more difficult. The New Deal established national standards and enforcement measures. The National Labor Relations Act (1935) created a labor arbitrator, the National Labor Relations Board (NLRB). The Fair Labor Standards Act (1938) provided a Federal (1) guarantee of the right of workers to select a union, (2) ban against unfair labor practices, (3) minimum wage, (4) 40-hour week (there is still no U.S. limit on overtime), and (5) limitation on child labor. In addition, the government started a program to reward businesses for improved labor relations. Businesses were permitted to display a blue eagle to signify to consumers their compliance with labor regulations, the ability of employees to organize, and the adoption of a code of conduct informed by consumers, government, and unions.
New Deal laws and their enforcement led to a decline in U.S. sweatshops and an overall improvement of labor practices. Today, the U.S. Department of Labor (DOL) is responsible for enforcement of the Fair Labor Standards Act and its Occupational Safety and Health Administration (OSHA) is responsible for health and safety regulation. Some industries are inspected by specialized agencies. Resources for inspections have been constrained and do not permit regular inspections of all facilities. Instead, small samples of workplaces are inspected, most often in response to worker complaints or targeting of sectors in which compliance is notoriously poor. Violators can be prosecuted criminally, fined, forced to pay back wages, or restrained by an injunction. U.S. states and localities have their own regulations. But there are no such laws internationally and in any case laws alone are not enough.
A “culture of compliance” is essential, with wide agreement on minimum standards and employers routinely abiding by the law—whether motivated by decency, fear of enforcement, or the bottom-line benefits of good human resources management.
The existence of a culture of compliance in the United States and other developed countries significantly amplifies government enforcement.