The following is a review of the book:
The Promise and Limits of Private Power
Promoting Labor Standards in a Global Economy
Richard M. Locke
Massachusetts Institute of Technology
Cambridge University Press, 2013
ISBN
978-1-107-67088-4
With the rise of global trade and the activities of
multinational companies, states are losing the strong grip they used to have on
regulation especially when it comes to labour standards. Globalization and new
communication technologies have liberated trade and movement of capital in such
a fast pace that many countries are falling behind adapting their systems and
body of regulation to meet the new challenges this liberation has brought.
Beside the classical argument that competing in today's world could lead to a
race to the bottom in labour standards in order to keep the nominal value of
labour competitive and attract foreign capital, issues of enforcement and
monitoring of national labour standards remain unresolved in many countries.
The lax enforcement, corruption, week capability, confusion and competition in
standards setting are few of the challenges that are often reflected in poor
labour conditions. Whether to complement national enforcement efforts, to
create a positive “marketable” social image, to reflect a true ethical
commitment, or simply to internally clarify an acceptable set of standards,
many multinational companies have stepped into the labour regulation arena
through drafting code of conducts, referring to and adopting internationally
accepted standards and enforcing those codes and standards where states are not
reaching anymore. The book of Locke explores those attempts of private
regulation and their role in promoting labour standards at an international
level.
The book presents the results of a multiple-year
research project of the author and his team investigating major multinational
companies and their suppliers in various countries. The research is conducted
as a business case; collecting data, conducting factory visits and interviews,
reviewing code of conducts and CSR statements, analyzing and comparing the
outputs to find the root causes and to evaluate efficacy of the various
initiatives studied. It, thus, provides a practical insight into the concerns
of multinationals, the actual everyday realities of compliance officers and
social auditors, challenges and limitations managers face to keep up with
changing environments of compliance frameworks. The value of the book comes
from this tangible, somewhat pedagogic, detailed descriptive account of the
various studies included in the research. Bearing in mind that it is addressed
to the business community in the first place rather than legal professionals,
the book nevertheless provides lively examples of how private regulation
actually functions. For example, how auditors' different backgrounds affect
their approaches to compliance, how different cultural contexts lead to
different results, how managerial styles dictate different approaches, how
relations among brands, suppliers and factories impose different challenges,
and how the nature of the industry itself can have a great impact on the
compliance initiative. The author supports his conclusions not only by the
results of the studies but by referencing other work conducted in that field.
As the work is not in the legal field, the use of the
term “labour standards” is not defined as ILO core labour standards[i],
or any other internationally accepted set of standards, rather it is a
reference to the concept of better working conditions and could differ from one
industry or company to another. This is still acceptable when moving to the
private regulation sphere and one cannot ignore the practice of “window
shopping” when private companies define their own standards[ii].
However, the book focus is on the application of private regulation and not on
the standards “per-se” or how they are selected. Out of the scope of the book
is also the compliance or reference to the UN Global Compact on Corporate
Social Responsibility[iii],
OECD guidelines[iv]
or others[v].
While this broad definition will lead to inconsistency in standards, it also
presents an avenue to expand the four core standards. Throughout the examples
in the book, freedom of association is often ignored, but minimum wage and
excessive working hours are often included in the compliance programs. Whether this is a threat to distort
international standards is a separate topic.
The book's departure point is that the new challenges
of labour conditions imposed by global supply chains can be best addressed by a
blend of private and public regulation frameworks that complement one another.
Thus, the author does not push the idea of private regulation to replace
national or international frameworks, but sees that the reach of those
classical institutions are limited today due to the complexity and dispersed
nature of the global supply chain and that private regulation can assist
filling that void to a certain extent. His quest is to test the role of private
regulation to see where it is effective and build on it, instead of
disregarding the idea of CSR or supporting it without evidence.
One of the major supporting arguments the book lists
is the success of private regulation and corporate responsibility initiatives
in similar areas such as environment protection, health and safety and
anti-discrimination and equal opportunity. However, the studies in the book
show that private initiatives in the field of labour has delivered good results
at first in improving labour conditions in general, but that those results
reached a ceiling and then remained stagnant, or in some cases deteriorated
back. Another observation is that improvements were better in few areas (health
and safety) while remained poor in others (excess working hours). Close
analysis of data then demonstrated that conditions varied dramatically among
factories (suppliers) of a same company following the same CSR guidelines.
These observations led the research to investigate reasons behind such
inconsistencies and to include variables such as size, location and type of
plants and relationship with the brand as determinants to the success of
private compliance programs. As the study expanded, factors such as country and
industry type were also included. An analysis of the impact of audit frequency
and audit fatigue, scoring methods and reporting all showed relationship with
the compliance scores obtained.
Locke concludes that the data shows the limitations of
the compliance model but also a capability of private regulation when we
address the factors and variables carefully in designing the appropriate
compliance programs. He acknowledges the effect of domestic law and national
institutional capacities in shaping labour standards. He argues for
corresponding private regulation programs to support local governments,
complement their efforts or go beyond in enforcing standards when needed. To
that end, he explores the capability building activities by private
multinationals as an alternative or complement to traditional compliance. Here
too the results are inconsistent and success depends on other factors, as Locke
puts it, the assumption of a direct link between capability building programs
and improved social conditions is flawed and the results of such programs are
not automatic[vi].
Again, the author suggests that addressing the specific social and political
factors of the country and focusing on a mutual long term relationship while
acknowledging and addressing the divergent interests of the different actors
can overcome the limitation.
The book then explores further approaches that can be
summed up as managerial styles which are focused on workers, their satisfaction
and self-fulfillment, engagement and participation. Not purely
capability building oriented, but including training and empowerment of
workers, these approaches demonstrate their positive impact not only on
production but also on improving workers' conditions in comparison with
different ones in similar settings. A similar analysis of the relationship of
the brand and its suppliers shows that a cooperative hands-on trust
relationship leads to better results in compliance programs than an arm's
length less trustful one.
Despite the enthusiasm for private regulation in
improving workers conditions and enforcing labour standards in the global
supply chain, the book documents limited success and inconsistency. That's why
the author challenges the conventional approach and questions whether the focus
on the workplace to study labour standards is hindering the compliance efforts.
He suggests looking at the upstream sources of labour conditions and examining
the entire supply chain. He then shows that market dynamics and conditions,
managerial practices all along the supply chain, production practices and
dependency on consumer and retails markets all play out on the factory floor
resulting in excess hours, long shifts and other labour standards deviations. To
overcome that, he calls for collaborative buyer-supplier relations as a
possible solution to set a ground for competition while considering the impact
on labour standards.
The book then states the limits thus far of private
regulation and emphasize that despite various suspicions of the intentions
behind private regulation, the problems are not those of bad intentions but
rather of market dynamics and upstream practices and until those challenges are
addressed, all attempts of regulation will deliver limited results. Having
identified the hurdles, the author suggests overcoming them. In the final
chapter of the book he presents his argument for cooperation among private
regulation, NGOs, buyers and suppliers as well as national regulatory
authorities to improve labour conditions. He supports his argument with actual
examples that resulted in better standards compliance through such complex and
innovative approaches. He reaffirms that private regulation cannot replace
public regulation but can complement it and contribute to it.
The book’s quest is to explore the promise and limits
of private powers in promoting labour standards in the global economy. It does
so by the various studies and analysis it presents. It provides a good exposure
to the world of global supply chain, the challenges and continuous changes it
involves. The main theme of the book is that the limited results of private
regulation are not due to lack of ethical commitment from the private actors,
and that this ethical commitment can and shall be built upon in any regulation
attempt by including private actors.
[i] As defined in the
Declaration on Fundamental Principles and Rights at Work, the four are freedom
of association and collective bargaining, elimination of forced labour,
abolition of child labour and the elimination of discrimination in employment
and occupation. http://www.ilo.org/declaration/lang--en/index.htm
[ii] Despite the gradual shift
to referencing global standards, realities of CSR demonstrates the selective
nature of private regulation
[iii] http://www.unglobalcompact.org/index.html
[iv] http://mneguidelines.oecd.org/
[v] With few exceptions when
the initiative studied referenced specific standards, such as in the example of
Better Factories Cambodia Program and the reporting on compliance to ILO standards
[vi] Richard M. Locke, 2013
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