CASE 9

Summary of case 9

•          An investigation revealed some of the bigger clothing brands had children and refugees working in their factories or for their subcontractors
•          The factories hired refugees without work permits and children to work for less than minimum wage in sometimes strenuous and hazardous conditions
•          The companies are claiming they were unaware of such practices and are applying changes and support for the exploited workers
•          Critics say the companies are not doing enough to ensure labor rights and that “not knowing” is not enough, they need to actively monitor all subcontractors and sub-subcontractors as far as the product goes back

Challenges:

·         How can a UK based clothing company ensure its subcontractors in another country is obeying rules?

·         Is the clothing company responsible for practices that take place in another business if they have given codes of conducts for subcontractors?

·         What is enough monitoring?

·         Is an outsourced service still under the same brand and laws of ethics as a company service?

Key Concepts, Model and Theory

There are always risks when taking HR decisions, taking on someone new or outsourcing a service. When the whole production line of a company, from beginning to end, is in the hands of a company, they can be almost certain, that no unethical decisions have been made during the HR process. As soon as companies need to start outsourcing, collecting materials from others, or sub-contracting parts of their business, a problem may occur. 

In case 9, we can see that the clothing companies failed to make sure all factory workers (own and subcontracted) were treated equally and humanely. This sort of news is very bad for the company brand in today’s enlightened consumer market.

Sweatshops and inhumane factory conditions have been on the radar for some time now, yet companies have difficulties in enforcing legal and just HR processes in subcontractors. The environmental challenges that globalization entails for a company are difficult to harness. According to L. Gomez-Mejia, D. Balkin, and R. Cardy, many companies try to implement a worldwide company culture, to smooth over cultural differences in the whole company. (L. Gomez-Mejia, D. Balkin, and R. Cardy, 2012, p.35) 

Manpower, for example, uses a model called reversed-expats:

“This approach rotates a local manager, based in the emerging market, through functions outside the home market. The experiences and insights that the manager gains from this can then be adapted to the local market upon his or her return”. (J. Webb, 2011)

This is one approach to the difficulties of having different cultures in a global company. Of course, this approach is more difficult to implement, when it comes to actual outsourced activities or sub-contractors.

The opportunity for workers to be exploited in the developing nations has risen as a result of the westernized world becoming more service-oriented and less industrial. Instead, the production of products has been moved to emerging markets, where standard of living is lower, and therefore, the wages are lower. In the western world, labor unions have traditionally defended worker’s rights and have had a very strong place in society. (L. Gomez-Mejia, D. Balkin, and R. Cardy, 2012, p.36) This is not the case for the third world, where workers have little or no rights when it comes to employment practices. As union membership drops in the west, the third world is left with exploitation. In Cambodia, for example, the clothing industry exploitation and violence in connection to that, has been an ongoing issue for years. The international brands state that they pay factory workers the country’s minimum wage, but the unions in the country do not have enough power to ensure that the minimum wage is high enough to cover basic living expenses. (DW,2017)

Most companies perform some sort of monitoring to ensure legal and ethical standards are met in factories and subcontractor’s practices. They lay out codes of conducts for all subcontractors and evaluate and monitor appliance. Yet, the problem doesn’t cease to exist. Consumer’s today, are getting more and more aware of these issues, which means that companies too, start to care about their production facilities. Unethical behavior (whether it’s through a subcontractor or not) does not look good for the company brand. However, supporting ethical HR processes and legal practices, even though the company has previously been caught using child labor, can even be good for the company brand. For example, H&M is making money out of making a point of ethical behavior, therefore the company produced their brand H&M Conscious and now defend factory worker’s rights in disputes over wages. (AFP 2017) Making ethical HR decisions can therefore bring more, not less, money into the corporation.

Human Resources in a globalized company is a challenge. The most common HR processes of recruitment, legal advice, and competitive strategies, are all completely different when it comes to a global company. Add in subcontractors, and that makes Human Resources even more of a challenge. Yet, consumers see the company as a whole, wanting the HR process to maintain ethical standards, no matter where or by whom the product has been produced. The use of HR consultants is a growing business and many companies have understood, that it is often cheaper to hire an expert or a HR firm, than to deal with the legal issues and bad press after an unsuccessful HR process. The field of HR maintains a strong foothold in today’s businesses and, in tomorrow’s even more interconnected and global business world.

Literature: 

AFP, 2017, “Top brands including H&M, Zara to boycott Bangladesh garment summit”, Mail Online,  http://www.dailymail.co.uk/wires/afp/article-4249614/Top-brands-including-H-M-Zara-boycott-Bangladesh-garment-summit.html (6.3.17)

DW, 2017, Cambodian garment workers stay poor while dressing the West, DW, http://www.dw.com/en/cambodian-garment-workers-stay-poor-while-dressing-the-west/a-37796952 (6.3.17)

J. Webb, 2012, “'Reverse expat' your way to emerging markets”, Procurement Leaders, http://www.procurementleaders.com/blog-archive/blog-archive/reverse-expat-your-way-to-emerging-markets-220205 (6.3.17)

L.R Gomez-Mejia, D.B Balkin, R.L Cardy, 2012, “Managing Human Resources”, 7^th Edition, chapter 1. Pearson Education Inc. New Jersey