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Coc Nike Supply Chain

Coc Nike Supply Chain

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Published by: isabelle on Nov 19, 2007
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Industrial and Labor Relations Review,
 Vol. 61, No. 1 (October 2007). © by Cornell University.0019-7939/00/6101 $01.00
DOES MONITORING IMPROVELABOR STANDARDS? LESSONS FROM NIKE
RICHARD M. LOCKE, FEI QIN, and ALBERTO BRAUSE*
Using a unique data set based on factory audits of working conditions in over 800of Nike’s suppliers across 51 countries over the years 1998–2005, the authors explore whether monitoring for compliance with corporate codes of conduct—currently theprincipal way both global corporations and labor rights non-governmental organizations(NGOs) address poor working conditions in global supply chain factories—achievedremediation, as indicated by improved working conditions and stepped-up enforce-ment of labor rights. Despite substantial efforts and investments by Nike and its staff to improve working conditions among its suppliers, monitoring alone appears to haveproduced only limited results. However, when monitoring efforts were combined withother interventions focused on tackling some of the root causes of poor working condi-tions—in particular, by enabling suppliers to better schedule their work and to improvequality and efficiency—working conditions seem to have improved considerably.
*Richard M. Locke is the Alvin J. Siteman (1948)Professor of Entrepreneurship and Professor of PoliticalScience in the Sloan School of Management at Massa-chusetts Institute of Technology; Fei Qin received herPh.D. from M.I.T.–Sloan in 2007 and is now an Assistant Professor at the London School of Economics; and Alberto Brause, who graduated from the Sloan Schoolof Management MBA program in 2005, is the Service& Finance Manager at MasterFoods USA.The authors thank the Hewlett Foundation and theMIT Sloan School of Management’s Dean’s InnovationFund for financing their research. They also thankLucio Baccaro, Suzanne Berger, Joshua Cohen, KristinForbes, Simon Johnson, Thomas Kochan, Donald Les-sard, Michael Piore, and participants at various seminarsand workshops at Brown University, Duke University,Harvard University, MIT, New York University, OxfordUniversity, Rutgers University, Stanford University, andthe University of Pennsylvania for insightful commentson previous drafts of this article. In addition, they thank numerous Nike managers—including MariaEitel, Hannah Jones, Dusty Kidd, Kelly Lauber, Cait-lin Morris, Mark Loomis, Jeremy Prepscius, CharlieBrown, and Catherine Humblet—for helpful com-ments on previous drafts of this article. Finally, they thank Nike manager Michael McBreen, who shared hisknowledge of the compliance process and facilitatedaccess to the audit data for the individual factories. A data appendix with additional results, and copiesof the computer programs used to generate the resultspresented in the paper, are available from the first author at Sloan School of Management, M. I. T., RoomE52-589, 50 Memorial Drive, Cambridge, MA 02139;rlocke@mit.edu.
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See Collier and Dollar (2002) and Moran (2002) formore on the positive potential of globalization.
lobalization, with its volatile mix of eco-nomic opportunity and social disrup-tion, has provoked a fierce debate over working conditions and labor rights indeveloping countries. On the one hand,foreign direct investment and the diffusion of global supply chains in an array of different industries—apparel, electronics, footwear,toys, and so on—have provided developingcountries much-needed capital, employ-ment, technology, and access to internationalmarkets. Seen in this light, globalization ishaving a catalytic and transformative effect on local economies, allowing poor countriesto finally achieve their long sought-aftergoal of development.
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On the other hand,global corporations and their local suppliersare depicted as agents of exploitation, tak-ing advantage of developing countries’ low
 
4INDUSTRIAL AND LABOR RELATIONS REVIE wages and weak social and environmentalregulation to produce low-cost goods at theexpense of the local workers’ welfare. Nu-merous reports have described exploitative working conditions in global supply chainplants. Workers are paid only a few dollarsand required to work excessive hours, oftenin poorly lit and unsafe conditions.
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In the wake of several well-publicizedscandals involving child labor, hazardous working conditions, excessive working hours,and poor wages in factories supplying majorglobal brands, multinational corporationshave developed their own “codes of conduct”
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as well as a variety of “monitoring” mecha-nisms aimed at enforcing compliance withthese codes. In fact, given the limited ability of many developing country governments toenforce their own laws,
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monitoring for com-pliance with codes of conduct is currently theprincipal way both global corporations andlabor rights non-governmental organizations(NGOs) address poor working conditionsin global supply chain factories. The logicbehind this model of “private, voluntary regulation” is that monitoring should provideinformation useful both to consumer groupsseeking to exert market pressure on globalbrands and to these same brands so that they can pressure their suppliers to improve fac-tory conditions.Given their widespread use, how effectiveare these monitoring systems? Aside fromproviding information about working condi-tions in various global supply chain factories,does this system actually promote change in working conditions? In other words, doesmonitoring lead to remediation in terms of improved working conditions and enforcedlabor rights? If so, under what conditions?Using a unique data set based on factory audits of working conditions in over 800 of Nike’s suppliers in 51 countries,
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in this paper we seek to address those questions. We build on the results presented in thispaper, together with more intensive case study data collected as part of this project (Lockeand Romis 2007), to suggest a reframing of thedebate and the approach to monitoring andimproving labor standards in global supply chains. We suggest that what is needed is amore systemic approach, one combining ex-ternal (countervailing) pressure (be it fromthe state, or unions, or labor-rights NGOs) with comprehensive, transparent monitoringsystems and a variety of “management sys-tems” interventions aimed at eliminating theroot causes of poor working conditions. We first present a highly synthetic reviewof the major debates about monitoring, andthen provide background on the athleticfootwear industry in general and Nike, Inc.in particular. The core empirical analysisfollowing those preliminaries addresses threequestions. First, how bad (or good) are work-ing conditions among Nike’s various suppli-ers? Second, what determines variation in working conditions among these suppliers?(In other words, what accounts for the greatly differing working conditions across factoriesproducing more or less the same productsfor the same brand?) And third, are work-ing conditions improving over time in thesefactories? We conclude by pondering thebroader implications of our findings for themore general debates over labor standardsin a global economy.
Monitoring: A Review of the Debates
Corporate codes of conduct and variousefforts aimed at monitoring compliance withthese codes have been around for decades. Whereas monitoring efforts began by empha-sizing corporate or supplier compliance withnational regulations and laws, over time they 
2
See, for example, Verité (2004), Pruett (2005), andConnor and Dent (2006).
3
For a good description of this movement, see Jenkins(2001), Schrage (2004), and Mamic (2004).
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For more on this, see Baccaro (2001) and Elliot andFreeman (2003).
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This paper is part of a larger project organized by Richard Locke on globalization and labor standards. Inaddition to the data analyses presented in this paper,the research entailed field research in China, Turkey,Mexico, Europe, and the United States as well as over200 interviews with factory managers, workers, NGOrepresentatives, union leaders, and Nike managers(both in the United States and abroad). We thankthe other project participants—Jonathan Rose, Jen-nifer Andrews, Dinsha Mistree, Rushan Jiang, MonicaRomis, and Alonso Garza—for their helpful commentsthroughout the project.
 
MONITORING AND LABOR STANDARDS AT NIKE5have increasingly focused on compliance withprivate, voluntary codes of conduct. More-over, if at first corporate codes were centeredon redressing power imbalances betweenmultinational corporations and developingcountries, or on promoting “transparency”(in other words, preventing bribery), in-creasingly they have come to focus on theimpact of globalization on labor and theenvironment.
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Much of the recent literatureon monitoring and other forms of “private voluntary regulation” focuses on either theparticularities surrounding the actual processof monitoring (that is, how these inspectionsare conducted, by whom, for what purposes)or on the relationship between these regula-tory efforts and other forms of regulation,especially state regulation.Critics of voluntary monitoring regimesargue that they “crowd out” more thoroughgovernment and union interventions andare designed
not 
to protect labor rights orimprove working conditions but instead tolimit the legal liability of global brands andprevent damage to their reputation (Esben-shade 2004). Far from protecting workers,these monitoring schemes eviscerate stateregulation and undermine union power with-out replacing them with a viable alternativeregime. Others, however, argue that privatemonitoring is not an attempt to underminethe state but rather an appropriately flexibleresponse to the reality of global productionnetworks and the low capacity of developingcountry states to fully enforce labor laws andregulations (Nadvi and Wältring 2004). Ac-cording to this second group
,
under certain conditions,
the monitoring efforts of brands,multi-stakeholder initiatives, and NGOs can work to strengthen government enforcement of national laws, particularly when states lackthe capacity or the resources to carry out systematic factory inspections (Bartley 2005;Fung et al. 2001; O’Rourke 2003; Rodriguez-Garavito 2005). A second debate over monitoring focuseson whether those conducting the audits canbe trusted to make accurate and honest as-sessments of factory conditions and transpar-ently report their findings. Critics identify a number of important conflicts of interest that exist among the key actors involved inthe monitoring process (National ResearchCouncil 2004; Esbenshade 2004; Pruett 2005;Rodriguez-Garavito 2005). Given that brandsand their suppliers may have an interest inhiding labor violations rather than reportingthem, how trustworthy are these internalaudits? Might not the moral hazard for theseinterested parties be too great? Nor doesauditing by “third party” organizations escapeobservers’ skeptical regard. If the third par-ties are NGOs, how competent are they in as-sessing certain technical issues (for example,air quality)? If, instead, private monitoringfirms are the third-party auditors, how forth-coming will they be, given that they probably hope to please their clients (the brands andtheir suppliers, who pay for these services)and generate future business? In responseto these criticisms, various procedures andpolicies were established to promote greatertransparency and oversight by “independent”organizations. Increasingly, external audi-tors, ranging from for-profit social auditingcompanies to local NGOs, are being certifiedby Multi-Stakeholder Initiatives (MSIs) likethe Fair Labor Association and the Fair WearFoundation. These institutional mechanismsare meant to bolster the creditability of monitors. Still, some observers (for example,the Worker Rights Consortium) argue that monitoring must be completely independent of brands and factories in order to be truly effective. A third debate concerns the growingnumber and diversity of codes of conduct and auditing protocols as well as the unevenquality 
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of the audits being performed. Thediversity of codes and monitoring schemesbeing applied to global suppliers is well docu-mented (Brown 2005a, 2005b; Jenkins 2001;O’Rourke 2003). Underlying these different codes and implementation systems are very different principles and goals. Whereas some
6
For an interesting historical review of corporatecodes of conduct and their evolution over time, see Jenkins (2001). Another interesting historical parallelcan be found in Seidman (2003).
7
For a critique of existing auditing practices, seePruett (2005).

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