Journal of World Business 39 (2004) 49–60

Ethics in international business: multinational approaches to child labor
Ans Kolka,*, Rob Van Tulderb
a

Amsterdam graduate Business School, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands b Rotterdam School of Management, Erasmus University Rotterdam, The Netherlands

Abstract How do multinationals address conflicting norms and expectations? This article focuses on corporate codes of ethics in the area of child labor as possible expressions of Strategic International Human Resource Management. It analyses whether 50 leading multinationals adopt universal ethical norms (related to exportive HRM) or relativist ethical norms (related to adaptive HRM and multidomestic strategies). Child labor is not an issue where universalism prevails. Although some multinationals adhere to universal ethical norms, HRM practices are largely multidomestic. To manage the ethical dilemmas, shown from case material, strategic trade-offs (concerning strategy context, process and content, and particularly organizational purpose) are outlined. # 2003 Elsevier Inc. All rights reserved.

Managing across borders increasingly includes difficult ethical dilemmas, as pointed out in large numbers of publications on this topic (e.g., Bansai & Sama, 2000; Buller & McEvoy, 1999; DeGeorge, 1993; Donaldson, 1989; Enderle, 1999; Van Tulder & Kolk, 2001). The field of business ethics, which aims to formulate requirements for companies and the managers who act on their behalf (Kaptein & Wempe, 2002), therefore also pays attention to multinationals. Recent attention has, following the resource-based perspective, focused on the potential of ethical capabilities to improve multinationals’ competitive advantage (Bowie & Vaaler, 1999; Buller & McEvoy, 1999; Litz, 1996). Bowie and Vaaler (1999) emphasize the high asset specificity of certain ethical commitments and the importance of avoiding their dilution,
* Corresponding author. Tel.: þ31-20-525-4289; fax: þ31-20-525-5281. E-mail addresses: akolk@fee.uva.nl (A. Kolk), rtulder@fbk.eur.nl (R. Van Tulder).

leading to the argument for universal moral standards for multinational corporations. According to such a ‘market morality,’ markets would induce multinationals to refrain from cultural relativism. Buller and McEvoy (1999) take a different approach, outlining the need to gear ethical capabilities to overall corporate strategy and the vital role for strategic human resource management (HRM) in this respect. Building on the integration/responsiveness grid (Bartlett & Ghoshal, 1989; Prahalad & Doz, 1987) and Taylor, Beechler, and Napier’s (1996) Strategic International Human Resource Management approach, they distinguish three possible configurations. A global strategy might be accompanied by exportive HRM and universal ethical norms; multidomestic strategies by adaptive HRM and relativism; and a transnational strategy by integrative HRM and cosmopolitan ethics. This tripod is, however, not seen as rigid and excluding other options. Using child labor as an example, Buller and McEvoy (1999) suggest that for such an ethical issue multinationals might follow a

1090-9516/$ – see front matter # 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2003.08.014

50

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

universal approach (e.g., through a corporate code of ethics), even in the case of a multidomestic, adaptive strategy. At the same time, gift giving could be an example where local traditions are respected, even by multinationals that strive for global consistency. In spite of strategic HRM and ethics, a ‘moral free space’ thus still exists, in which context matters, and where managers have to deal with conflicts of relative development and cultural traditions. As Donaldson (1996: 56) put it, ‘In this gray zone, there are no tight prescriptions for a company’s behavior. Managers must chart their own course.’ This moral free space is likely to be issue-specific as well (cf. Husted, 2000). Child labor is such a topic where host-country and home-country (international) norms sometimes diverge, with different perceptions of what constitutes child labor, the position of children in society and the standards that must be adopted (Kolk & Van Tulder, 2002a). Donaldson (1989) also points at the fact that views of ‘minimally sufficient education’ for children depend on countries’ levels of economic development. In that sense, child labor might be less susceptible to universalism than Buller and McEvoy (1999) suggested. This paper examines how multinationals address these dilemmas related to conflicting norms and expectations, focusing on corporate codes of ethics as the instruments for expressing HRM strategies. It conceptualizes universalism versus relativism in the case of child labor codes, and analyses multinational policies in this regard as well as the degree of consistency between norms and their specific company-internal application. Existing research on codes of conduct has concentrated on descriptive surveys and content analysis, with rather limited attention to the peculiarities of multinationals. If multinationals are studied, a sectoral and/or country approach is generally followed, so far with scant interest in finding firm-specific factors that might explain differences. Finally, this research has focused on aspects that determine whether companies adopt codes of conduct or not. The search for explanations for ethical/HRM configurations is therefore by necessity more exploratory, with emphasis on suggestions for further research directions. Furthermore, the more managerial implications can be explored by relating corporate decision-making on child labor to companies’ strategic choices in general. In order to assess the effectiveness of Strategic

International Human Resource Management, it can be positioned in a number of fundamental strategic trade-offs, which includes universalism/convergence versus localism/diversity (or particularism, as it has been called, see e.g., Hampden-Turner & Trompenaars, 2000), but also the extent to which companies want to focus on planning and control or a more incremental approach to organizational change, and aspire to be industry leaders or rather follow mainstream developments. Pettigrew (1992) distinguishes three logically distinct, yet related areas of strategy: strategy context, strategy process, and strategy content. To these three basic categories, De Wit and Meyer (1999) have added ‘organizational purpose,’ identifying, for the resulting four areas, ten ‘tradeoffs’ or strategy tensions (Table 1). In the final section of this paper, these ten trade-offs will be used to explore the strategic managerial aspects related to child labor codes, on the basis of the ethical dilemmas emanating from the analysis. It is in the organizational purpose where the tension between profitability and responsibility, and between shareholder and stakeholder values finally crystallizes, as the paper underlines.

1. Child labor codes To examine multinationals’ approach to child labor, we collected corporate codes of ethics (frequently also designated as ‘codes of conduct’ to distinguish such external, societal, usually international documents from the more internally-oriented ethical ones). From a set of approximately one hundred codes of the largest multinationals and companies that have been pioneers in the field of corporate social responsibility, those codes were selected that explicitly addressed the issue of child labor (Kolk, Van Tulder, & Welters, 1999). Only 13 large companies turned out to have a code with such provisions. Therefore, we added a set of slightly smaller firms that are known as pioneers in the adoption of codes (Van Tulder & Kolk, 2001; Wolfe & Dickson, 2002). These appeared to have a substantially higher share of child labor provisions. The sectors in which these leading companies operate are the ones with the highest likelihood of child labor: retail and apparel (Kolk & Van Tulder, 2002a; Wolfe & Dickson, 2002). The selection procedure resulted in

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60 Table 1 Strategy issues and trade-offs Category Strategy context Strategic issue International context Industry context Organizational context Strategic thinking Strategy formation Strategic change Business level strategy Corporate level strategy Network level strategy Strategic tension Globalization Compliance Control Logic Deliberateness Revolution Markets Responsiveness Competition Profitability Localization Choice Chaos Creativity Emergence Evolution Resources Synergy Cooperation Responsibility Strategic perspective Convergence Industry evolution Leadership Rational thinking Planning Discontinuous change Outside-in Portfolio Discrete organization Shareholder values Diversity Industry creation Dynamics Generative thinking Incrementalism Continuous change

51

Strategy process

Strategy content

Organizational purpose Source. Based on De Wit and Meyer (1999).

Inside-out Core competencies Embedded organization Stakeholder values

a total set of fifty so-called ‘child labor codes.’ The appendix lists the 50 companies, of which more than 60% originates from the US, and 35% from Europe; no Japanese companies could be included in the sample. Almost 75% is active in the apparel industry, with the remainder spread over a variety of sectors. While the relatively small number of child labor codes issued by large industrial companies thus has a clear sector effect related to types of products and labor intensity, there is also another possibility for the absence of child labor codes, as the case of Shell illustrates. This company has a corporate code of conduct without explicit child labor provisions, but it issued a separate, rather extensive ‘management primer’ on the issue, which clearly analyzes the dilemmas, to which we will return later. Moreover, other companies with a child labor code also point at the fact that it cannot include everything. Levi Strauss, for example, notes that ‘A code of conduct is a statement of principles, which should be supported by implementation policies in the factories from which the company sources. Therefore, not everything is detailed in a code of conduct, as often the solutions to situations are on a case-by-case basis, depending on what is the most suitable form of support.’ And Nike states that ‘Codes of conduct are not the only formal strategies that companies have. In case the use of child labor is detected, other formal policies come into force. However, these policies are not visible to the public. But the code of conduct would become an enormous document, if all the possibilities are addressed at each and every provision.’

With these caveats in mind, all the fifty codes collected were examined with an existing standardized framework of analysis, adapted to the peculiarities of child labor (see Table 2). This framework focuses on the specificity of the child labor provisions included in the codes (both with regard to contents and scope), and the compliance mechanisms (monitoring and sanctions in case of violations). For the purpose of this paper, particular attention was paid to two aspects: standards and the company-internal applicability of minimum-age norms (respectively components 1.4 and 1.1/1.2 in Table 2). Both serve to identify a multidomestic versus a global approach. The other aspects in the table, which as such do not present evidence on universalism or localism but involve implementation and compliance, will be mentioned in the paper where relevant. ‘Standards’ refer to the extent to which corporate codes mention international ILO (International Labor Organization) and UN (United Nations) conventions on child labor, which can be done either explicitly or implicitly, through the inclusion of the major provisions of international organizations’ standards in the corporate codes. Alternatively, child labor codes can also refer to host-country or home-country laws, or to none of them. Industry standards, such as those that have emerged recently in for example apparel, are not included in this category, as they do not represent governmental attempts to arrive at generally applicable, legal rules. It must be noted that the codes that have been analyzed do not refer to sector standards, possibly because these are too recent or seen as less

52

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

Table 2 A model to analyze and compare codes of conduct on child labor issues Criteria Specificity 1.1 Minimum age to employment 1.2 Applicability 1.3 Organization targeted Short elaboration Does the code include a minimum age to employment? If so, what age? Is this a universal minimum age or are country-specific exceptions indicated? To whom is the code addressed? General, governments; internal operations of specific firms; business partners (suppliers, subcontractors, vendors, manufacturers) Is reference made to international standards (ILO, UN), either implicit or explicit, or to home-country or host-country laws? Are alternative measures included in the code (such as education for children)? Or does the code only prohibit child labor? Good insight into system and process (clear); reference to some parts, but criteria or time frames are lacking (clear to vague); only general reference to monitoring without details (vague) Firms themselves (first party); BSGs (second party); external professionals paid by firms (third party); combinations of different actors (fourth party); NGOs (fifth party); legal authorities (sixth party) Measures have no large implications, e.g., warnings and exclusion of membership (mild); threat to business activities (severe) Measures such as fines, or demands for corrective action (mild); severance of relationship, cancellation of contract (severe) Classification Yes (age); no N.a.; universal; country-specific Actor category (exact wording)

1.4 Reference

None; home; host; international (implicit/explicit) Broad; strict

1.5 Nature of code

Compliance

2.1 Monitoring systems and processes

Clear; clear to vague; vague; none

2.2 Position of monitoring actor

Ranging from: 1st to 6th party

2.3 Sanctions

None; mild; severe

2.4 Sanctions to third parties

N.a.; none; mild; severe

Source. Kolk and Van Tulder (2002b).

‘hard’ than those prescribed by law. Earlier research has shown that codes drawn up by industry associations are least specific and have the lowest compliance likelihood compared to codes developed by three other types of actors (companies, international organizations and non-governmental organizations; Kolk et al., 1999). A few companies in the set of fifty base their code on the Social Accountability 8000 Standard (SA8000; see the next section), developed by the Council on Economic Priorities Accreditation Agency (CEPAA, now renamed to Social Accountability International, SAI), but SA8000 is firmly rooted on the recognition of ILO and UN conventions. In addition to these legal norms, we focused on the company-internal HRM issue of the minimum age for its employees. This involves the question whether a company regards a minimum age to employment as universal, regardless of the country where it operates,

or as country-specific and thus contingent on the situation in its various locations.

2. Global or multidomestic approaches to child labor? Of the fifty multinationals with child labor codes, none mentions home-country laws. Codes never refer to the standards that are applicable in the companies’ country of origin (usually the US or Europe). This can be explained from the fact that international conventions have incorporated prevailing ideas in Europe and North America about those requirements for child labor employment that are deemed feasible in the international context. Home-country laws, which are usually stricter, therefore apparently fall beyond the scope of corporate codes.

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

53

Whereas home-country standards are not mentioned in codes of conduct, multinationals do refer to host-country laws and/or to international standards. Typical examples of the former are Lands’ End, which prohibits ‘child labor below the minimum working age in the host-country’ and KMART, which states that ‘Suppliers and their subcontractors must comply with local child labor laws and regulations. Children under the local age will not be employed by the supplier.’ A case in point of the reliance on international standards is Hennes & Mauritz, which explicitly follows the definitions of children laid down in international conventions, also with regard to the rules for types of work allowed under apprenticeship programs. As Table 3 shows, one quarter of the companies refers to international conventions, whereas slightly more than half of them only mentions to adhere to the laws in host countries. The remaining 20% does not at all indicate its standards. The reliance on international child labor standards is higher than previous research on codes of conduct in general showed, where reference to international conventions remained below 20% (Kolk et al., 1999; OECD, 1999). Both studies also observed a much higher corporate commitment to observe the local laws in the countries of investment, which is in fact not a very surprising statement since this seems a basic condition for doing business in a (host) country in the first place. In the case of child labor norms, it can be concluded that a multidomestic approach is more prevalent than a global strategy, but that both are followed by a considerable number of the multinationals studied. One of the main issues concerning child labor is the minimum-age requirement, in other words, at what age do companies regard children as old enough to become their employees. Almost all multinationals that stipulate a minimum age to employment explicitly mention host-country specificity. They thus adopt a multidomestic ethical strategy. Only a very small percentage

Table 4 Company-internal applicability of minimum-age requirements (n ¼ 50) Applicability Country-specific Universal, worldwide Not indicated Percentage 66 6 28

adheres to a minimum-age requirement that applies to all locations, and is thus universal (see Table 4). An example is Sara Lee, which states that ‘while the legal definition of ‘‘children’’ sometimes varies from country to country, Sara Lee will not knowingly employ individuals who are under 15 years of age.’ Phrased in terms of Buller and McEvoy’s (1999) configurations, a global strategy can thus be observed in the case of the child labor norms (a universal approach to ethics). This is, however, relatively seldom with regard to the company-wide application of a major component, the minimum age to employment (which would represent exportive HRM practices). Hence, even if multinationals have a global instrument such as a code of conduct with child labor provisions, their approaches can much more be characterized as local responsiveness, although this picture does not apply to all of them. Moreover, ethical and HRM approaches can diverge, in that the former is universal (representing global integration), whereas the latter is adaptive (a multidomestic strategy). Table 5 presents this information for those 35 multinationals that have made their ethical and HRM approaches explicit in their child labor codes. Almost 70% has an internally consistent approach for the two dimensions, which aims, in nearly all cases, at local responsiveness. By contrast, 30% supports universal ethical norms, while following a country-specific approach in the implementation of HRM practices.
Table 5 Classification of explicit ethical and HRM approaches in child labor codes (in percentage n ¼ 35) Ethics: norms for child labor Universal Relativist HRM: applicability of child labor policy Exportive 3 0 Adaptive 31 66

Table 3 Ethical norms referred to in child labor codes (n ¼ 50) Standard Host-country laws only International conventions None Percentage 52 26 22

54

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

This phenomenon reflects the different perceptions of child labor and the position of children in society with which multinational managers are confronted in their international activities. Frequently, diverging views can be noted between the host countries in which multinationals operate and their country of origin. In their home countries, companies face a quite different set of expectations about their role in society, and possibly stakeholder pressure that deviates from what host governments find reasonable. This can lead to difficult dilemmas, for example, with consumers at home urging a complete ban on child labor, and accompanying strict monitoring of compliance, while company plants are located in countries where the host government support and the regulatory infrastructure is lacking, and where child labor is (still) as common as it was in many Western countries a century ago. Multinationals run the risk of being accused of showing a lack of respect for cultural traditions, and for interfering with national approaches. Apparently, one way to deal with this complexity is to adhere to universal ethical norms, while adapting the implementation more to local circumstances. The way in which Shell approaches child labor in its ‘management primer’ clearly shows awareness of these dilemmas, on the basis of the experiences of other companies. Shell points at the difficulty that a very strict prohibitive policy would preserve its good reputation with customers, but might, at the same time, in some cases harm the situation of children by driving them to more hazardous work. However, as the primer notes ‘A company which focuses on the needs of its supplier and local community stakeholders might well have a different response to the same problem. Rather than seeking to eliminate all work undertaken by children, it might choose instead to change the nature of work, in line with ILO recommendations and ideally in consultation with a local community based organization. The risk with this approach is that although the children may benefit from restructured working hours and conditions, the company may be exposed to allegations of exploitation from quarters where the complexity of the child labor issue is not understood.’ The Shell advice to its companies is therefore to gather detailed information on a caseby-case basis, to develop an ‘appropriate response in the context of the particular country and business sector’ and thus ‘respond to local needs in their

markets across the world’ through a ‘multi-local’ approach. International universal standards from the ILO and UN serve as references when drawing up models and contracts. Looking at the child labor codes in our study, another way out of these difficult dilemmas seems a less explicit child labor code. As Tables 3 and 4 show, a considerable percentage of the multinationals does not disclose information about their ethical and/or HRM approaches at all. They merely state, for example, to support a ‘ban on forced child or prison labor’ (Body Shop), to ‘reject the use of child labor’ (Elf Acquitaine) or to ‘not knowingly allow the importation into the United States of merchandise manufactured with illegal child labor’ (JCPenney). By leaving such aspects vague, these companies to some extent also avoid other dilemmas that explicit child labor codes raise (Kolk & Van Tulder, 2002a). One issue concerns the appropriate minimum age, for which different standards are followed. Important factors in this regard are the type of work (light or heavy), local cultural perceptions about the moment at which children become adults, a country’s stage of development, and the existence of alternatives (such as education) for non-working children. Explicit child labor codes, moreover, lead to questions concerning monitoring (how and by whom), and the enforcement in case the provisions are violated. Whereas strict measures tend to be received with approval in companies’ home societies, they may be counterproductive because the underlying causes of child labor are not addressed, and the situation of the child workers can be worsened by driving them into more hazardous work in the informal sector. Final dilemmas concern the extent to which multinationals are responsible for the activities of direct suppliers and other companies in the whole supply chain, and for supplementing governments in case of insufficient regulatory and enforcement capabilities. Case research into companies that have experience with explicit child labor codes provides some interesting illustrations. Nike, for example, has reviewed its code of conduct a few times since 1992, which included an increase in the minimum age from 14 to 18 years for footwear factory workers and from 14 to 16 for equipment and apparel, exceptionally high compared to other company codes and the ILO minimum-age convention. The company also started

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

55

an internal compliance program, supplemented with external monitoring, but this seems not to have been sufficient to silence the staunchest critics. Its website reflects the way in which Nike tries to openly address this critique, with ample information about the monitoring of facilities and the dilemmas the company faces after the introduction of its latest code. A different approach to monitoring has been taken by C&A, which set up its own internal unit, an organization structured in such a way as to be fully independent of the company’s commercial activities. It has full and independent authority to monitor the standards included in the code of conduct, and publishes an annual report. The company does not object to third-party, external auditing, but prefers a detailed, so-called ‘grass-roots’ approach from an organization that has a profound understanding of C&A’s sourcing system, the national context of its suppliers, and the peculiarities of garment production. Chiquita Banana almost completely follows the SA8000 standard, including all references to international conventions, but with a few modifications, primarily to take account of workplace issues specific to agriculture. The company’s strict child labor provisions do not apply to family farms, small-scale holdings in the seasonal, non-banana businesses which do not regularly employ hired workers. This is also meant to allow for employment of a farmer’s own children in seasonal activities. WE’s code of conduct is fully equivalent to the SA8000 standard. In line with this standard, both companies include provisions for remediation of children found to be working in supplying factories by giving ‘adequate support to enable such children to attend and remain in school until no longer a child.’ Such a broad approach to child labor, in which responsibility for the fate of the children prevails over strictly punitive measures towards suppliers, is taken by a very few other companies as well. Hennes & Mauritz explicitly recognize the social context in which children are forced to work, emphasizing that it cannot be solved without broader policies. The company therefore underlines its responsibility for ensuring that measures are taken in the child’s best interest, considering its specific social situation, education and age. Similar statements are included in ´ Nestle’s code of conduct, which states that ‘ill-considered policies and commercial measures can make

the situation worse for children,’ and showing clear awareness of the broader societal context and the complexity of the causes of child labor. These experiences of companies with explicit child labor codes clearly show the dilemmas involved in addressing this issue. Most companies have been less explicit in their codes so far, as our data show. Although we cannot draw definite conclusions about the type of ethical and HRM strategies for all multinationals studied, the analysis clearly shows that child labor is not an issue where universalism prevails. The picture is more diverse, with both global and multidomestic ethical approaches, but predominantly multidomestic HRM practices.

3. Implications for research As already mentioned in the introductory section, the few studies that have analyzed child labor codes have largely focused on content analysis and on the factors that influence their adoption by companies, generally taking a sectoral and/or case study approach. Sectors that have received particular attention have been the production of carpets, leather footwear, soccer balls, tea, sporting goods and/or apparel (Kolk & Van Tulder, 2002a; US DOL, 1997; Wolfe & Dickson, 2002). The concentration on sector as important determinant clearly stems from the fact that the sectors mentioned have a relatively high number of child workers. Moreover, they sell their products on consumer markets, not on business-to-business markets, frequently even with children as final consumers. These peculiarities strongly increase the vulnerability of companies to societal demands for action on the issue of child labor, and thus the likelihood of code adoption, both at the corporate and the industry level. Likewise, research in the international sporting goods industry on multinationals from different home countries (US, Europe and Japan) showed that the domestic context influences corporate inclinations to draw up codes of conduct, due to the dynamics of the interaction between various stakeholders (Van Tulder & Kolk, 2001). This domestic stakeholder context affected US companies in particular. A study in the late 1980s, which compared the US and Europe, also underlined that the adoption of corporate codes started much earlier and was more widespread in the US

56

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

(Langlois & Schlegelmilch, 1990). Japanese multinationals are least inclined to adopt codes, which seems in line with their general HRM approach that stresses informal coordination and control rather than specific contractual relations. While sector and country characteristics thus influence the adoption and evolution of corporate codes of conduct, these are likely to be of much less direct importance once multinationals have them in place, and when it comes to the specific way in which ethical standards are approached and implemented internally. Langlois and Schlegelmilch (1990) also noted that there are no differences between European and US multinationals with regard to ethical principles that transcend cultures. Although the set of multinationals in our study is relatively small, this assumption could nevertheless be considered with regard to US multinationals in general and US apparel companies in particular. Of the fifty child labor codes, a considerable percentage originated from the US (64%), and a smaller, but still substantial, share from the US apparel industry (44%). Tables 6A and 6B show the information on ethical norms and HRM practices for the three sets of multinationals, listing multinationals from the US, from the US apparel industry, and for the full set (as already presented in Tables 3 and 4). It can be concluded that
Table 6A Ethical norms referred to in child labor codes (in percentage) Standard Host-country laws only International conventions None Whole set (n ¼ 50) 52 26 22 All US MNEs (n ¼ 32) 59 25 16 US apparel (n ¼ 22) 64 27 9

Table 6B Company-internal applicability of minimum-age requirements (in percentage) Standard Country-specific Universal, worldwide Not indicated Whole set (n ¼ 50) 66 6 28 All US MNEs (n ¼ 32) 75 9 16 US apparel (n ¼ 22) 86 9 5

the diversity concerning global versus multidomestic approaches, as noted for all multinationals, equally applies to the two other sets. While repeating the caveat mentioned before about the limited number of observations, the tables appear to underline the societal scrutiny in the US in general, and the US apparel industry in particular, as the smaller percentages of ‘none’ and ‘not indicated’ reveal. Compared to the more than 20% for all fifty multinationals, the percentages are much lower for the US, and especially for the apparel subset. These companies seem to have felt much more pressure to be specific with regard to the child labor issue, mostly resulting in multidomestic approaches. On the basis of this exploratory study, it can be hypothesized that the most important determinants of companies’ integration/responsiveness grid concerning the ethics of child labor will be firm-specific. Research on the evolution of codes of conduct, including both adoption and stringency, has pointed at the structure of multinationals’ production networks (Van Tulder & Kolk, 2001). The spread and intensity of international production increases coordination problems, and thus the likelihood that multinationals need codes of conduct to guide their ethical conduct. However, this does not necessarily result in the adoption of a universal approach. Internationalization of production thus seems less relevant for the specific implementation of an ethical strategy than for the adoption as such. A comparable logic seems to apply to the employment characteristics of multinationals, that is the extent to which they employ production workers outside their home country, whether this involves their own staff and production facilities or has been outsourced, and the economic situation in the countries where this takes place. Here again, codes of conduct can be vital instruments to improve coordination within the multinational and to address its ‘vulnerability’ to ethical pressure from stakeholders, but seem less important for the peculiar internal arrangements of such provisions. They do, however, represent promising venues for investigation into the adoption likelihood of ethical codes by multinationals. Particularly the distribution and types of markets, and market shares appear important factors to be considered further. It might be suggested that the more multinationals are truly internationalized in terms of sales and markets, the greater the tendency to gear to local contexts (cf. UNCTAD, 2001). This would also

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

57

involve the need to be responsive to specific requirements in these countries. It can be hypothesized that when these countries are those where child labor still exists, multinationals will be inclined to adopt a multidomestic approach, whereas universality will prevail in other cases. The latter might also apply for multinationals with low degrees of internationalization, or with a predominant market share in one or more industrialized countries. In addition, it is worthwhile to analyze to what extent a reliance on universal or local ethical standards also originates from firmspecific characteristics which lead to large corporate visibility, such as market leadership, brand reputation and profitability. Further research into these various aspects with potentially different degrees of influence could help to shed light on the way in which multinationals’ ethical approaches are related to their overall corporate strategies. This linkage is also very important to management practice.

4. On the management of strategic and ethical trade-offs As pointed out in the introductory section, corporate policy on child labor codes involves a number of strategic trade-offs. They can be discussed in the context of strategic tensions, especially to shed light on how managers could deal with dilemmas, and possibly embed it in the organizational purpose (Table 1). The strategy context, discussed in more detail in this article, deals not only with globalization versus localization, and the managerial choice for convergence (universalism) or divergence, which in the case of child labor has so far led to multidomestic, relativistic approaches. It also involves the trade-off between ‘compliance’ and choice, where managers will take the ethical and strategic behavior of other firms in their sector into account. This implies a consideration of the preferred position of the company: to what extent will it follow industry practices with regard to reliance on international networks of production and supply, and outsourcing? Moreover, does it aspire to be a leader in ethics, with concomitant uncertainties surrounding (rising) stakeholder expectations and possible criticism from other companies in the industry, or merely aim to follow the general evolution of approaches in the sector, usually embodied

in industry codes? As such, the rise of industry codes can be expected to have a converging effect, and follow-up research into the influence of these codes will be worthwhile. It is, however, unclear how specific such industry attempts will be, in view of previous research which showed that such codes tend to be rather vague and weak on compliance and monitoring, also when compared to company codes (Kolk & Van Tulder, 2002b; Kolk et al., 1999). The tendency towards the ‘lowest common denominator,’ noted in other studies on industry self-regulation as well (e.g., King & Lenox, 2000) means that leadership from individual companies in the sector continues to be necessary to guide (future) ethical behavior. This issue of leadership, included in the organizational context in Table 1, refers to the trade-off between more or less managerial control. A more ‘empowered’ management style means a high tolerance for ambiguity. As noted by Whetten et al. (2000: 17), ‘managers with a high tolerance of ambiguity are more likely to be entrepreneurial in their actions, to screen out less information in a complex environment and to choose specialties in their occupations that involve less structured tasks.’ Buller and McEvoy (1999) already noted that ethical management in multinational corporations requires transactional leadership, which thus in practice should be operationalized as a high tolerance for ambiguity. From the analysis of the child labor issue, it can be concluded that a limited number of multinationals, indicated in the case material in this article, have adopted an active policy with explicit codes and policies, while others follow with rather general statements. External pressure, either on the industry as a whole or on individual companies, has sometimes played an important role in this regard. Nike, subject to harsh criticism concerning labor conditions from the early 1990s onwards, is a case in point. This also applies to Shell, forced to overhaul its overall ethical and environmental positioning following Nigeria and the Brent Spar. Interestingly enough, the company has issued a ‘business primer’ on child labor, although the industry is hardly involved in it, only perhaps indirectly through supply chain relationships. Shell’s strategy of extending its activities to retail seems to have inspired the company to become a leader on the issue in its ‘old’ industry. It uses this as a first step to facilitate stakeholder dialogue, which aims at mutual learning processes.

58

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

Table 7 Shareholder versus stakeholder values perspective Shareholder value perspective Emphasis Organizational objective Measure of success Major difficulty Corporate governance through Stakeholder management Social responsibility Society best served by Profitability over responsibility To serve owner Share price and dividends Getting agent to pursue principal’s interests Independent outside directors with shares Means Individual, not organizational matter Pursuing self-interest (economic efficiency) Stakeholder value perspective Responsibility over profitability To serve all parties involved Satisfaction among all stakeholders Balancing interests of various stakeholders Stakeholder representation End and means Both individual and organizational Pursuing joint interests (economic symbiosis)

Source. Based on De Wit and Meyer (1999).

We thus see that those companies with a more explicit ethical policy make particular choices with regard to the strategy process and content. With regard to strategic thinking (the trade-off between rational and generative thinking), strategy formation (planning versus incrementalism) and strategic change (discontinuous or continuous), these companies engage in continuous, incremental change, leaning more towards generative thinking. The nature of leadership involves an open attitude towards stakeholders in different countries and settings, in which a universal, standardized approach does not really fit. This also means a perspective of an embedded (rather than a discrete) organization, which focuses on cooperation and dialogue. Unilever provides a clear illustration with the statement that ‘there is no such thing as a ‘‘universal’’ standard. The Universal Declaration of Human Rights is intended to be such a standard (. . .), but is often interpreted in different ways. Observance of ethical standards (. . ..) is also in our commercial interests. Companies like ours are very much dependent on the trust that they receive from society. In a continuous dialogue with society, companies must establish what is acceptable and what is not. That differs from one society to another and from one period to another.’ (Tummers, 1999: 54). Likewise, some leading companies mentioned in earlier sections of this article explicitly acknowledge responsibility for the fate of the children found working in supplying factories and recognize the broader social and economic context. In such a broad approach to child labor, the code of conduct is part of an ongoing negotiation process, in which the company reckons with the implications of its policy for internal and

external stakeholders, including (former) employees, managers and suppliers (at whatever distance in the supply chain), and the effects on other companies in the industry. The linkage between ethics and corporate strategy ultimately affects the organizational purpose, which underlies all other strategic trade-offs. In the trade-off between profitability and responsibility, and between shareholder and stakeholder values, companies that want to integrate ethics will lean more towards the stakeholder values perspective and emphasize responsibility, not only profitability. Table 7 outlines the different elements in these two perspectives, which might help managers to position themselves when dealing with their ‘moral free space.’ While companies that aspire ethical leadership will move in the direction of the stakeholder values perspective, those that prefer a low profile on ethics will stick more to the shareholder model, with the ‘ethical followers’ in between. Although an active policy on an issue such as child labor involves many dilemmas, as shown in this article, an open dialogue and a clear choice for stakeholder values can be expected to bring many positive spin-offs as well, and avoid risks that a more passive approach to ethics might entail. Case study research, which compares a typical ‘stakeholder-oriented’ company with a ‘shareholderoriented’ company could be helpful to shed more light on these issues.

Acknowledgments This article is one of the publications resulting from a joint, long-term project on multinational enterprises

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60

59

and corporate social responsibility. Inge Sloekers is gratefully acknowledged for her contribution to creating the dataset on which this paper is based.

Appendix A. List of codes of conduct analyzed in this article Allied Domecq Body Shop Burton Group C&A Chiquita Banana Converse Dayton Hudson Dillard Department Stores Dress Barn Elf Acquitaine Federated Department Fruit of the Loom Gap Hennes & Mauritz JCPenney Jones Apparel Group Karstadt Kellwood Kmart Lands’ End Levi Strauss Limited Liz Claiborne Mercantile Stores Merck ´ Nestle Nike Northern Telecom Oxford Industries Phillips–Van Heusen Pricecostco Puma Reebok Russell Corporation Salant Corporation Sara Lee Stage Stores Starbucks Stork Talbots

TotalFinaElf Tultex Corporation Vendex KBB Venture Stores VF Corporation Wal-Mart Stores Walt Disney Warnaco WE Woolworth

References
Bansai, M., & Sama, L. M. (2000). Ethical dilemmas in MNCs’ international staff policies. A conceptual framework. Journal of Business Ethics, 25: 221–235. Bartlett, C. A., & Ghoshal, S. (1989). Managing across borders. The transnational solution. Boston: Harvard Business School Press. Bowie, N. E., & Vaaler, P. (1999). Some arguments for universal moral standards. In G. Enderle (Ed.), International business ethics. Challenges and approaches (pp. 160–173). Notre Dame, London: University of Notre Dame Press. Buller, P. F., & McEvoy, G. M. (1999). Creating and sustaining ethical capability in the multi-national corporation. Journal of World Business, 34: 326–343. DeGeorge, R. T. (1993). Competing with integrity in international business. New York: Oxford University Press. Donaldson, T. (1989). The ethics of international business. New York: Oxford University Press. Donaldson, T. (1996, September–October). Values in tension: Ethics away from home. Harvard Business Review: 48–62. Enderle, G. (Ed.). (1999). International business ethics. Challenges and approaches. Notre Dame, London: University of Notre Dame Press. Hampden-Turner, C., & Trompenaars, F. (2000). Building crosscultural competence. Chichester: Wiley. Husted, B. W. (2000). A contingency theory of corporate social performance. Business and Society, 39(1): 24–48. Kaptein, M., & Wempe, J. (2002). The balanced company. A theory of corporate integrity. Oxford: Oxford University Press. King, A. A., & Lenox, M. J. (2000). Industry self-regulation without sanctions: The chemical industry’s Responsible Care program. Academy of Management Journal, 43: 698– 716. Kolk, A., & Van Tulder, R. (2002a). The effectiveness of selfregulation: Corporate codes of conduct and child labour. European Management Journal, 20: 260–271. Kolk, A., & Van Tulder, R. (2002b). Child labor and multinational conduct: A comparison of international business and stakeholder codes. Journal of Business Ethics, 36: 291–301. Kolk, A., Van Tulder, R., & Welters, C. (1999). International codes of conduct and corporate social responsibility: Can

60

A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60 Van Tulder, R., & Kolk, A. (2001). Multinationality and corporate ethics: Codes of conduct in the sporting goods industry. Journal of International Business Studies, 32: 267–283. Tummers, F. (1999). Our common future. In R. van Tulder (Ed.), Redrawing organizational boundaries (pp. 49–60). Rotterdam: Sviib. UNCTAD. (2001). World investment report. Promoting linkages. Geneva: United Nations. US DOL. (1997). By the sweat and toll of children. Washington: Department of Labor, Bureau of International Labor Affairs. Whetten, D., Cameron, K., & Woods, M. (2000). Developing management skills for Europe (2nd ed.). Harlow: Prentice-Hall. De Wit, B., & Meyer, R. (1999). Strategy synthesis. Resolving strategy paradoxes to create competitive advantage. London: Thomson Learning. Wolfe, J. H., & Dickson, M. A. (2002). Apparel manufacturer and retailer efforts to reduce child labor: An ethics of virtue perspectives on codes of conduct. Clothing and Textiles Research Journal, 20(4): 182–195.

transnational corporations regulate themselves? Transnational Corporations, 8(1): 143–180. Langlois, C. C., & Schlegelmilch, B. B. (1990). Do corporate codes of ethics reflect national character? Evidence from Europe and the United States. Journal of International Business Studies, 21: 519–539. Litz, R. (1996). A resource-based view of the socially responsible firm: Stakeholder interdependence, ethical awareness, and issue responsiveness as strategic assets. Journal of Business Ethics, 15: 1355–1363. OECD. (1999). Codes of corporate conduct: An inventory. Paris. Pettigrew, A. (1992). The character and significance of strategy process research. Strategic Management Journal, 13: 5–16. Prahalad, C. K., & Doz, Y. (1987). The multinational mission. Balancing local demands and global vision. New York: The Free Press. Taylor, S., Beechler, S., & Napier, N. (1996). Toward an integrative model of strategic international human resource management. Academy of Management Review, 21: 959–985.