Department of Management London Centre for Corporate Governance

Department of Management London Centre for Corporate Governance and Ethics International Labour Regulation and Supply Chains Dr George Tsogas

Previous work on ILR • Workers’ Rights and International Trade. A Comparative Study of the EEC & US Approach. (1991). MA Thesis - Rutgers The State University of New Jersey • Labour Standards in International Trade. A Study in Theory and Policy. (1998) Ph. D Dissertation - Birkbeck University of London • “Labour Standards in International Trade Agreements: An Assessment of the Arguments. ” (1999) International Journal of Human Resource Management 10(2): 351 -375. • “Labour Standards in the Generalized System of Preferences of the European Union and the United States. ” (2000) European Journal of Industrial Relations 6(3): 349 -370. • Labor Regulation in a Global Economy. 2001. New York: M. E. Sharpe. Issues in Work and Human Resources series, with a forward by Daniel J. B. Mitchell, UCLA. • “International Labour Regulation – What Have We Really Learnt So Far? ” (2009) Relations Industrielles / Industrial Relations 64(1): 75 -94. 2

The Emergence of the Corporate Form • The first company: the Dutch United East Indian Company (Dutch: Vereenigde Oost-Indische Compagnie; VOC, 1602) – The very first company was global and had its very own supply chains (then in became “multinational”) • The Dutch tulip bubble: Nov 1636 – Feb 1637 • Emergence of the modern corporate form (the “legal person”); 14 th Amendment: “…no state shall deprive any person of life, liberty, or property, without due process of law…” Corporations are legal persons, separate from their shareonwers; they can buy and sell proprety, form partnertrships, sign contracts, sue and be used in courts, etc.

What are Labour Standards? 1. Right of association 2. Right to organise and bargain collectively 3. Prohibition of forced or compulsory labour 4. Minimum age for employment of children 5. Minimum wages and hours of work 6. Occupational safety & health All terms are taken from ILO Conventions 4

Fundamental question of ILR • What sort of intervention, if any at all, should and could there be when one industry or country is “loosing out” (or concerns are being raised) due to “unfair” competition from overseas suppliers where substandard conditions of employment (such as sweatshops, child, forced, and slave labor) are prevailing, enabling low-cost, undercutting and unethical production. 5

Three major eras of ILR scholarship • Debates typically flare-up around major conjunctures of capitalistic development. • The first era is from the early 19 th century culminating to the establishment of the ILO in 1919. • The second is from the mid-1970 s (following the first oil crisis in 1973) to the end of the first Gulf war in 1991 • And a contemporary era with a rupture signified by the Rana Plaza disaster in Bangladesh, in 2013. 6

First era of ILR • The ILO was set up in 1919 (in the aftermath of the Soviet revolution in Russia) to provide a solution for the 19 th and early 20 th century “social question”; how to dissuade working classes in developed capitalist economies from becoming radicalized and embracing revolutionary ideas. Welfare capitalism: class compromise, collective bargaining, and statesponsored tripartism, was an answer 7

Second era of ILR • Emergence of neoliberalism and “globalization” • Academic literature mainly from US labour law and trade policy perspectives • US unions involved in GSP petitions & NAFTA campaigning – emergence of labour solidarity groups • In the UK, international labor regulation was seen as marginal/exotic field (governments denounced several ILO Conventions) 8

Third era of ILR • WTO door closes for ever! (1994 Marrakesh - 1999 Seattle) • Move away form state-bound to “private” forms of ILR – from intergovernmental, internationaltreaty-enshrined social clauses to “soft” form of regulation • Emergence of commercial social labeling schemes (SA 8000, AA 1000, ISO 21000, etc. ) & IFAs (trade union response) 9

Characteristics of contemporary capitalism (1) • Rise and dominance of intra & inter-firm trade (i. e. trade within and between supply chains). • Intra-firm trade: insourced production in subsidiaries that are owned by the mother-company (1960 s-1980 s) • Inter-firm trade: outsourced production to subcontractors in other firms (1990 s+) • Inter-national trade characterized previous eras, where intra & inter-firm trade are more contemporary. • Lack of data and secrecy on intra & inter-firm trade transfer pricing. 10

Characteristics of contemporary capitalism (2) • Complete disassociation between labour costs (which are only one small factor of total production costs) and final price. • “Cognitive Capitalism and a Management Theory of Value, ” 30 th EGOS Colloquium 'Reimagining, Rethinking, Reshaping: Organizational Scholarship in Unsettled Times. ' Rotterdam School of Management, Erasmus University, The Netherlands, July 3 -5, 2014. 11

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CMP = cut, make & pack or CMT = cut, make & trim, LDP = landed duty paid, FOB = 13

SMV = standard minute value 14

Department of Management The apotheosis of Taylorism, brought its demise. . . in the sense that is no longer the dominant management theory of value

An Analytical Model of Intercorporate Labor Regulation in Supply Chains 16

Criteria for assessing ILR outcomes • What are the labour-market outcomes? • What pro-worker outcomes if any, can be demonstrated? • That is: we seek elements of labour regulation that are pro-union, and emancipation of workers through policies that are at least progressive and enabling, in the sense that they promote improved conditions of employment, international labour solidarity. That is, policies that do result in betterment of daily work and life experiences, and not merely in policy documents, procedural discussions, intellectual exercises and managerialist debates, especially the kind that seek to prove how profitable, useful or ethically desirable for companies certain forms of labour regulation can be. • In other words, we aim to seek out the emancipatory benefits of ILR and not to reaffirm its subjugatory role. 17

“Hard” regulation 18

Child & forced labour imports to the USA • February 2016, the Trade Facilitation and Trade Enforcement Act of 2015 came into force. • Amended the U. S. Tariff Act of 1930 and reportedly removed a legal loophole (the “consumptive demand” clause) that allowed certain products made by forced or child labour into the U. S. , if there was not sufficient supply to meet domestic demand. • The US Customs and Border Protection (CBP) collects petitions form interested parties and after investigations may issue a Withhold Release Order (WRO). Shipments of merchandise subject to WROs are detained. • A “full-fledged protection of human rights in global supply chains” (ILRF, 2016). 19

GSPs • Foreign policy considerations are paramount; human rights and labour standards violations have historically always come second. • US: El Salvador, Guatemala (Coca Cola) • EU: Pakistan (child labor in footballs) G. Tsogas. 2000. “Labour Standards in the Generalized System of Preferences of the European Union and the United States. ” European Journal of Industrial Relations 6(3): 349 -370. Frundt, H. J. 1998. Trade Conditions and Labor Rights: US Initiatives, Dominican and Central American Responses. Gainesville, FL: University Press of Florida. 20

Labour Standards in Regional Trade Agreements NAFTA EU Social Charter 1 2 3 4 5 6 7 8 9 10 11 12 Right to work in any Member State Right to fair remuneration Right to improved living and working conditions Right to social protection Freedom of association and collective bargaining Right to vocational training Equal treatment for men and women Right to information, consultation and participation Right to health protection and safety Protection of children and adolescents Rights of the elderly Better integration of the disabled 1 2 3 4 5 6 7 8 9 10 11 Freedom of association and protection of the right to organise Right to bargain collectively Right to strike Prohibition of forced labour Protections for children and young persons Minimum wages and overtime pay Discrimination on the grounds of race, religion, age, sex, or other, determined by domestic laws Equal pay for men and women Prevention of occupational injuries and illnesses Compensation in cases of occupational injuries and illnesses Protection of migrant workers 21

Characteristics of NAALC (i. e. worker’s rights in a “free trade area” • No standardisation or harmonisation • Signatory countries undertake the responsibility to simply comply with their own labour laws • NAALC introduced “proceedings to seek appropriate sanctions or remedies for violations of [each Party’s] labor law” 22

Characteristics and shortcomings EU NAFTA • Aims at harmonisation of standards • Significant involvement of “social partners” • Strong developmental perspective, part of a political and economic (“even-closing”) union • Created a “fourth tier” of IR • No scope for harmonisation or integration • Economic considerations take precedence • Lack of developmental / social cohesion perspective • Enhanced international labour solidarity & international (re)orientation among trade union(inst)s 23

ILR in free trade agreements • ILO (2015) reported 58 trade agreements that contained labor provisions in 2013. • Reflecting on “whether labor provisions have created more space for improving labour standards and whether the ability to implement existing labor standards has improved”, it quickly concluded that “it goes beyond the scope of this publication to examine these issues in detail” (ILO, 2015: 22). 24

“Soft” regulation 25

Corporate & Industry Codes of Conduct • • Developed by individual corporations, and mostly in response to pressure (Nike, Wal-Mart) Introduced first in high-profile labels – prime target for activists Language used is similar to that of on ILO conventions (esp. forced labour, child labour, freedom of association, etc. ) Rarely independent monitoring – debatable enforcement Local subcontractors are governed by multiple CCC Coverage: directly employed workers or whole chain (less often) Specific measures: Working hours, conditions, use of child labour, health & safety, etc.

Labour marker outcomes of ILR • Richard M Locke and his research team (Locke et al. 2007, 2009, 2013, 2015) has provided the rare exception to this rule. His findings over a ten-year period – as summarized by Gereffi (2014: 220) – showed that “the traditional compliance model of private voluntary regulation, which sought to deter labour violations by policing and penalizing factories, as well as the alternative capability-building approach that tried to prevent violations by enabling factories to enforce labor standards on their own, both have serious limitations. ” • If we consider the horror that the Rana Plaza disaster uncovered, the evidence – made by the piled up bodies of buried-alive workers – suggest anything but an improvement; rather a steep regression. 27

International Framework Agreements • Voluntary agreements between social partners (employers and trade unions) at global (sometimes European) level • Based on ILO core conventions (esp. freedom of association) • Provisions for independent monitoring (often by trade unions or independent NGOs) • Most in metal, chemical and food industries, also services and construction • Most often EU-based MNCs • Process began in late 1980 s, now over 200 to date – most after 2000 • Specific measures: bargaining rights, working conditions, end to child labour etc.

The UN Global Compact • Initiative linking ILO and main UN institutions – as in between legal and voluntary regulation • Initiated by UN Secretary General Kofi Anan in 2000 • 10 principles including the Fundamental Principles and Rights at Work 1998 • Self monitoring through networks and annual reports • Voluntary and without sanctions beyond embarrassment from being expelled (many companies exit) • Is it credible? – No demonstrated improvement in working conditions – In practice, the completely voluntary nature of the UNGC and the lack of any oversight or implementation mechanism have given rise to new euphemism: bluewash!

English common law 30

Common Law • Private law is “hard” regulation and must not be confused with the neologism of “private regulation” • Is concerned with relationships among individuals and between an individual (or the private rights of a public entity) and the state. • Common law is pertinent to the contractual regulation of global supply chains through company, contract, consumer and tort law. • 31

Company law • Corporate governance regulations that contain social responsibility clauses and affect all the activities of a company. • The most central legislative item on corporate governance issues in the UK is the Companies Act (2006). • Results remain disappointing. CSR is left to the discretion of company directors whilst the primacy of shareholder value has not been challenged (neither in corporate culture and certainly nor in law). The implication is that unless a more pluralistic understanding of the firm takes hold in English company law, little could change. 32

Contract Law • May influence conditions of employment in supply chains through engagement with CSR policies that can become contractually enforceable. • But, contract law has significant limitations for promoting CSR in developing countries, and companies typically do not consider CSR as important enough to litigate. 33

Consumer protection • How consumers can be protected by misleading CSR statements and company practices. 34

Nike v. Kasky (1) • In April 2002, the California Supreme Court ruled on a lawsuit against Nike brought by Marc Kasky, a Californian activist, over claims that statements the company made in letters to newspapers and press releases relating to work conditions in some of its suppliers’ factories in Asia were misleading advertising. At stake was whether corporate statements on human rights, labour standards and other public policy issues – in corporate social reports, labels or other forms or communication – should be considered as “free speech” and thus protected under freedom of speech guarantees, or “commercial speech” and thus not falling under the US First Amendment, but subject to regulations on advertising. • On appeal, the US Supreme Court agreed to hear the case but refused to rule. 35

Nike v. Kasky (2) • California Supreme Court’s initial decision still holds, essentially deeming any public business communication as “commercial speech” and, thus, subject to strict regulation, even if such communication may not be directly linked to advertising or product labeling information. • Corporations do not have the right to free speech, only people do! • Quietly and behind the scenes, billboards boasting ethical credentials have come down, social reports have been carefully rewritten and web-sites cleansed. Instead, cliché phrases denoting unsubstantiated commitment, such as “striving towards” or “aspiring to” nowadays abound in corporate ethics communications. 36

Tort law • Deals with “civil wrongs” as negligence, nuisance, libel, slander, trespass, assault and battery. • But so far the debate has been focused on transnational tort litigation and the liability of parent companies for the conduct of their subsidiaries. • Restrictions in the UK on the use of injunctions and class actions – again in contrast to the US – limit the scope of tort law for promoting CSR 37

The Rana Plaza disaster and common law (? ) • Provisions, workings and effectiveness of the Accord on Fire and Building Safety and Alliance for Bangladesh Worker Safety show that their ineptness is mainly due to prevailing businessas-usual attitudes and a business-driven CSR • BUT, maybe some optimism for the near future: English private law, in spite of weakness, may take the lead in regulating the behaviour of multinational firms in their supply chains, by providing the missing hybrid link between hard law and voluntarism. • A new avenue of labour regulation is opening? 38

Thank you! • https: //www. researchgate. net/profile/Georg e_Tsogas • https: //birkbeck. academia. edu/George. Tsogas 39