In today’s competitive global market environment, it has become essential for multinational companies to find means and methods to stay ahead of competition, not only for the purpose of profit, but recently, for the very purpose of sustenance as well. In this hunt for cheaper means of profiteering, the multinationals have to maintain a certain set of rules or protocol which would monitor their activities ensuring that the practices been followed during these profiteering methods, they do not stray from the righteous path of corporate social responsibility.
“Corporate Social Responsibility can be defined to be the continuing commitment of by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” Lord Holme, Rio Tinto & Royal Dutch Shell.
Corporate governance is the process to ensure to the stakeholders/ shareholders that the enterprise being run by them is doing so as per their intensions.
The question which is at hand: Who benefits, who pays? Where does the buck stop? has always been of relevance and is even more so in today’s day and age where companies are doing whatever is in their power to appeal to the customers, be it cheap pricing, aggravated marketing strategies etc.. The question being discussed was always going to arise as in the process of manufacturing, supplying and selling, there is always going to be one party which is going to reap benefits and there may be a party which may lose in the game. The question is where and which party is accountable in the end? Where the buck stops is the ultimate responsible for the on goings.
Who benefits?
In this race to grab the customers’ pocket, the question again arises as to whether the MNC, the employees or stakeholders/ shareholders are the beneficiaries.
Who pays?
It is again an arguable point as to who pays the price in the deal, the destitute and the exploited or is it the society as a whole?
The supply chain for any modern company consists of a large link of logistical networks whose operations span throughout the globe. A person sitting in front of his computer can place an order for a jacket from a website; the order is received at the local shop which in-turn reciprocates the same to the supplier half way across the globe who then orders the manufacturer to complete the order which is then sent back via the same route to the customer. We as customers may not realise the processes that take place after the simple click of a button but, that very click is what brings the bread on the table for many.
As discussed above, a multinational enterprise has a set of rules by which it ought to govern and has a written statement in the charter of Corporate Social Responsibility. Now, those who own, manage and run the company are those who can be said to be accountable for the functions which are performed and the actions or decisions that are taken. Accountability is basically a leadership role which can be said to be the acknowledgement and assumption of responsibility for the decisions and actions taken towards policies of governance and ethical administration.
The common problem which persists in the field of ethics is that people often desire an end but fail to take the means necessary to achieve it.
The system of subcontracting is very divisive in nature. Proximity is created in a network of trade and it can be argued that this interdependency is the generator of wealth, acting as an agent for removal of poverty thus leading to development of powerful economies. It is the belief of some neo-liberals that responsibility is the concern of authorities and governments and not of the firms. It is their argument that the primary role of any multinational is to maximise profits while the responsibility as an issue is the matter of stockholders. They who are opposed of sub-contracting, point to the ill conditions of the sweatshops, the crackdown on trade union membership and the damage caused to the environment as the result of corporate indifference. Absence of consumers from the assembly lines means that they do not feel responsible for how the product was manufactured and thus it does not necessarily affect their decision to buy a particular product or a brand in general. A wide range of techniques have been used by campaigners such as non government organisations in an effort to deconstruct the sub-contracting system for the benefit of knowledge of the buyers. The most effective approach could be through the channel of the media. Documentaries are regularly shown and news coverage is extensive and recently, even websites detailing the callousness and lack of responsibility shown by business are on the rise. In parallel with these approaches has been an increase in advocates of ethically produced items.
For the ease of understanding the working of industries and ethical issues involved, the case of Primark can be considered. Through the case study on the unethical practices followed by Primark, the scam which was uncovered a few years back, we come across examples which portray companies and multinationals in bad light where it might not necessarily be the fault of the multinational in the first place. The issue which was highlighted in the video shown in my opinion shows only one side of the story.
Primark is a retail group operating in Ireland, Holland UK and Spain employing over 27500 employees branded as a “Best Value High Street Fashion” shop by GMTV and ITV (Company website).
A few years back, the BBC carried aired a documentary showing the grim conditions which were prevalent in the factories located in the South of India which supplied Primark garments to sell in the high streets of its European outlets. The documentary showed how under-aged children were roped into working on sequin patterns for clothes which would later land up in shops across the Primark outlets.
The issue can be broken up into three sub-issues:
The facts highlighted by the BBC documentary showing the un-ethical practices followed by Primark in allowing what was happening: Primark was shown to have been responsible for the usage of child labour in the production of the clothes in question. The undercover reporters were shown roaming the streets of the village in question revealing how the practices were un-folding.
The fault lies in my opinion in the practices of Primark, for it would know how much the capacity of production of the supplier would have been to whom the work was contracted to in the first place. If it knew this capacity, it would have given the contractor an order such which would comply with the capacity thus resulting in the completion of the work by the contractor in the manufacturing plant itself without actually handing out the job to under-aged labour.
The issue of the contractors working for Primark hiring children hence promoting use of child labour for the sake of making a quick buck is the second point to be highlighted. The contractor could have for the purpose of sowing on the sequin work have hired an additional force of workers if it could not be carried out in the factory/ manufacturing unit itself and contacted Primark about the situation, which would in turn have supported the hiring of additional work-force as the rate of pay for labour in that part of the world is cheap and well within the reach of Primark as it was cutting down on labour charges by setting contracts in India in the first place.
The issue which is the most appalling is the one faced by the under-aged workers. They have been put to do such work in grim conditions when they should be in school and being educated about the same issue which they have been victimised into performing. The issue is not how the western world may perceive it to be. People may have a notion that the children have been forced to work in these un-friendly conditions, but what they may not understand is the mentality of the parents of those children who were ready to send them to this type of work. For the average slum dwellers and refugees which have been specified in the documentary, every single penny earned by a family member is one step to bringing food on the table at night. While we may argue about the ethical aspects from the sheltered lives we lead, the real issue here is the one relating to survival. What we may not understand is the complications which arise in the developing economies, where one side may show a pretty picture with boom in all sectors, but we fail to see the darker ally’s which are still shrouded in poverty, illiteracy and disparity overall.
In response to the documentary aired by the BBC in there award winning program the Panorama, Primark went on to deny that the clothes being worked on by the minors were sold in their shops and later when they acknowledged their shortcomings, they broke the contract with that particular unit. This was again seen as an issue by many arguing that due to the earlier mismanagement of Primark, innocent workers would lose their livelihood. It can be concluded that multinationals in their haste to reduce prices should be weary to the issues which may plague their very existence and tarnish their image as an ethical enterprise.
This brings us back to our dilemma: who benefits, who pays? and where does the buck stop. The points discussed indicate that both the parties in the supply chain are at fault and the ones who have to pay the price are those affected. The beneficiary were the customers who were getting “Fast fashion” at cheap rates and initially the company which was getting its work done at cheap labour rates and earning respect and awards for being high value for money. But when the tides turned against it, Primark had to face retaliation from all fronts thus affecting its image on the high streets.
A similar case can be highlighted in this context which related to Nike. Nike a well established shoe manufacturer had set up operations for manufacturing in south-east Asia where their mal-practices of paying workers below the minimum wages was un-earthed. Not only were the workers being under paid, but child labour was also seen to be an issue there. This got a lot of media attention and Nike did its part by drastically changing the situation and followed ethical practices in ensuring that all the criteria for running operations from a foreign country were aptly met.
In this case it can be clearly marked out that the under paid workers were the ones who were exploited by being made to work long hours under the minimum wage while Nike the company was the benefactor when they were the ones who were actually responsible for the situation and was up to them to take the control in their hands to see to it that ethical practices are followed and the Corporate Social Responsibility issues are adhered to.
Many other cases of this nature can be cited involving child labour, low wages, long working hours and bad working conditions like in the cases mentioned above. Companies such as Gap, IKEA have also become victim to charges of negligence towards work ethics of their respective supply chains.
Environmental degradation is another issue which has made headlines of late. Multinationals in their greed to generate income from a resource available in a foreign land, do what is in their power to exploit them. This may be in the form of cutting down trees and complete forests, as in the case of the African country of Somalia, where for the production of charcoal for local use and export to Gulf countries major deforestation has taken place. This has caused change in lives of the once nomadic tribes of the region and is endangering wildlife as well.
Somalia has in the last few decades faced the problem of dumping of nuclear waste on its lands due to the incompetence of the government and negligence of the people, the media and the civic authorities. This illegal dumping has caused deaths of people living near the shorelines due to poisoning and death of fishermen operating in the seas as well.
Through the cases studied, it can be apt to say that every party has a role to play in the issues relating to the ethical standards of a multinational enterprise. The cases may range from environmental responsibility, or issues relating to human rights such as working conditions, wage pays, health and safety amongst others. Ethical issues may be raised regarding involvement of the enterprise in the political system of the country, region into which it has established its influence and how this influence can affect the wage rates of the common people working not only for them, but also for the overall welfare of the people in the region.
While the MNC’s should always be responsible for the actions which they take, the responsibility should also be put in the hands of the local governments and the civic authorities who should see to it that the people and the environment receive no harm in any way. Media should be awake and aware about the happenings and the role of this estate cannot be compromised in any way as it is basically a vehicle to transport the information to the commoners.
The ideology stating the importance of proximity in the discussion of responsibility is a valid one. Free flow of trade can be said to be a lynchpin of modern thought of global market and the exploitation of the resources be it materials or people as discussed will surely demand accountability. Sub-contracting practices are not only the responsibility of corporations as customers cannot claim to be unaware of the issues surrounding such places, and ultimately, through spending power can exercise responsibility by choosing to shop elsewhere. This leads us to the third party involvement as well; the customer.
Consumers in the developed world are through the breakdown of subcontracting procedures have been made aware of the realities and thus brought to a proximity to the source of the items that they want and desire to purchase leaving with them less recourse to claims of negligence on their part as buyers. The closer proximity and better understanding of outsourcing provides them with an ethical choice and therefore a degree of responsibility.
To conclude, the issue of who is responsible and who benefits will always haunt the masses as long as there is one party which is bent on the idea of profit generation without the consideration of others in the chain. There cannot be a society which runs in perfection and harmony as one would want it to be and thus the ultimate responsibility lies in the hands of all those involved in the chain, the manufactures, buyers and the corporation as well in ensuring that no one is at loss and the smooth flow of goods is maintained without hassle.
“Corporate Social Responsibility can be defined to be the continuing commitment of by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” Lord Holme, Rio Tinto & Royal Dutch Shell.
Corporate governance is the process to ensure to the stakeholders/ shareholders that the enterprise being run by them is doing so as per their intensions.
The question which is at hand: Who benefits, who pays? Where does the buck stop? has always been of relevance and is even more so in today’s day and age where companies are doing whatever is in their power to appeal to the customers, be it cheap pricing, aggravated marketing strategies etc.. The question being discussed was always going to arise as in the process of manufacturing, supplying and selling, there is always going to be one party which is going to reap benefits and there may be a party which may lose in the game. The question is where and which party is accountable in the end? Where the buck stops is the ultimate responsible for the on goings.
Who benefits?
In this race to grab the customers’ pocket, the question again arises as to whether the MNC, the employees or stakeholders/ shareholders are the beneficiaries.
Who pays?
It is again an arguable point as to who pays the price in the deal, the destitute and the exploited or is it the society as a whole?
The supply chain for any modern company consists of a large link of logistical networks whose operations span throughout the globe. A person sitting in front of his computer can place an order for a jacket from a website; the order is received at the local shop which in-turn reciprocates the same to the supplier half way across the globe who then orders the manufacturer to complete the order which is then sent back via the same route to the customer. We as customers may not realise the processes that take place after the simple click of a button but, that very click is what brings the bread on the table for many.
As discussed above, a multinational enterprise has a set of rules by which it ought to govern and has a written statement in the charter of Corporate Social Responsibility. Now, those who own, manage and run the company are those who can be said to be accountable for the functions which are performed and the actions or decisions that are taken. Accountability is basically a leadership role which can be said to be the acknowledgement and assumption of responsibility for the decisions and actions taken towards policies of governance and ethical administration.
The common problem which persists in the field of ethics is that people often desire an end but fail to take the means necessary to achieve it.
The system of subcontracting is very divisive in nature. Proximity is created in a network of trade and it can be argued that this interdependency is the generator of wealth, acting as an agent for removal of poverty thus leading to development of powerful economies. It is the belief of some neo-liberals that responsibility is the concern of authorities and governments and not of the firms. It is their argument that the primary role of any multinational is to maximise profits while the responsibility as an issue is the matter of stockholders. They who are opposed of sub-contracting, point to the ill conditions of the sweatshops, the crackdown on trade union membership and the damage caused to the environment as the result of corporate indifference. Absence of consumers from the assembly lines means that they do not feel responsible for how the product was manufactured and thus it does not necessarily affect their decision to buy a particular product or a brand in general. A wide range of techniques have been used by campaigners such as non government organisations in an effort to deconstruct the sub-contracting system for the benefit of knowledge of the buyers. The most effective approach could be through the channel of the media. Documentaries are regularly shown and news coverage is extensive and recently, even websites detailing the callousness and lack of responsibility shown by business are on the rise. In parallel with these approaches has been an increase in advocates of ethically produced items.
For the ease of understanding the working of industries and ethical issues involved, the case of Primark can be considered. Through the case study on the unethical practices followed by Primark, the scam which was uncovered a few years back, we come across examples which portray companies and multinationals in bad light where it might not necessarily be the fault of the multinational in the first place. The issue which was highlighted in the video shown in my opinion shows only one side of the story.
Primark is a retail group operating in Ireland, Holland UK and Spain employing over 27500 employees branded as a “Best Value High Street Fashion” shop by GMTV and ITV (Company website).
A few years back, the BBC carried aired a documentary showing the grim conditions which were prevalent in the factories located in the South of India which supplied Primark garments to sell in the high streets of its European outlets. The documentary showed how under-aged children were roped into working on sequin patterns for clothes which would later land up in shops across the Primark outlets.
The issue can be broken up into three sub-issues:
The facts highlighted by the BBC documentary showing the un-ethical practices followed by Primark in allowing what was happening: Primark was shown to have been responsible for the usage of child labour in the production of the clothes in question. The undercover reporters were shown roaming the streets of the village in question revealing how the practices were un-folding.
The fault lies in my opinion in the practices of Primark, for it would know how much the capacity of production of the supplier would have been to whom the work was contracted to in the first place. If it knew this capacity, it would have given the contractor an order such which would comply with the capacity thus resulting in the completion of the work by the contractor in the manufacturing plant itself without actually handing out the job to under-aged labour.
The issue of the contractors working for Primark hiring children hence promoting use of child labour for the sake of making a quick buck is the second point to be highlighted. The contractor could have for the purpose of sowing on the sequin work have hired an additional force of workers if it could not be carried out in the factory/ manufacturing unit itself and contacted Primark about the situation, which would in turn have supported the hiring of additional work-force as the rate of pay for labour in that part of the world is cheap and well within the reach of Primark as it was cutting down on labour charges by setting contracts in India in the first place.
The issue which is the most appalling is the one faced by the under-aged workers. They have been put to do such work in grim conditions when they should be in school and being educated about the same issue which they have been victimised into performing. The issue is not how the western world may perceive it to be. People may have a notion that the children have been forced to work in these un-friendly conditions, but what they may not understand is the mentality of the parents of those children who were ready to send them to this type of work. For the average slum dwellers and refugees which have been specified in the documentary, every single penny earned by a family member is one step to bringing food on the table at night. While we may argue about the ethical aspects from the sheltered lives we lead, the real issue here is the one relating to survival. What we may not understand is the complications which arise in the developing economies, where one side may show a pretty picture with boom in all sectors, but we fail to see the darker ally’s which are still shrouded in poverty, illiteracy and disparity overall.
In response to the documentary aired by the BBC in there award winning program the Panorama, Primark went on to deny that the clothes being worked on by the minors were sold in their shops and later when they acknowledged their shortcomings, they broke the contract with that particular unit. This was again seen as an issue by many arguing that due to the earlier mismanagement of Primark, innocent workers would lose their livelihood. It can be concluded that multinationals in their haste to reduce prices should be weary to the issues which may plague their very existence and tarnish their image as an ethical enterprise.
This brings us back to our dilemma: who benefits, who pays? and where does the buck stop. The points discussed indicate that both the parties in the supply chain are at fault and the ones who have to pay the price are those affected. The beneficiary were the customers who were getting “Fast fashion” at cheap rates and initially the company which was getting its work done at cheap labour rates and earning respect and awards for being high value for money. But when the tides turned against it, Primark had to face retaliation from all fronts thus affecting its image on the high streets.
A similar case can be highlighted in this context which related to Nike. Nike a well established shoe manufacturer had set up operations for manufacturing in south-east Asia where their mal-practices of paying workers below the minimum wages was un-earthed. Not only were the workers being under paid, but child labour was also seen to be an issue there. This got a lot of media attention and Nike did its part by drastically changing the situation and followed ethical practices in ensuring that all the criteria for running operations from a foreign country were aptly met.
In this case it can be clearly marked out that the under paid workers were the ones who were exploited by being made to work long hours under the minimum wage while Nike the company was the benefactor when they were the ones who were actually responsible for the situation and was up to them to take the control in their hands to see to it that ethical practices are followed and the Corporate Social Responsibility issues are adhered to.
Many other cases of this nature can be cited involving child labour, low wages, long working hours and bad working conditions like in the cases mentioned above. Companies such as Gap, IKEA have also become victim to charges of negligence towards work ethics of their respective supply chains.
Environmental degradation is another issue which has made headlines of late. Multinationals in their greed to generate income from a resource available in a foreign land, do what is in their power to exploit them. This may be in the form of cutting down trees and complete forests, as in the case of the African country of Somalia, where for the production of charcoal for local use and export to Gulf countries major deforestation has taken place. This has caused change in lives of the once nomadic tribes of the region and is endangering wildlife as well.
Somalia has in the last few decades faced the problem of dumping of nuclear waste on its lands due to the incompetence of the government and negligence of the people, the media and the civic authorities. This illegal dumping has caused deaths of people living near the shorelines due to poisoning and death of fishermen operating in the seas as well.
Through the cases studied, it can be apt to say that every party has a role to play in the issues relating to the ethical standards of a multinational enterprise. The cases may range from environmental responsibility, or issues relating to human rights such as working conditions, wage pays, health and safety amongst others. Ethical issues may be raised regarding involvement of the enterprise in the political system of the country, region into which it has established its influence and how this influence can affect the wage rates of the common people working not only for them, but also for the overall welfare of the people in the region.
While the MNC’s should always be responsible for the actions which they take, the responsibility should also be put in the hands of the local governments and the civic authorities who should see to it that the people and the environment receive no harm in any way. Media should be awake and aware about the happenings and the role of this estate cannot be compromised in any way as it is basically a vehicle to transport the information to the commoners.
The ideology stating the importance of proximity in the discussion of responsibility is a valid one. Free flow of trade can be said to be a lynchpin of modern thought of global market and the exploitation of the resources be it materials or people as discussed will surely demand accountability. Sub-contracting practices are not only the responsibility of corporations as customers cannot claim to be unaware of the issues surrounding such places, and ultimately, through spending power can exercise responsibility by choosing to shop elsewhere. This leads us to the third party involvement as well; the customer.
Consumers in the developed world are through the breakdown of subcontracting procedures have been made aware of the realities and thus brought to a proximity to the source of the items that they want and desire to purchase leaving with them less recourse to claims of negligence on their part as buyers. The closer proximity and better understanding of outsourcing provides them with an ethical choice and therefore a degree of responsibility.
To conclude, the issue of who is responsible and who benefits will always haunt the masses as long as there is one party which is bent on the idea of profit generation without the consideration of others in the chain. There cannot be a society which runs in perfection and harmony as one would want it to be and thus the ultimate responsibility lies in the hands of all those involved in the chain, the manufactures, buyers and the corporation as well in ensuring that no one is at loss and the smooth flow of goods is maintained without hassle.
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