The Meaning of Ethics

The principles of conduct governing an individual or a group.The standards used to decide what your conduct should be.Behavior that depends on a person's frame of reference.

Ethical Conduct in the Workplace (a short video)

https://www.youtube.com/watch?v=0mUxMpMTT28

Why consider ethics?

Interest in activities and conduct of international business

Criticism and accusations about exploitative behaviour

External pressure on international firms

Different perceptions about ethical standards between cultures

Labour Standards:

Labour standards are those that are applied to the way workers are treated.

"... aimed at promoting opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and dignity.

In today's globalized economy, international labour standards are an essential component in the international framework for ensuring that the growth of the global economy provides benefits to all."

Globalisation and Labour standards;

ILO's Declaration of Fundamental Principles and Rights at Work (1998)

Obligates member states to respect, promote and realize

freedom of association and the right to collective bargainingthe elimination of all forms of forced or compulsory labourthe effective abolition of child labourthe elimination of discrimination in respect of employment and occupation.

The declaration stated explicitly that labour standards should not be used for protectionist purposes

Globalisation may help economic growth but ...

...must be accompanied by a set of social rules enabling stakeholders to obtain a fair share of the wealth they have helped to create, but ...

... the desire to encourage economic development must be reconciled with the need to allow for each country's situation, capabilities and preferences.

Labour standard and International Trade:

Globalisation may help economic growth but ...

...must be accompanied by a set of social rules enabling stakeholders to obtain a fair share of the wealth they have helped to create, but ...

... the desire to encourage economic development must be reconciled with the need to allow for each country's situation, capabilities and preferences.

International Trade Organisation formed in 1947

The Havana Charter (Article 7):

"The members recognise that unfair labour conditions ["anti-competitive practices"], particularly in production for export, create difficulties in international trade, and, accordingly, each member shall take whatever action may be appropriate and feasable to eliminate such conditions in its territory."

The Charter was never ratified but replaced by GATT a temporary arrangement that lasted for almost half a centuryGATT did not include any references to labour rights

International Trade Organisation formed in 1947

The Havana Charter (Article 7):

"The members recognise that unfair labour conditions ["anti-competitive practices"], particularly in production for export, create difficulties in international trade, and, accordingly, each member shall take whatever action may be appropriate and feasable to eliminate such conditions in its territory."

The Charter was never ratified but replaced by GATT a temporary arrangement that lasted for almost half a centuryGATT did not include any references to labour rights

The World Trade Organisation

The WTO established in January 1995 as a result of the GATT Uruguay round (1986-1994) - the Marrakesh AgreementThe GATT agreement a core agreement of the WTONo WTO agreements concluded since the end of the Uruguay round (GATT) include labour rights obligations (social clause)WTO has been criticized for being

"the one major international governance organisation that does not examine the impact of its policies upon the ability of member states to advance human rights"

(Aronson and Zimmerman, 2006)

Regional Integration Agreement (RIA):

Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services and production factors between each other.

Promotes the unhampered flow of goods and services between the three countries, but not the free movement of people.

Complemented by the North American Agreement on Labour Cooperation (NAALC).

NAALC commits each of the three signatory countries to protect, enhance and enforce basic workers' rights" and establishes 11 "guiding principles" that they undertake to promote, subject to their domestic law.

The agreement does not, however, establish common minimum standards for each country's domestic law - there is no reference to ILO standards;

Rather the principles indicate "broad areas of concern where the parties have developed, each in its own way, laws, regulations, procedures and practices that protect the rights and interests of their respective workforce".

NAALC - violations and complaint procedures

The NAALC establishes complaints procedure. Violations fall into three categories:

For issues relating to freedom of association and collective bargaining there are no sanctions, only the prospects of public hearing.

For forced labour, equal pay, discrimination, worker's compensation and migrant labour issues, an independent evaluation committee may be established - can only make non- binding recommendations.

Only in cases where there are violations of child labour, minimum wages and occupational health and safety provisions is there the prospect of arbitration and possibly sanctions.

EU Directives

Require member states to implement community policies into domestic law but allow for the national bodies to determine the exact form regulatory adjustments will take.

Allows states to honour community obligations without turning a blind eye toward national ER/HR system characteristics.

National traditions/practices respected by the Maastricht social protocol which prohibits directives on union organising, collective bargaining or industrial action (strikes/lockouts).

Regulations

A second form of EU law that must be received into domestic law in their exact form.

Bilateralism

Political, economic and cultural relations between two sovereign states - bilateral trade agreements.

A weakness of USA's bilateral trade agreements is the parties' obligation to respect their own national laws with the provision that these laws should conform to ILO standards:

Often no impartial criteria for evaluating the compliance of all FTA signatories as ...

... the agreements themselves do not always provide for an external

and objective control body to confirm the effective application of the

rights enunciated.

Where a country has ratified an ILO Convention on a specific principle, the ILO does have an effective supervisory system that can determine compliance (Committee of Experts) but ...

...when the relevant convention has not been ratified and there are no other monotoring bodies, assessing conformity is more difficult.

Nonetheless, there is evidence that the majority of FTA signatories have made some progress in terms of compliance with and improvement of their labour regulations.

The World Trade Orgnaisation

Reluctance (refusal) to add a social clause" to trade agreements negotiated under the auspices of the World Trade Organisation

Bilateral trade agreements and social clauses

Limited scope and coverage (selected standards)

A non-standardised approach (discriminatory)

Weak monitoring and regulation system

Weak and inefficient sanctions

Voluntary standards embodied in codes of conduct specifying norms and rules by which to evaluate factory performance.

Pressure from consumer groups, labour and human rights organisations has motivated multinational corporations to adopt codes of conduct.

Internal monitoring systems usually extend over organisations' supply chains with suppliers are required to take on the code as an additional task.

Criticism, limitations and weaknesses:

Organisational codes are criticised for its purpose and design; not intended to protect labour rights but rather brands' and organisations' reputation and thus limit the legal liability of global brands and potential damage from consumer/NGOs campaigns (boycotts).

Suppliers often big and sophisticated organisations that have developed core competencies in both manufacturing and product design and development and thus important, if not essential, links in their respective supply chains - dependency relations.

Programmes establishing standardised codes of conduct and systems of monitoring that are conducted by accredited third-party auditors.

Examples:

Fair Labour Association (FLA)

Social Accountability International (SAI)

Worldwide Responsible Apparel Production (WRAP)

International Finance Corporation (IFC)

Each programme promotes a code of conduct largly based on ILO's core standards.

Differences in procedures:

auditing (who conducts and how)

certification (factory or brand)

reporting (what is publicly disclosed)

Some critical issues

It is claimed that it is impossible to "certify" compliance with labour standards based on only 1 day audit carried out once a year.

Very limited coverage by monitoring schemes.

Criticised for corporate biaz and weak controls on the quality of the monitors.

Potential or real conflict of interests: auditing agencies are paid directly by the brands or factories being monitored - monitoring may therefore not be "truly independent".

Membership to the SAI and similar accreditation schemes can be prohibitive for cost reasons.