sum & ngai - code of conduct in a chinese workplace

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COMPETITION & CHANGE, Vol. 9, No. 2, June 2005 181–200

Globalization and Paradoxes of Ethical

Transnational Production: Code of Conduct in a Chinese Workplace

NGAI-LING SUM1 and PUN NGAI2

1Department of Politics and International Relations, Lancaster University, Lancaster, UK

2School of Social Science, Hong Kong University of Science and Technology, Hong Kong

Neo-liberal economic globalization and acceleration in information and communication

technologies have strengthened the competitiveness of transnational corporations by

making it easier for them to stretch their global commodity chains to developing countries.

Such control from a distance threatens national states’ capacity to regulate TNCs and their

impact upon environment, labour and human rights in developing countries. This has

prompted anti-TNC sentiments and campaigns that challenge brand-named TNCs on

labour exploitation in the south. These changes have triggered discussions on setting labour

standards in the international arena. With the WTO distancing itself from the ‘social clause’,

this has prompted the TNCs, NGOs and other stakeholders to self-regulate by introducing

codes of conduct. Concentrating on the clothing industry, this paper examines the emer-

gence of company and multi-stakeholder codes of conduct that require the involvement of

subcontractors and NGOs in developing countries. The moving of ethical codes to develop-

ing countries condenses and reproduces, under the twin pressures of competitiveness and

social auditing, the paradoxes of ethical transnational production in the internal organiza-

tions of local firms. These paradoxes are demonstrated from a case study of a workplace in

China. The paper ends by outlining three paradoxes and commenting on the development of

a managerialist ‘audit culture’ in workplace practices as commodification of ethical code.

KEY WORDS Audit culture, Civic activism, Codes of conduct, Commodity chains,Corporate social responsibility, Chinese workplace.

Introduction

There is a growing trend for transnational corporations (TNCs) to introduce codes o

conduct regarding labour conditions in their global activities. This paper discusses this ph

nomenon in general terms and then identifies some paradoxes in the implementation of suc

codes through a case study of one corporation in southern China. We first suggest thneo-liberal economic globalization and the acceleration in information and communicatio



182 N.-L. SUM and P. NGAI

regulate TNC activities and their impact upon the environment, labour and human rights

especially as the TNCs often exercise their powers at a distance and international bodi

such as the WTO are less committed to ‘social clauses’ (see the second section below). W

then explore how the transnational nature of these commodity chains and the dominan

of TNCs in their organization have prompted general disquiet and resistance over labo

exploitation in the south and anti-TNC sentiments in particular. This has triggered discusions on setting labour standards through TNCs and/or through multi-stakeholder codes

conduct (see the third section below). Turning to the clothing industry, we then examine th

‘code rush’ and the emergence of an arena for global business governance that is mediat

by the UN, the ILO, NGOs, TNCs and states. The emergence of this governance aren

enables large corporations to adopt their own codes and/or multi-stakeholder ones. On

possibility, which is the focus of our attention in this paper, is for TNCs to adopt in-hou

codes that contain the main provisions of a multi-stakeholder code (see the fourth sectio

below). Next, we explore the implementation of this code in a case study in southern ChinThis case reveals how the transfer of this code from the transnational arena to a specif

local site condenses and reproduces in the internal organizations of local firms some emer

ing paradoxes of ethical transnational production. This occurs under the twin pressures

competitiveness and social auditing (see the fifth section below). The paper concludes b

identifying three such paradoxes and suggests that the managerialist audit culture that

being adopted in workplace practices in developing countries can be understood as

commodification of ethical codes (see the sixth section below).

Globalization and Transnational Production

Economic globalization has accelerated transnational production through the acceleratio

of innovation in information and communication technologies, inexpensive transportatio

logistics and the often-asymmetric liberalization of world trade under the WTO and oth

multilateral arrangements. Together with the celebration of neo-liberalism as the highe

principle of rationality and basis for action, this has strengthened the competitiveness

TNCs by making it easier for them to stretch their global commodity chains to developin

countries and thereby exploit new cost advantages (Dicken, 2003; Gereffi 1999; Gereffi an

Korseniewicz 1994). This involves these corporations collaborating flexibly with networ

of suppliers in developing countries to produce goods mainly sold in the developed worl

This new mode of transnational coordination rests on TNCs’ ability to control productio

(e.g. delivery dates, quality standards, design specifications) over long distances witho

exercising ownership. Various consumer goods, including clothing, footwear and toys, ha

commodity chains in which control resides with brand name producers such as Lev

Strauss, The GAP, Reebok, Nike, Mattel and the like (Frenkel 2001; Jenkins 2001; Jenki

et al . 2002). Such control from a distance threatens national states’ capacity to regulaTNCs and their impact upon the environment, labour and human rights in developin



18GLOBALIZATION AND ETHICAL PARADOXES

labour, unsafe working conditions, and lack of the right to free association (organizin

unions) in developing countries (Taplin and Winterton 1997; Waddington 1999). In partic

lar, such criticisms have been directed against major brand-name producers by consum

associations, non-government organizations (NGOs), international trade unions, and th

media concerning labour issues in these countries. Such public allegations of labour explo

tation have triggered a discussion, especially from the early 1990s onwards, on settinlabour standards in the international arena.1

The World Trade Organization (WTO) and the International Labour Organizatio

(ILO) are important international economic institutional players in these discussions. I

April 1994, during the final stages of GATT/WTO’s Uruguay Round, there was inten

debate over a proposal to link labour standards with trade – the ‘social clause’ – as pa

of the international trade regime (Wilkinson 2002). Seeing the ‘social clause’ as ‘disguise

protectionism’ by developed countries, negotiators from developing countries opposed i

inclusion in the Uruguay Round. The issue of a social clause protecting workers was raise

again in the WTO’s first Ministerial Meeting in Singapore in December 1996 and, as beforwas deeply divisive. Nonetheless, the meeting did articulate the WTO’s and ILO’s position

on labour standards. The WTO renewed its commitment to observe labour standards an

the ILO was accepted as the appropriate body to deal with these standards. Reflecting i

neo-liberal orientation, however, the WTO only committed itself to continue its ‘existin

collaboration’ with the ILO – whilst leaving unclear the nature of such ‘collaboratio

(Wilkinson 2002: 217). This ambiguity was reinforced in subsequent WTO summit meetin

in Seattle and Doha in 1999 and 2001, respectively.

This distancing from the ‘social clause’ and the resultant marginalization of laboucompared with the golden years of the (international) postwar settlement has prompte

alternative ways of introducing labour standards into the international agenda. There is

shift from harder methods, such as enforcing ILO conventions through national courts,

softer methods (e.g. codes of conduct) suggested by non-state actors such as TNCs, NGO

and other stakeholders. This occurs as global commodity chains in the consumption sect

come under the increasing scrutiny of consumer activism from developed countries.

Global Commodity Chains and Civic Activism

With the drive to cut costs and maintain competitiveness, brand-named TNCs such as Lev

Strauss, Nike and The GAP have subcontracted their production processes to developin

countries in search of cheaper labour and lower environmental standards. Gereffi’s work o

global commodity chains is very helpful in understanding such developments in global cap

talism (Gereffi 1999; Gereffi and Korseniewicz 1994). For him, each commodity cha

has three main dimensions: (1) the structure of inputs and outputs that links products an

services in a sequence so that each activity adds value in turn; (2) the territorial aspects of th

networks among enterprises – networks may be spatially dispersed or concentrated; and (the structure of governance, with its vertical and horizontal relationships of power an




As dominant buyers, TNCs in buyer-driven chains are able to control production (edelivery dates, quality standards, design specifications) over long distances without exercing ownership. Non-ownership of suppliers also enables them to collaborate flexibly otheir terms with subcontractors (e.g. global sourcing allows them to order flexibly to suchanging consumer demand and flexible labour and overtime enables them to adapt to flu

tuating demand and fashions). A variety of labour-intensive consumer goods, includinclothing and footwear, are characterized by buyer-driven commodity chains in whi

Fig. 1. An ideal-typical buyer-driven global commodity chain: directions of supply and contr

(context: neo-liberal globalization and debates on ‘corporate social responsibility’).




These developments have contributed in turn to the rise of anti-TNC sentiments th

fuelled anti-globalization movements, quasi-organized ‘corporate watch’ efforts and ant

sweatshop campaigns (Klein, 2000). Civic activism along these lines and their related NGO

began to operate on the global level and, indeed, to cooperate on different scales, to chec

TNC activities or hold them more accountable. Based on guidelines formulated by ILO an

OECD, the TNCs have responded by formulating their own codes of conduct. These corprate codes of conduct are written statements of ethical standards that TNCs claim to ado

and that apply to their suppliers and trade partners as well as themselves. They often conta

a variety of clauses measured against ILO conventions, in particular those concerne

with the respect of human rights at work. As documents initiated by corporations, codes

conduct are not legally binding and standardized in the same way as governments are boun

by the international conventions that they sign and ratify. They amount to what is calle

‘soft regulation’, which consists of ‘declarations, resolutions, guidelines, principles an

other high-level statements by groups of states such as the UN, ILO and OECD that a

neither strictly binding norms nor ephemeral political promises’ (ICHRP 2002: 73).The proliferation of multilateral and firm-level codes of conduct was a response to th

growing multilateral challenge from a wide range of actors on different scales to the deteri

rating conditions in the labour market and labour process in developing countries and to th

limits on workers’ efforts to organize to improve these conditions (Taplin and Winterto

1997; Waddington 1999). As dominant buyers in the chain, these TNCs are few in number

this makes them susceptible to political pressure and charges of condoning sweatsho

conditions. They are especially vulnerable to charges leveled against them by consum

associations, NGOs, international trade unions, religious organizations, student coalitionand the media concerning labour issues in industrial zones in Asia, Latin America and th

United States.

Civic activism of this kind can be seen in a number of anti-sweatshop campaigns worl

wide. Well-known campaign and civic groups that target the garment industry includ

Clean Clothes Campaign (Europe), Maquila Solidarity Network (Canada), United Stu

ents Against Sweatshops (the USA), Oxfam’s Clothes Code Campaign, and the Interfait

Centre on Corporate Responsibility (the USA) (Lipschutz 2002; 2003). They participate

the new politics of consumption to end sweatshop abuses and urge TNCs to take on mor

responsibility for the workers in their employment; for consumers to look behind the laband think about the products before they buy; and in general, the concern for global an

local inequality. For example, the Clean Clothes Campaign uses a mix of activities t

promote political consumerism and civic activism. These include alternative fashion show

emails to corporations, e-newsletters, on-line dissemination of research reports, fair trad

evaluations in retail stores, in-house training of voluntary workers and demonstration

These kind of campaigns, together with the media’s strategies of ‘naming and shamin

highly visible companies and celebrities, has created a transnational resistance space again

corporate power. For example, the Washington Post in 1992 exposed Levi-Strauss’s explo

tation of Chinese indentured labour to make jeans on the Island of Saipan (Sajhau 1997This was followed by a series of other cases, including the CBS reporting in 1996 on swea




The ‘Code Rush’ and the Emergence of Global Business Governance

The emergence of this transnational resistance towards corporate excesses has triggereself-regulation based on the drawing up of in-house codes of conduct (Culter et al . 199Haufler 2001). Since the early 1990s, there has been a proliferation of company cod

initiated by the brand-name traders and corporations. Levi-Strauss was among the first draw up a code on labour standards, entitled Business Partner Terms of Engagement anGuideline for Country Selection, in 1991 (revised in 1994). It covered issues such as workinconditions, minimum wages, environmental standards and child labour (see Table 1). broke new ground in terms of the transnational scope of such codes by covering 600 suppers and subcontractors in developing countries.2 Nike also unveiled a corporate code conduct in the same year; but the external auditors were subsequently criticized, includinPriceWaterhouseCoopers, for weak implementation (O’Rouke 2003). Seeing Nike’s prolems, Reebok improved its practices by instituting a policy of not buying soccer balls fro

factories using child labour. In Europe, C&A has been the focus of many actions in thNetherlands and the UK since 1990, and in Belgium, Germany and France since 1995. OtVersand was been the first action target of the German Clean Clothes Campaign since 199and developed codes to be sent to its suppliers. In 1999, the Italian newspaper Corriera del

Sera revealed that Benetton was using child labour in Turkey and a code of conduct wadopted in the same year. By 2003, it was estimated there were about 10,000 codes that weaccompanied by varying management systems for implementation (Global Unions 2003

For illustrative purposes, the following are three well-known codes of conduct, nameLevi-Strauss, Nike and The GAP (see Table 1).

A detailed discussion of these codes is beyond the remit of this paper. However, outliing these codes does serve to illustrate the ‘code rush’ by TNCs since the 1990s. Thcontribute towards the making of the discourse on ‘ethical corporations’ that is being thicened by the emergence of narratives on Corporate Social Responsibility (CSR). Man

TNCs have begun to pledge that they will assume social responsibilities in their trannational activities. Business schools and business consultancies started to construct idesuch as ‘corporate citizenship’ and tie ‘doing good’ to profit since the mid-1990s. Concep

such as capital are narrated in terms of companies’ reputation – reflected in the new notioof ‘reputational capital’ – that is essential for building corporate names and hence prof

This linkage between ‘capital’ and ‘reputation’ is also narrated as part of ethical corporastrategy in a global age (Bossone 1999; Fombrun 1996; Jackson 2004; King anMacKinnon 2001). This revival of talk on business ethics and its role in capital accumultion is narrated mainly in an instrumental manner, i.e. corporate culture and ethic

obligations are seen as ‘good for business’.In spite (and perhaps because) of this company ‘code rush’ and discourses on CSR

trade unions, consumer groups, NGOs and international organizations continued to cri

cize these ‘soft’ self-regulating codes as public relations tools or window-dressing exercisto deflect consumer/community inquiries about workplace conditions and to project a

image of a ‘caring company’ when in reality business carried on as usual. These complainfrom trade unions, NGOs and UN-related organizations have pushed some TNCs to mo




TABLE 1

Labour standards in three TNC codes of conduct

Selected labour Levi-Strauss (business Nike The GAP (sourcing

standards in each code partner terms of (Code of conduct) guidelines for vendor

engagement) selection)

Child labour Use of child labour is In accordance with Subject to all applicab

not permissible local regulations. laws, rules and

Levi- Strauss

encourages

apprenticeship

programmes.

Forced labour No use of prison or Forced labour – Prohibited.

forced labour. prison or otherwise –

must not be used at

any stage of

production.

Working conditions • Working hours in In accordance with Prevailing industry

accordance with local trade legislation standards in the

local standards. as regards minimum surrounding

• Maximum: 60 hours wages, overtime, leave, community.

a week. public holidays.

Health and safety Business partners must In accordance with Employees must not b

provide good health local regulations. exposed to conditionsand safety conditions. dangerous to their

health.

Implementation of Internal methods: Internal methods: Internal methods:

codes and evaluation • Evaluation carried • For each plant, a • The plants of

out by a Levi- representative of subcontractors are

Strauss team. Nike is responsible selected and

• A 20-page evaluation for the day-to-day inspected by

document reviews application of the representative of the

practices in Memorandum. management of Theproduction and • Obligations on GAP and/or by a

working conditions. suppliers/ commercial

• Workers are also subcontractors to representative

directly concerned retain and to make responsible for

and unannounced available to Nike all purchasing.

visits to enterprises documentation External methods:

are sometimes concerning ethical • An independent

carried out. criteria contained monitoring

External methods: in the Memorandum. working group set

• The assessment is • The Memorandum up in cooperation

also based on is posted up in all the with NGOs and

regulations.




governments, TNCs, trade unions and NGOs. They work together to improve the quality

standards, reporting and auditing procedures of corporate subcontracting activities. Alt

gether, there are 11 major codes. Here, we will concentrate on four prominent ones relat

to the garment/sportswear industry (see Table 2). Let us start with the Fair Labor Associ

tion code in the USA.

In 1996, the Clinton Administration, in response to the sweatshop movement, launch

the Apparel Industry Partnership (AIP), which consisted of 18 garment makers, unions anNGOs. Controversy arose when several unions and NGOs withdrew because they disagree

TABLE 1

Continued

Selected labour Levi-Strauss (business Nike The GAP (sourcing

standards in each code partner terms of (Code of conduct) guidelines for vendor

engagement) selection)

enterprise by trade • Nike reserves the • Work towards th

unions officials and right at all time to improvement of

local associations. have an independent codes and

monitoring carried propose solutions

out of the plants of

suppliers/sub-

contractors.

Sanctions Termination of trade In the event of non- Termination of trade

relations with respect of the relations with supplierpartners who do not Memorandum, Nike subcontractors who d

respect guidelines. may insist that the not respect the code o

situation is redressed conduct.

or it may cancel its

trade commitments.

Basic ethical principles Business partners Principles that govern Learning from NGOs

of the corporation should respect a code the conduct of human rights leaders,

of ethics that includes: business development experts,

• Respect for include trust, factory personnel and

employees, suppliers, teamwork, honesty from garmentclients, consumers and mutual respect. workers.

and shareholders; Nike expects Open dialogue gener-

• Respect for basic compliance with the ates fresh ideas and

human rights. same principles by its stakeholders learn

trading partners about The GAP’s

commitment to creatin

sustainable progress in

the workplace.

Source: Adapted from information derived from Sajhau (1997).




TABLE 2

Main features of selected multi-stakeholder codes of conduct

Main Fair Labour Workers Rights Social Accountability Clean Clothes

features Association Consortium (WRC) International (SAI) Campaign (CCC)

(FLA) (SA8000)

Year of Clinton US-American US-American Dutch Research

foundation Administration Students’ consumer Institute SOMO

1996. Organization 2000. organization 1997. 1990.

Membership/ Members: Members: Board: 2 NGOs, More than 250

governance 13 companies, 110 universities, 1 lawyer, NGOs and unions

6 NGOs, USAS. 3 companies. in 14 CCCs in 12

3 universities, European countrie

1 chair.

Labour Freedom of Freedom of Freedom of Freedom of standards association association association association

Collective Collective Collective bargaining Collective

bargaining bargaining No forced labour bargaining

No forced labour No forced labour No child labour No forced labour

No child labour No child labour No discrimination No child labour

(except 14 years if No discrimination Living wage No discrimination

legal) Living wage Occupational health Living wage

No discrimination Occupational and safety Occupational heal

Legal minimum health and safety Hours of work and safety

wage including Hours of work Management Hours of work

benefits Establishment of systems (reference to Establishment of

Occupational employment relation ILO and to UN Employment

health and safety No harassment or Human Rights Relationship

Hours of work abuse Women’s Conventions)

(exceptions from rights (reference to ILO)

ILO – 48 hours

plus 12 hours

overtime/ week

possible)Overtime pay

possible at normal

rate

No harassment or

abuse

Methods/ Independent • More SA 8000 Standard, • Code of Labour

instruments verification, complaint-driven. independent Practice.

certification by • No certification; verification, • Independent

third-party but spot-check certification of verification andauditing firms that inspections in producers/ suppliers. certification.

cover the whole whole supply • North South




TABLE 2

Continued



(FLA) (SA8000)

Scope of The whole supply The whole supply Emphasis on The whole supply

application chain of garment chain of garment factory/farm, chain of garment

products. products. but also products.

recommendations

for supply chains.

Monitoring/ • Brand • Brand orientation. • Factory/farm • Brand

verification certification. • Investigations certification. certification.

• Annual rather than • 9 SAI accredited • Verification

monitoring monitoring or audit companies institution

and certification. certification verify producers with board of

• As from second • Spot-check according to 50% company

year onwards, inspections. SA8000 guidance and 50% NGO/

internal • Local NGOs in document union

monitoring of all joint investigative • SA8000 certificate representatives,

facilities in teams. is valid for 3 years. contracts with

supply chain, audit company

independent possible.

verification of

5% of allfacilities.

• 13 accredited

audit companies.

Reporting/ • Internal and • WRC verification • Certified factory • After each

disclosure independent and remediation listed on website. inspection audit

monitoring reports go to all • Audit reports go reports go to all

reports go to the parties involved. to SAI and to the parties.

FLA staff. • Full disclosure of companies. • The verification

• The FLA all reports from • Other parties can body informs th

evaluates audits, investigations. get audit reports public. jointly develops after having signed

remediation a confidentiality

plan, and then agreement.

publishes

summary reports

of remediation

results.

Complaints/ • Third party • The WRC Agency Complaints/appeals Complaints/

appeals/ complaints go examines the can go to: appeals go to the

corrective to FLA, which complaints. • the management foundation, whichactions then to informs • Appeals, initiates of the factory, then initiates




involved in AIP, including UNITE (a major US garment and textile labour federation

also withdrew, charging that some provisions were too lenient. The NGOs in the AIalso split, with the Interfaith Center on Corporate Responsibility leaving the originClinton initiative. Nonetheless, the FLA advances a monitoring and certification syste(see Table 2).

Current members of the FLA include some major branded apparel and sports shocompanies (e.g. Levi-Strauss, Nike, Adidas, Reebok, Liz Claiborne and Polo RalpLauren), as well as 131 universities whose licensed apparel is produced by US manufactu

ers. FLA members are moving toward implementing a monitoring and certification systebased on a monitoring sample of 30% of the company’s suppliers. It also announced a Unon-profit monitoring organization (Verité) and three commercial compliance certificatiofirms (Intertek Testing Services, Merchandise Testing Labs and Global Standards) as i‘external’ monitors to carry out code compliance verification for members. Monitorreports will be made available to FLA staff and summary reports of remedies published.

As the FLA were approving companies and accrediting auditors for its external montoring programme, two US-based initiatives were also moving ahead in certifying factorieFirst, the Worker Rights Consortium (WRC) is an initiative by the United Students Again

Sweatshops. When several trade unions and NGOs withdrew from the AIP, claiming ththe provisions were too weak (no standard for living wage), some student activists from th

TABLE 2

Continued



(FLA) (SA8000)

• Also possible each of them being

complaints able to initiate

direct to brand corrective action.

companies.

Costs/ Administration • Administrative Annual fees for • Participating

financing costs are paid by costs are paid by member companies companies and

annual company the fees of vary between US$ organizations

fees and member 1,500–15,000 contribute to th

contributions by universities: 1% according to administrativeuniversities. of annual revenues. costs of the

licensing independent

revenues. verification

• Funds from body.

foundation. • Pilot projects

mainly paid for

by companies.

Source: Adapted from Wick (2003: 68–79).




does not certify factories or brands; instead, it carries out investigation (both pro-active anin response to worker and third-party complaints) of factories. Investigations are carrieout by joint teams made up of WRC members and local NGO and labour organization

It makes all its investigation reports public and develops an on-line database for pubdissemination.

Second, Social Accountability 8000 (SA8000) was created in 1997 by the Council oEconomic Priorities, a US NGO which specializes in corporate responsibility. It outlines thworkplace standard for producers and suppliers on the commodity chain. It is administereby Social Accountability International (SAI), with an advisory board (see Table 2). Bran

name companies become ‘SA800 Signatories’ and they are audited by one of its nine accreited Certification Auditors. Apart from accrediting auditing firms, the SAI also providtraining for SAI auditors. The audit reports go to companies and other parties after signina confidentiality agreement. The SA8000 system differs from the FLA in a number regards, most notably on issues of wages and certification. SA8000 requires factories to p

workers a ‘basic needs’ wage and not a prevailing wage, which is a weaker requirement.also certifies manufacturing facilities and not brands or retailers.

Concurrent with these developments in the USA, there were several initiatives Europe. The Dutch Clean Clothes Campaign (CCC) exists in 12 European countries. Thresulting activities are coordinated by an international secretariat in Amsterdam thorganizes a network of over 250 unions and NGOs. The campaign aims to improve laboconditions in the garment and sportswear industry by informing consumers, influencincompanies and supporting workers’ organizations. Its Code of Labour Practices for thApparel Industry including Sportswear was adopted in February 1998 (see Table 2). Som

TNCs’ in-house codes contain the main provisions of the CCC code and the relevant verifing body can be composed of companies, industry associations and employers’ associationon the one hand (50%), and trade union organizations and NGOs, on the other (50%). Afteach inspection, audit reports go to all parties. The CCC also lobbied the European Parliment and the EU Commission concerning their recent initiatives on codes of conduct ancorporate social responsibility (Wick 2003: 27–30).

The same emphasis on codes of conduct and corporate social responsibility can bfound in the UN Global Compact project. In Summer 2000, UN Secretary General KoAnnan officially launched the UN Global Compact, which, in addition to environme

protection and human rights principles, invites companies, large and small, to promote tprinciples in the ILO Declaration. The Compact is not a regulatory instrument but it doseek to promote institutional learning and social dialogue between business, unions anNGOs. Within the Global Compact, corporations are called upon to support the nine bas

principles derived from the universal declaration of human rights, the ILO declaration ofundamental principles and rights at work and the 1995 Copenhagen social summit and tRio Declaration of the UN conference on environment and development. It became thUN’s attempt to deal with CSR and entered into partnership with TNCs. By October 200approximately 400 companies from 30 countries had associated themselves with the Glob

Compact.3

The co-existence of two types of code – TNC and multi-stakeholder – has two impo




prestige (and protection) by adopting their own codes as well as using their involvement multi-stakeholder codes to integrate themselves into the state–TNC–NGO circuit. Theare two distinct types of TNC–NGO links. In the direct-link type, TNCs, even if they hav

their own in-house code, subscribe to one of the multi-stakeholder codes (e.g. Nike anLevi-Strauss have both adopted the FLA code and its monitoring system). The indirect-lin

type involves the TNCs’ adoption of in-house codes that contain the main provisions ofparticular multi-stakeholder code backed up by the commissioning of particular NGproject teams to monitor their compliance with the code (e.g. the case study in the fiftsection, below, illustrates this type). Whether direct or indirect, these codes are implemente

in specific sites through the setting up of monitoring and verification systems at thlocal level. This typically involves the participation of local NGOs in pilot schemes thmonitor selected supply factories in the commodity chains. For example, the FLA in Marc

2001 designated the Guatemalan Commission for the Monitoring of Code of Condu(COVERCO) and the Bangladesh-based NGO, Phulki, for monitoring projects. They we

the first southern NGOs to carry out external monitoring for companies affiliated with thFLA. Similarly, the WRC contacted NGOs in a number of countries (e.g. India anMexico) concerning their participation in joint investigations. The various national CleaClothes Campaign groups also involved southern NGOs in piloting similar projects (SOM

2001). In 2003, the Swedish Clean Clothes Campaign in conjunction with a local NGO – thHong Kong Christian Association – finished a pilot study on monitoring labour standarin China.

In general, the implementation of these codes has prompted various concerns in deve

oping countries. There is growing recognition that these codes have been driven primari

by actors and interests in developed countries that have paid insufficient attention to thculture and concerns of workers in developing countries (e.g. female workers having to wo

alongside men and the lack of a place to pray). These workers are often portrayed a

‘victims’ to be studied by outside organizations rather than as potential agents of change.

has also been questioned whether monitoring constitutes a public relations gimmick th

may usurp the regulatory role of national governments and unions by privatizing th

enforcement of labour standards through codes of conduct. Furthermore, some worry th

smaller firms in developing countries will be displaced because they are less able to compwith the codes than larger ones (Utting 2001: 20–21). These are important questions th

reflect the struggles and worries that are involved when codes are transferred to developincountries.

Paradoxes of Ethical Transnational Production in a Chinese Workplace

Most studies in this area concentrate on how these codes affect workers’ wages and conditions, labour organization, and the forms and extent of unionization (Ascoly and Zelderust 2003; Lum 2003; Scharage 2004). This paper does not aim to cover this familiar groun

but, instead, concentrates on how codes create and reproduce the paradoxes of trannational production in the internal organization of subcontracting firms in developin




in southern China. This company, which we shall call SSG, produced sportswear for

European brand-name corporation that adopted an in-house code of conduct in 1995. 5 Th

contained the main provisions of labour standards in the Conduct for the Apparel Indust

including Sportswear formulated by the Clean Clothes Campaign (see Table 2 and t

fourth section, above). The management of SSG had some knowledge of company cod

and international labour standards such as SA8000 (see Table 2). Five years later, in 200SSG was also supposed to introduce a new European Corporation Code to its productio

workers. Of some 800 employees in SSG, about 700 were production workers, and mo

of them were rural migrant workers mainly from Hunan, Hubei and Sichuan province

Almost all the workers had received at least primary education, 80% had junior seconda

schooling, and a few had senior secondary schooling and technical tertiary education. Th

should have had no problem in understanding the provisions of the Code.

During the three visits to the firm in 2002 and 2003, a two-page Chinese summary of t

Code was displayed on the wall of each shop floor. The font was so small that workers cou

hardly read the content. Even if it was legible, the clauses lacked details concerning chilabour, discrimination and overtime pay/work. No full Code was posted on the noticeboa

in the workplace, canteen or dormitories. The use of a two-page summary indicate

that SSG was not serious in promoting the Code. However, the management insisted th

every worker had been provided with a full written copy (in Chinese) of the Europea

Corporation Code when they signed or renewed their contracts. They also claimed they ha

introduced the Code to the workers during morning briefing meetings.

Yet all workers interviewed denied that they had received a written copy of the Cod

They also said that they were coached to provide standard answers to the code inspectors auditors, especially on the issues of wages, working hours and rest days. Thus, when th

issue of overtime work was raised, the workers replied as follows:

We work eight hours each day. No compulsory overtime work. We have Sunday off. We get

1.5 times pay for evening work, double for weekends and triple for public holidays.

The ‘willingness’ to repeat this standardized answer was secured from the worke

through a tactical quid pro quo. The company told the workers that giving the ‘wron

answers about the Code would undermine the company’s reputation and, hence, the firm

prospects for production orders and the workers’ chances of work. A social instrument thaims to inform and empower workers about their rights has been turned into an econom

narrative that interpellates ‘workers as (loyal) employees’ who should not upset the manag

rial apple cart both for their own sake and that of the firm. In this regard, workers’ conse

to management hegemony was traded for a little tale of profit and opportunity. The tactic

alliance between the workers and the management in the face of the Code inspectors reflec

how this little tale suppresses (without resolving) the contradiction between the social an

the economic in the workplace.

In most cases, the economic seemed to dominate the everyday practices of the factor

Further interviews with some workers revealed that they had to work up to 12 to 14 hoursday, and they were only paid an overtime bonus for evening and Sunday work. The worke




In our interviews with management representatives, the production manager direct

criticized the Code of Conduct. She described it as a ‘paradoxical’ and ‘hypocritical’ act b

the TNCs to assuage the ‘inner sins’ of the ‘rich western countries’. She stressed that, whepressed to meet production orders by the TNCs, she had to give up ‘labour rights’ anviolate the Code in favour of pushing workers to work faster and longer. Severe glob

competition for low-cost, just-in-time and fashion-conscious products imposed structurlimits on the implementation of the Code of Conduct, revealing its ‘hypocritical’ natureThe ability to comply was undermined by TNC sourcing practices such as cutting ord

times, reducing prices and changing fashion constantly. Likewise, the company directsummed up this paradox by pointing out that production order prices continuously droppebut the requirement for labour codes had become more stringent. He also remarked that th

code required by the European Corporation involved a change in its ‘market behavior’ –demanded huge investment to meet the labour standard in order to secure production ordefrom European and American retailers. He also complained that TNCs were unwilling t

share this investment cost so that the whole burden fell on local producers. ‘To survive in thworld market, we have no choice but to do as we are instructed,’ said the director. In thregard, from the company’s viewpoint, the Code of Conduct had less to do with protectin

labour rights than with its own and the buyer’s business strategies. For the subcontractoand the TNC alike, the Code has become a marketing device to enhance their respectivpositions in a global commodity chain. This is a far cry from the original intention behin

‘corporate social responsibility’, at least as seen by consumer groups and NGOs, namely, entrench and protect labour rights.

In July 2002, an inspector from the European Corporation produced a report th

directly and forcefully identified SSG’s non-conformities with the Code. In order to proteits ‘reputational capital’, the Corporation formulated a corrective action plan for SSG taddress its non-conformities within a specified timeframe that included child or juveni

workers as well as wages and contractual arrangements. In September 2002, a SociCompliance Officer (SCO) who would be solely responsible for implementing the Code the workplace was employed. The responsibility of this SCO was ambiguous because sh

had to report her activities to the European Corporation as well as to SSG’s managemen

The major role of this SCO, a local graduate, was to set up a task force to implement th

Code standards in SSG. Under the instruction of the task force, she devoted all her efforto building up filing and documentation systems. During the visits, she was keen to sho

the inspectors freshly constructed files and records in order to prove the institutionalizatio

of labour standards. Thus there were files on Code of Conduct Training Procedure

Code of Conduct Test Records, New Workers’ Assessment Forms, Workers’ Complaiand Handling Records, Guidelines on Admission and Dismissal, and the like. Bein

pro-management and proud of this documentation system, she said:

We now learn how to build up a filing and reporting system. We learn this from other

companies. The code monitors came for a few hours only for every inspection. They like

tables, figures and data, don’t they?

This way of implementing a code of conduct was further applauded and confirmed b




contracts, and non-discrimination employment policies, hoping to satisfy the correcti

action plan. A two-page summary of the Code in Chinese was then distributed to all workewho were asked to sign their new contract and the copies of their signature were proper

filed. Training sessions on the Code provisions were organized for new workers who hato pass a test covering, most importantly, the Code provisions, basic information o

the company and their contract provisions. Sample test papers were shown to the teaand all had a full mark. However, interviews with workers continued to indicate that thworkers did not actually understand the reasons for having such a Code and its benefifor themselves, although some did mention ‘human rights’ and ‘labour rights’ such as nodiscrimination and no compulsory work. In fact, except for the new workers, traininsessions were only provided to the upper and middle managerial staff, such as supervisoand line leaders, who in turn disseminated the information on the Code to their work unor production lines.

This process of institutionalization was further crystallized in the redrafting of a ne

contract and a new wage register by the task force. In March 2003, the whole workforce wprovided with a new contract that was re-written according to the China Labour Law, anthe workers again had to sign to confirm receipt of the copy of their contract. A new waregister system had also been set up. The wage calculation sheets distinguished norm

workdays, rest days and holidays. The register could now show that the net monthly wagof the workers for a 40-hour week corresponded to the legal monthly minimum wage. Tworkers could also receive a wage slip each month. The slip, however, did not explicitly l

normal and overtime hours worked in a month. Nor did it detail the piece-rate and thpayment of statutory holidays. Thus the workers were still unable to work out by themselv

whether they had received the correct wages.Recruitment policy was also reformulated by implementing a written no

discrimination policy in the summary of the Code, in particular with respect to age angender. The workers, however, did not fully understand the issue of discrimination b

noted that it was common knowledge that new jobs were only open to the 18–25 age grouThe deposit system had been discontinued: all the deposits were refunded to the workewho had signed the receipt and new workers hired were no longer required to leave

deposit. The system of salary deductions for disciplinary reasons had also been discontiued. However, on closer inspection, it had been re-categorized as ‘performance rewardwhich meant that disciplinary fines would still be deducted from it.

Thus, the contradictions between the formal requirements of the Code and actual pratices in the Chinese workplace seemed to have been resolved through this rapid process ‘soft’ institutionalization. Documentation, registers and filing were seen as a must in ordto implement the Code, and at least as having records to demonstrate their compliance wiit and Chinese Labour Law. The trouble of unannounced inspections could be easily deawith if piles of files were available for show. In this regard, the implementation of the Coof Conduct, if it really happened, was actually a process of institutionalization of paperwowith little improvement in working conditions, as shown by SSG. It is, after all, a window

dressing practice without real commitment from either local or transnational companies




this kind began to operate on the global level in order to hold these brand-named corportions more accountable through corporate and multi-stakeholder codes of conduct. At firsight, these codes of conduct as initiated by TNCs and NGOs seem to open up an arena thholds out the promise of rebalancing the social obligations of dominant market players transnational production. There are numerous attempts by TNCs and NGOs to move the

codes to developing countries. Our case study in China adds to the critical literatuon implementation of these codes in two ways. First, it reveals three paradoxes regardinbusiness ethics and just-in-time competition in transnational production. Second, it higlights the difficulties in introducing ethics in a new-liberal environment and this leads tocommodification of the codes of conduct.

The first main conclusion from our case study is the three paradoxes regardintransnational ethical production. First, the pressures from just-in-time, low-cost anfashion-conscious production for the world market structurally constrain the forms anextent of compliance with the Code. The firm faces the paradox of lowering productio

order prices at the same time as adopting more elaborate labour codes. This paradoxiccombination of pressures to engage in business ethics and maintain just-in-time competitivness has led the subcontractor to prioritize the market logic over ethical principles in thworkplace. Thus, the subcontractor reacts in terms of its market logic and sees the Code an opportunity to enhance ‘reputational capital’ and thereby promote its competitiveness the global market. ‘Advancement of labour rights’ is translated into ‘compliance wilabour code’ as business strategy. Second, the introduction of an ethical code for workprotection leads paradoxically to the firm using the Code to encourage workers to cooperawith the management to avoid the loss of contracts and hence future employment opport

nities. This is achieved by narrating a little management tale that links workers’ employmewith the firm’s profits and opportunities. This tale not only encourages the workers to entinto tactical alliance with the management in the face of social auditing; but also suppress(without resolving) the increasing contradiction between the social and the economic in th

workplace. Third, the incorporation of the labour code as part of its business strategy hlead the firm to build elaborate managerial and audit/documentation systems to defenthe subcontractor against charges of infringing the Code. This institutionalization of ‘sof

procedures and systems produces the paradoxical result that more effort goes into papework than into actual advancement of labour rights protection. Based on the advice b

auditors, management showcases its files, registers and records as proof of compliance.The second main conclusion concerns the commodification of ethical codes in work

place practices. Our case study suggests that there is a tendency towards the managerilization of the social agenda so that codes of conduct and CSR become marketing devic

and commodities that mask the contradiction between global capitalism and social inequaity in the workplace in developing countries. This managerialization/economization codes of conduct is what leads to the above-mentioned focus on paperwork, records an

documents. This raises the question of whether such initiatives have created a ‘market fethics’, a ‘market in ethics’ or an ‘ethics for the market’. The first market would involve th

recognition by TNCs, service-oriented NGOs, monitors, and southern subcontractors thethics can become the basis for accumulating reputational capital. Thus they seek to tur




Together, the primacy of managerialized ethics and the routinized practices of the emergin

code-of-conduct industry are giving rise to a neo-liberal globalization with an audit (and n

a human) face. These managerialization and auditization7 practices regarding codes m

foster reputational/material benefits for the TNCs, service-oriented NGOs, monitors, an

subcontractors. But this occurs at the expense of diverting attention from the workers’ we

fare and undermines the original motivation behind labour codes, namely, to develop aninstitutionalize an ‘ethics for the market’. This would advance the rights of workers in deve

oping countries on an equal footing with those of transnational capital. On the basis of th

present study, this aim of civic activism in developed countries is still far from being realize

in developing countries.

Acknowledgements

We are grateful to the two anonymous reviewers for their insightful and helpful commenand to Bob Jessop, Jeff Henderson, Julie Froud and Alvin So for making this artic

possible. The usual disclaimer applies.

Notes

1 The UN proposed an international code in 1980 but it never reached consensus and finally fail

after a decade of unsuccessful negotiations. The ILO has had a Declaration of Principle on Mul

national Enterprise and Social Policy since 1977 but it failed to endorse an agreed internationcode of conduct for all industries and companies.

2 Women Working Worldwide (2000) Company Codes of Conduct, available at http://www.popt

org.uk/women-ww/company_coc.htm.

3 There is mounting criticism of Kofi Annan’s Global Compact on the grounds that the Unit

Nation has provided moral legitimacy for TNCs. It has thereby helped to ‘bluewash’ the TNC

which means the use of the reputation of the United Nations to present a more humanitaria

image for the profit-oriented TNCs.

4 The reason why China is chosen is because China is increasingly being seen as the ‘factory of t

world’. With China joining the WTO since December 2001, it has become a major player in t

international garment industry. In March 2002, the Financial Times predicted that after the 20phase-out of apparel export quotas currently in place under the Multi-Fibre Agreement, glob

apparel chains will stretch to China so that it will become the producer of half the world’s garmen

by 2005 (Brandsma 2002).

5 The Code of the European Corporation required all its ‘contractors, their sub-contractors, prin

pal suppliers and licensees to observe the standards when producing or distributing products

components of products for XXX’. Moreover, the Corporation demanded from all its supplie

that they comply with applicable labour laws in the countries where they operate.

6 The production manager often referred to the Corporation Code as ‘paradoxical’ a

‘hypocritical’.

7 The idea of ‘auditization’ stems mainly from Michael Power (1997).




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