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Business Ethics in the News

A discussion on the week's top business ethics stories by Professor Kirk O. Hanson, Executive Director of the Markkula Center for Applied Ethics, and Patrick Coutermarsh, Fellow in Applied Ethics and recent graduate of Santa Clara University.

The following postings have been filtered by category Supply Chain. clear filter
  •  DISNEY: Should Retailers Cut and Run from Bangladesh?

    Thursday, May. 2, 2013

    Western apparel companies have been under tremendous public scrutiny after the fallout of last week’s factory fire in Bangladesh that killed 400 workers. Retailers are torn between staying and improving conditions, and leaving Bangladesh entirely. Bangladesh is the second largest apparel exporter with $18 billion, 3.6 million garment workers, and some of the lowest wages in the world. Wal-Mart, GAP, and Children’s Place met in private recently to discuss improving worker conditions, while Benetton has repeatedly had to revise its explanation of relations to the factory. After a factory fire 6 months ago, Disney announced a one-year phase-out of all manufacturing in Bangladesh ending in March 2014. While retailers determine if they will follow Disney’s example, labor groups are urging them to stay and improve conditions as opposed to cutting their losses and running. Do these retailers have an obligation to improve working conditions in Bangladesh once they have used subcontractors there? Is it better to walk away and source clothes in another low-cost location? Is the problem instead that U.S. companies expect their clothes to be made at unrealistically low prices?

      Kirk: There is plenty of blame to go around. The worldwide search for cheap production does contribute to unsafe conditions. If the U.S. companies want low-cost production, they have to resist doing business with the very lowest cost suppliers who are most likely to be cutting corners. They have to find suppliers who produce quality clothes in quality factories. Most are only screening for the first. I hope they stay in Bangladesh; they will have the same problem in another country in five years if they don’t change their selection process.

      Patrick: Once Disney leaves another retailer will take its place to exploit the cost structure; and as Kirk mentions, the problem will migrate to the next low-cost region free of the public outrage associated with Bangladesh working conditions. To stop the cycle, monitoring groups such as the Business Social Compliance Initiative, which certified two factories in the building of the fire in Bangladesh, need to step up their standards. Higher standards will necessitate better margins for the factories providing the funds for building compliance, fire safety training, and adequate wages. It’s on retailers to only do business with certified factories, and up to consumers to hold them to it.

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  •  HP: Are Companies Paying Suppliers Enough to Allow for Good HR Practices?

    Tuesday, Feb. 12, 2013

    Hewlett-Packard Co. announced this week that it would tighten oversight on its Chinese suppliers' use of student interns and temporary workers. Chinese factories often resort to interns and temporary workers to supplement its workforce while avoiding the costs associated with full-time employment, and reports of abuse of these workers are on the rise: such as long hours and being underpaid. In response to these trends, HP is imposing a limit on the number of student workers allowed at its suppliers, as well as mandating that they must be working in an area related to their field of study. While labor groups view HP's announcement as a positive step forward, many fear that the source of the problem is directly linked to HP not paying high enough supplier fees, forcing suppliers to cut corners to win contracts. Is HP obligated to take additional steps toward addressing this problem?

      Patrick: While additional steps toward preventing labor force abuse should be taken, HP is not obligated to increase the amount they pay in supplier fees. Let's not forget that HP isn't the only moral agent here, suppliers and factory owners have a role to play as well. Accordingly, it is the responsibility of suppliers and factory owners not to take contracts that they cannot legally fulfill. Aggressive negotiation is well within HP's right and does not serve as an excuse for factory worker abuse. Despite this, HP should consider additional measures toward preventing this problem; such as, increasing the screening that suppliers and factories must go through, as well as implementing a penal system for transgressions.

      Kirk: I think you let HP and other firms off too easily. The competitive bidding process inevitably leads to visible and hidden cost reduction. HP needs to do something concrete to demonstrate it is willing to pay for safe and humane working conditions. Imposing one or more standards, such as limiting intern workers, will likely lead to cost cutting elsewhere unless HP and other global forms that outsource can "lean against" bad practices by deep engagement and communication with suppliers.

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