Yiu Por Chen Assistant Professor Public Services Graduate Program DePaul University & IZA e-mail: email@example.com Phone: 312/362-8441 Fax: 312/362-5506
Abstract The corporate social responsibility code of conduct (CSRC) has been the model of corporate governance (CG) used by multinational corporations (MNCs) for their suppliers. Using the transaction cost perspective, this study argues the CSRC system may reduce some transaction costs for MNCs in planning and implementing corporate social responsibility (CSR). However, the CSRC may suffer from opportunism at the supplier level, which may undermine CSRC outcomes. By utilizing a unidimensional item response model with a randomized survey of factory workers of 12 toy manufacturers in Southern China, this study provides a unified measure to evaluate the effects of CSRCs on labor conditions from workers’ voices. Furthermore, this study offers fresh empirical evidence to show the ways opportunism may undermine CSRC effects on labor relations.
JEL code: M14, M23, J28, J50, J81, J83, J88 Keywords: Corporate Social Responsibility, Multinational Corporations, Outsourcing, Safety, LaborManagement Relations, Working Conditions, Workers’ Rights, Labor Market Policy
“There are lots of firms and lots of changes in labor practices among them, so there is no lack of data. To judge whether formal labor market rules produce worse employment outcomes, as claimed by orthodox analysts, one could contrast employment between firms with more or less rigid internal rules.” − Richard Freeman (2005: 19-20), suggesting that a microanalysis of workers and firms will be a path forward to understanding the effect of labor institutions.
1. Introduction Corporate social responsibility (CSR) has been rapidly institutionalized and now covers the vast majority of industrial sectors around the globe. Donaldson (1996) highlights that 90% of all Fortune 500 companies have established codes of conduct, which are by far the most common mode of CSR used by corporations today. Furthermore, 51% of German firms claim to have codes of conduct, compared to 41% in the UK, and 30% in France (Schneider and Barsoux, 1997). Brytting (1997) also found that 52% of the larger Swedish companies had codes of conduct. In fact, CSR is largely the response of multinational corporations (MNCs) to the accusation of being the major actors in “new exploitations” of less developed countries (LDCs) (Chan, 2001). 1 For the outsourcing MNCs, one of the important aspects of CSR is to ensure that workplaces and labor conditions in poor nations are not “too” terrible (even if it is worse than in the workplaces of developed countries). Theoretically speaking, the original approach to CSR suggested in the literature is a stakeholder approach. The stakeholder approach advocates that firms should not only maximize profit but also behave as good citizens of the community and take account of the needs of other stakeholders that may be affected by the firms’ production. This approach to CSR involves all related stakeholders in the development and implementation of the CSR (Freeman, 1984). In reality, the corporate governance
CSR in general is closely linked with principles of “sustainable development”, that is, enterprises should be obliged to make decisions based not only on the financial/economic factors but also on the social and environmental consequences of their activities. In terms of labor condition issues related to the outsourcing process, there are numerous reports and news about the exploitation of labor. The interested reader can visit some labor NGOs’ websites, for example, www.AMRC.org, China Labor Watch, ILO, etc.
(CG) approach (or firm-centered approach), which uses corporate social responsibility codes of conduct (CSRC) to regulate the suppliers’ operations in LDCs, is more...