2.  The Limitations of Private Compliance.  The Promise of an alternative, “collaborative,” approach.  Beware of “technocratic” solutions; factory- focused solutions.  Bringing Distributional Issues & “Upstream” Business Practices Back into the Conversation.

3. Globalization has created all sorts of opportunities for growth and development. But also… Child labor, excessive work hours, hazardous working conditions, poor wages rampant in developing world factories In absence of functioning international organizations capable of promoting global justice and/or nation-states willing or able to enforce domestic labor codes, codes of conduct and other forms of private compliance programs have become dominant method MNCs and NGOs address problems with labor standards

4.  Does Private Compliance Work? If so, how? Under what conditions?  If not, what other private and/or public interventions improve labor standards?  Under what conditions can a new, more “collaborative” approach be constructed and diffused?

5. Study of Global Buyers and their Suppliers in Different Industries (Footwear, Apparel, Agriculture, Electronics) Analysis of Thousands of Company Audit Reports and Sourcing Data Field Research (Matched Paired Analysis) in Brazil, China, India, Bangladesh, Turkey, Dominican Republic, Honduras, Vietnam, Mexico, U.S. Over 700 interviews; over 100 factory visits

6. Number of Observations: 575 Average M-Audit Score: 65% First M-Audit Scores across all factories (Nov. 2002 to Jan. 2005) Similar patterns of variation within sectors (footwear, apparel, equipment) and within countries. Factory Conditions Vary Across Sectors & Countries Case 1: Nike

7. Are Things Getting Better? CR rating Case 1: Nike

8. Change in CR RatingFreq.Percent -3 (Down by 3 degrees)202.62 -2 (Down by 2 degrees)749.70 -1 (Down by 1 degree)18123.72 0 (No change)32342.33 1 (Up by 1 degree)11615.20 2 (Up by 2 degrees)425.50 3 (Up by 3 degrees)70.92 Total763100 B) Change in Compliance Rating Inspections Note: A is 4, B is 3, C is 2, and D is 1, and the change in CR rating is the score in the most recent audit minus the score from the earliest audit, ranging from –3 to 3. For example, if a factory has a score C in the earliest audit and a score A in the most recent audit, then it has a change of +2. Are Things Getting Better? The Limitations of Private Monitoring (Auditing)

9. Case 2: HP Compliance summary for HP suppliers (as of most recent audit) The Limitations of Private Monitoring (Auditing)

10. Case 2: HP Compliance summary for HP suppliers (as of most recent audit) The Limitations of Private Monitoring (Auditing)

11. How to Explain Mismatch Between Company Rhetoric / Reputation & Reality of It’s Supply Base? Not Lack of Will, Moral Fiber, Interests, Resources Problems are Inherent in Traditional Compliance Model

12. Asymmetric Power Relations Between Global Buyers & Suppliers Importance of Audit-Based Data Incentives Lots of debate over the Model. How to make it more transparent, accountable, rigorous Traditional Compliance Model

13. Ambiguous Power Relations Unclear (Perverse) Incentives Impossible to Generate Accurate Information Theoretical & Empirical Weaknesses As a Result, “Ritual” of Compliance Factories Moving In & Out of Compliance Not Tackling “Root” Causes of Labor Issues

14. Workplace Characteristics Plant APlant B Average Weekly Wage$ 86.00 USD$ 67.80 USD Team WorkYesNo Job DescriptionMulti-TasksSingle Task Job RotationYesNo Worker Participation in Work-Related Decisions YesNo Nationality ManagersMexicanChinese SupervisorsMexicanChinese Production WorkersMexicanMostly Mexican OvertimeVoluntary and Within Limit Mandatory and Over Limit

15. Comparison of Production Systems Plant APlant B Total # of Workers in one line or cell 610 T-Shirts per Day per line or cell 900800 Daily Wage per Worker (Fixed Salary + Bonuses) $ 17.20 USD$ 13.60 USD T-Shirts per Worker15080 Cost per T-Shirt$ 0.11 USD$ 0.18 USD An Alternate, More “Collaborative” Model: Nike Plants Revisited

16. Comparison between Old and New System of Production in Plant A Old System (module) New System (cell) Total # of Workers106 T-Shirts per Day per module or cell 1200900 Productivity per Worker120150 Average Weekly Salary$ 67.80 USD$ 86.00 USD An Alternate, More “Collaborative” Model: Nike Plants Revisited

17. ComplianceCollaboration Approach:Rules/Standards Focus “Meeting” Standards Uncovering, Analyzing and Correcting “Root Causes” of Current Issues Mechanisms:Policing, Detailed Audit Protocols (checklists), Inspections, Documentation Joint Problem Solving, Information-Sharing, Repeated Interactions, Reciprocity Dynamics:“Us vs. Them” Functional Division of Labor Mixed Signals Mentoring, Coaching, Diffusion of Best Practices, Integration of Standards with Operational Excellence, Sharing Risks & Benefits Drivers of Change: Repeated Audits, Pressures from Above, (Negative) Incentives Learning, Capacity-Building, (Positive) Incentives, Mutual Respect, Mutual Gains

18. Mean Capacity Variation In Percent 300 200 100 RetailComponent/Module BuildFinal Assembly Stylized Demand Volatility along Supply Chain Demand Signal Source: Locke Samel WP 2011

19. Successful compliance/capability building not just technical issue but also a political/distributional process Requires collaboration among key actors within and across firms Collaboration built through repeated interactions and mutual understanding that all parties must share benefits and costs Institutions can help shape/reinforce patterns of collaboration