October 2, 2007

Corporate Social Responsibility: Labor Relations in Emerging Markets

Experts from academia, business and NGOs discuss the merits and consequences of corporate social responsibility in developing countries at the April Columbia World Leader's Forum.


Columbia University's World Leaders Forum featured a panel entitled "Corporate Social Responsibility: Labor Relations in Emerging Markets," sponsored in partnership with the Chazen Institute of International Business. This presentation included a diverse array of experts who spoke to the different and often conflicting motivations of interests they represent. The panelists were Alan Hassenfeld, chairman of toymaker Hasbro, Inc.; Alice Tepper Marlin, president of Social Accountability International, which promotes human rights for workers around the world; Jagdish Bhagwati, University Professor of Economics and Law at Columbia University; Rajat Kumar Gupta, senior partner worldwide at McKinsey & Company; and Clive Crook, chief editorial advisor to the chairman at Atlantic Media Company. Opening remarks were made by Jerome A. Chazen, MBA ‘50, founder of the Chazen Institute and of Chazen Capital Partners, LLC. Geoffrey Heal, the Paul Garrett Professor of Public Policy and Corporate Social Responsibility at Columbia Business School, moderated the event.

The original impetus for outsourcing manufacturing to emerging markets was to increase corporate profits by taking advantage of lower-cost labor. Yet there is now no doubt that a positive by-product of Western corporations' outsourcing in recent decades has been a massive increase in living standards across much of the emerging world because of a shifting of the labor-demand curve. According to the panelists, for that positive trend to continue, significant and far-reaching changes need to be made in the system of checks and balances that weigh corporate profits against basic human rights and working conditions.

Alan Hassenfeld noted that Hasbro has been at the forefront of the debate on corporate social responsibility (CSR), given that 80 percent of toys are manufactured in China. He said the company is committed to improving working conditions through complying with governance standards, and he even noted that workers manufacturing Hasbro products are paid 33 percent above the minimum wage in the Pearl River area of China. "We have brought a lot of modernity to that part of the world," he said. But he added that there is still room for improvement and noted, for example, that there are simply too many governance codes across the many factories it deals with, making compliance difficult.

Mr. Hassenfeld would prefer one workers'-rights/working-conditions code that would allow companies such as Hasbro to better evaluate whether a given factory is in line. Corruption among those auditing the factories only adds to the complexity of evaluating whether factories are in compliance. Another inherent dilemma is that of punishment when a factory is not in line. Mr. Hassenfeld said Hasbro so far has been reluctant to strip business away from factories that are not treating workers with appropriate standards, because that would hurt the workers more. But he warned that may change. "We are not terminating factories, but at some point in time we are going to have to make some examples," he said.

Alice Tepper Marlin, who advocates on behalf of workers' rights, acknowledged that the factory-audit system is flawed because of rampant bribery and a lack of proper oversight. Her goal is to see improved oversight and more female recruiting, since 90 percent of auditors reviewing workplace conditions for females are males.

Jagdish Bhagwati added that inequalities in the workforce cannot be solved through multinational legislation, such as trade agreements. Instead, he would prefer to see the focus on educating local managers instead of on intense comparisons of wages in, say, Guatemala versus the United States. "NGOs concerned about wages are really missing the point," he said, adding that much of the CSR debate about low wage levels is fueled by concern for workers in the United States, not those abroad. U.S. workers suffer when their overseas competitors do the same work for far less pay. "It's really fear and not empathy that is fueling many of these movements," Professor Bhagwati said. "This is not a morally driven position for many people."

Read the Research

Scott Goodwin

"Corporate Social Responsibility: Labor Relations in Emerging Markets"

View abstract/citation  Download PDF  

Have You Read Columbia Business?

Columbia Business School’s alumni magazine connects alumni with each other and the School; celebrates alumni milestones and accomplishments; and chronicles the impact of Columbia Business School alumni, faculty members, and students on the global business landscape.

Read Columbia Business>