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A Case Study Of Rana Plaza Factory In Bangladesh

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Question:

In April 2013, the Rana Plaza garment factory collapsed upon its workforce, killing approximately 1,200 workers and injuring about another 2,000. The incident served to highlight the plight of low-paid Bangladeshi workers forced to work in dangerous conditions for the profit of big multinationals and shoppers in first world countries who want $2 shirts.You are to investigate what happened at Rana Plaza and identify the ethical issues involved. Explain whether these issues are particularly difficult or unique to multinational companies (MNCs).

Continuing with the Rana Plaza case, investigate what has happened since for the people of Bangladesh, and whether the MNCs associated with Rana have done more to recognize and act upon their ethical obligations.You should also look at how social media has placed pressure upon these MNCs through activism and stakeholder pressure. Does social media continue to play a positive role for the workers of Bangladesh, or is it only interested in a quick "Twitter moment"?

 

 

Answer:

Executive Summary

The case study of the April 2013 incident has been discussed in which Rana Plaza factory collapsed in Bangladesh. The result was the death of the workers in high number. This accident brought into light the various inefficiencies of the administration and local bodies in setting up safe work environment for the workers. The government machinery comes into action to bring in safety measures in application so that any such incident can be avoided in future. Various regulations and laws has been passed ever since to achieve a control over the business process in Bangladesh. The pressure of stakeholders on the business has also proved to bring in changes in the business environment that is meant to improve the working style followed in the factories.

This way effort is made to ensure worker’s safety at the workplace. Also the various other issues like applying minimum wage, increasing rights of trade unions and workers are all tried to achieve through the reformation process in action.

Introduction

The garment industry and factories are the main source of income generation in the Bangladesh’s economy. More than three million people are employed in these factories which work day and night to fulfill their necessities. Garments actually contribute to 80% of the export of the country and help in earning foreign currency.

Bangladesh government after decades of independence has not been able to execute plans and programs for the safety and security of its workers in factories. This led to the working of employees in a substandard sanitary and work environment. Factories are opened near residential areas, no disposal of industrial waste is followed, workers have to work in a already shattered building making the work environment highly unsafe. 80% of the garment workers in Bangladesh are women who come to support their families by working in these unsecure garment factories (Oaten, 2014).

In addition to the working environment, the workers in the garment factories are underpaid such that they can only support their necessities expenditures. This way the exploitation of the laborer has been the main idea through which the local factories and international brands tries to achieved economies of scale in their outputs (Stewart, 2014).

Investigating what happened at Rana Plaza

On April 24, 2013, nearly 1200 people in the Rana Plaza garment factory died due to the collapse of the building. The building was already substandard and an illegal addition of two more floors resulted in the occurrence of the incident. It is reported that the employees did contacted the related authority about the issues, but the arrogant authorities forced them to move back without giving any concern to their fear. Instead they claimed that the building will stay for next 100 years and if any worker is not ready to work than he or she will have to face consequences. Thus the workers who cannot compromise the daily wage because of their financial needs accepted the deal to enter the death warrant building (Oaten, 2014).

Stakeholders interest were not addressed properly

The workers in the factory are the stakeholders. As per the corporate governance the interest of the stakeholders requires to be given due care and the issues related to be addressed properly. This way stakeholder’s interest is an essential of every business. In case of Rana Plaza factory the stakeholder’s interest was not given due importance. The owner of the factory Mr. Rana was more concerned with the shipment of consignment to meet the deadlines and fulfill the $500 million contracts of various multinationals. This way including the head of the factory there were no commitment or assurance to work for the safety of the life of the workers (Burrel & Morgan, 1992).

Inefficient human resource management: low pay

The human resource management consists not only of recruitment, selection and training but also proper compensation to the employees. The workers in Bangladesh are not given due pay for their hard work. As per the record they are not virtually paid as the amount they are paid as compensation is much below the average income a laborer is paid in any other underdeveloped country. Moreover 80% of the workers are women who come to support their family’s financial status. These way human resources are exploited to achieve high economies of scale in the production process (Crane & Matten, 2003).

Non-organized trade unions.

There exist non-organized trade unions in Bangladesh. Due to this fact, the trade unions are unable to bargain with the related authorities for their rights. In some cases the conflicts rose in Bangladesh where the trade unions demanded for improved working conditions but due to lack of government backing and low income pressure there was no desired outcome. Thus the existence of non-organized trade unions led to the development of ineffective system in Bangladesh that could support the rights of the workers in the factory.

Government inactiveness

The government of Bangladesh has proved inefficient in dealing with the problems and issues of workers working in compromised conditions in garment factories. The government inactiveness has resulted in the happening of accidents in factories killing the work force. However after the accident of Rana Plaza factory, the government came into action and took various steps (Fisher & Lovell, 2008).

 

Illegal constructions

Rana Plaza factory had made illegal construction of two more floors in an already substandard building that led to the collapse of the whole building killing 1200 workers and injuring 2000 others. The illegal construction was done without the prior approval of the government bodies. Also the checks of safety and security of the workplace for the workers safety was not done. This way the building collapsed and led to the death of various workers.

Improper administration of basic human rights

Corporate governance and ethics ensure that the administration of the basic human rights. In Rana Plaza factory there was improper administration of basic human rights. This led to the development of various issues for the workers as follows.

  1. Workers were underpaid.
  2. Unhealthy work environment existed.
  3. Workers did not have the right to refuse working in case of unsafe work environment.
  4. Improper arrangements for lighting, water and other necessary requirements at the workplace.
  5. Workers were forced to work for long working hours.

Difficult or unique issues to Multinational Companies

The issues to the Multinational companies are not unique as this kind of similar issues are observed in other countries also which are underdeveloped economies. However the uniqueness of this issue was the severity of the irresponsibility on the part of the government and extent of greed of the local factory owner who kept aside the life of thousand workers in wake of earning profits.

Actually the multinational brands selling apparels and other garments in the first world countries like United States, United Kingdom and other wanted to offer their customers with the low cost shopping experience through selling of $2 shirts, $1 shop etc. This way the main motive of these multinationals is to bring down its expenditures so as to meet the cost cutting requirements of the business. The underdeveloped nations help in their motives due to the difference in the currency exchange rate. However the local factory owners try to huge profits by employing the local work force at low labor rates. This way the workers are forced to work in a subsidized environment where there is lack of proper sanitation facility, lighting problems etc. (Fray, 2007).

The issues that are faced by Multinational companies include the followings.

  1. Low wage rate:

The labor in the underdeveloped nations is paid low. This results in the defamation of the company name in the foreign market which may actually be paying in full but the local owner is taking away all the benefits. Thus the workers are paid less and even forced to work for longer working hours. In Bangladesh there are 80% of women workers working in factories. They paid lesser than the male workers and forced to work for longer working hours. This way the minimum wage law is not followed and the workers are not paid fairly in the underdeveloped countries.

  1. Ineffective labor rights:

The ineffective labor rights in the underdeveloped nations add to the problems of the Multinational corporations. The laborers are forced in to work in an unhealthy and sometimes dangerous work environment. Also they lack the right to reject working in a subsidized, unhealthy and unsafe work environment and in addition are threatened to face consequences for not working. This results in the outcome of an accident at the work place. Thus the association with the country in business terms that does not have effective labor rights finally ends in bringing low name to the multinationals.

  1. Environment pollution:

In wake of saving more earnings, the local factory owners do not dispose off the factory waste and chemicals. The result is the environment pollution that led to the leaving life at risks of various people, animals and even plants in the surroundings. This way the water, air and land pollution is promoted by the companies in the underdeveloped nations. The environment pollution that was done by Rana Plaza factory also affected the places near the factory. The non-disposal of the waste garments and other industrial waste resulted in the environment pollution that indirectly affected the image of the multinationals who are claimed to not have followed the eco-friendly methods of production.

  1. Bribery and corruption in the government agencies:

The government and local bodies in the underdeveloped nations consist of such people who are corrupt. These people ask for financial favors even for legal and fair trade practices. The bribery is at height in these countries. The result is that the local producer’s takes full advantage of this fact and pay some money to pass their illegal working methods and unfair trade practices. This is how the government regulations for safeguarding the interest and life of workers gets compromised in the under developed nations.

 

This way the above mentioned are among the few noted problems that are faced by the multinational companies in underdeveloped nations. These multinationals may not intend to break local laws and regulations as per the international laws but the local businesses makes full use of the ineffective government administration to earn more. This way the association of the multinational companies with the greedy local producers in a corrupt government environment brings in defamation at the later stage. In the short run the multinational may find to cut their cost of production but in the long run they lose lot of money in the form of giving compensation to the sufferers of accident that may occur (Stewart, 2014).

Bangladesh after Rana Plaza Tragedy

After the tragedy of Rana Plaza factory the government came into action. There were various steps taken by the government to ensure improvement in the plight and earnings of the workers in Bangladesh. The steps taken include the followings.

  1. Increased the minimum wage rate by 77%.
  2. Guidelines developed to maintain minimum safety standards in the factories.
  3. Supported the development and backing of trade unions.
  4. Passed laws that allows transparency in the working conditions and easy to check the working place in terms of safety at work.
  5. Added rights to the workers to stop working if they find the work place unsafe.
  6. The associated brands were now required to work with the factory owners to work on improvements of the workplace and plight of the workers.

This way various favorable steps were taken after the incident. But the question remains that if it was really required that the government wake up and take such actions only after the accident takes place which led to the death of 1200 workers and injuring 2000 others (Oaten, 2014).

Multinationals ethical obligations:

A number of ethical obligations were applied to the Multinationals after the accident. This included the followings.

  1. Signing of an accord on fire and building safety by 150 global brands. As per this accord the multinationals will work together with the local producers to improve the work place conditions and provide a safe and healthy work environment.
  2. An addition of the worker’s right to stop working under unsafe working condition.
  3. Local and global unions and companies could make independent assessment of the building and fire related security developments at the work place.
  4. Increase in the role and powers of trade unions to bargain for the safety development programs at the work place and delivering minimum wage to the workers.
  5. A definite amount of fund that is $43 million is created at ILOC managed trust fund by the contributions of multinationals along with the local producers to support the sufferers from the already occurred industrial disaster.
  6. The amount of compensation to the workers has been fixed for various issues and problems that may occur at the workplace.

(Stewart, 2014)

This way the multinationals were directed by the government to work with the local businesses to invest in bringing safety at the work place.

Social media pressure on Multinationals:

Social media played a responsible role in putting pressure on Multinationals in compensating the sufferers and improving the plight of workers and workplace itself. The various accomplishments of the social media were as follows.

  1. 27 United States multinationals set up their own working standards as per the international laws of safety in alliance for the Bangladesh Worker Safety.
  2. The brands associated with the Rana Plaza factory were brought into limelight and were made to pay appropriate compensation to the sufferer’s and their respective families.
  3. United States suspended the preferred nation status to Bangladesh until the establishment of worker rights in the country.
  4. Bangladesh Center for workers and other associated organization are given freedom to operate for the interest of workers.
  5. Guidelines are conveyed to the local producers to develop skills and technical help for application of structural safety issues.
  6. Customers were made aware of the issues in the supply chain.
  7. New investment models are developed through which the multinationals will upgrade factories to make them safer for the workers.
  8. Multinationals are now entering into long term contracts with the local producers to gain a definite level of sustenance and growth of the business.

Activism and Stakeholder’s pressure

Pressure from workers and trade unions:

The stakeholder’s of the company includes even the trade unions. The trade unions play a significant role in pressurizing the businesses to secure more safety and minimum wage rate for the workers. Although the recent accident brought in various rights and authorities from the government but the application is still not at large. The trade unions in Bangladesh are still not able to negotiate through collective bargaining process. The reason behind is resistance of the local producers and non-supporting of the corrupt local government officials. This has led to the difficulty in fair auditing and monitoring of the working conditions and various issues in Bangladesh. Although efforts are made overtime to reach a comfortable and respectable agreement with the authorities the trade unions still has a long way to travel to achieve more gains and benefits for the workers. This way the labor issues are still not addressed wisely and requires passing of regulations and acts to support the process (Gifford & Ansett, 2014).

 

Pressure from Multinationals:

After the accident, the pressure from various Multinationals has increased to producers in Bangladesh. These multinationals now are desparate to safeguard their brand image for which they are remaking contracts and signing deals with the Bangladesh producers so that the worker’s safety and fair payment can be secured. This is done so that the multinationals do not have face conflicts and avoidance in their respective countries. These companies therefore do not want to bring black spot on their years earned brand image. In this wake they are trying to make deals with the producers who accept to bring restructuring of the production process and reformation of the workplace. Also the guidance has been given to the local producers to pay the workers with the minimum wage rate as specified by the government (council, 2006).

Pressure from government agencies:

The government has passed the law of following a minimum standard of wage rate in the country. Through this regulation in action the workers in the country will now be able to earn at least 68$ on per month basis. This is actually a 77% increase in wage rate than earlier. The government agencies have also directed the producers to follow a set of safety guidelines at the work place so that the worker security and related concerns are taken due care of (Zhan et al., 2006).

Pressure from shareholders:

The shareholders of the business has also put a pressure on the Multinationals to look in for other avenues for attaining economies of scale than by bringing down the cost of production through low wage payments. The shareholders therefore wanted their brand image to stay and business to sustain for longer time period. For this reason these shareholders has directed the management either to improve the working condition and plight of the workers in the underdeveloped countries or to shift back their operations to their domestic areas.

Pressure from creditors:

The creditors who have vested interest in the multinationals wanted to make their investment safer. Thus they have defined their credit policy such that the business interest can be safeguarded by deploying of safety measures in the factories developed in the underdeveloped nations. These creditors have indirectly pressurized the local producers in Bangladesh to improve worker’s plight and working style such that the business could continue to grow in the country.

Role of social media for the workers of Bangladesh

Social media has played a significant role for the workers of Bangladesh. This is due to the fact that the low income workers have managed to get hold of the Smart phones along with internet connections. This has led to the uploading important information related to the accident. The sufferers who escaped death tweeted and posted their work experience before accident and later the almost death experience after the accident. This helped the other people in and outside the country gets the first-hand knowledge about the real facts about the accident (Trevifio & Brown, 2004).

Along with the tweets of personal experience, the information outbreak of the various Multinational Corporations that were working with Rana Plaza factory also came out. The result was these multinationals faced serious criticism in their own country from customers as well government. The Multinationals faced huge defamation through this process. The result was that these Multinationals took over the responsibility and contributed in the government fund for supporting the sufferers of the accident (Koheler, 2014).

This way social media clarified that in the coming years the companies following unethical methods of production or hiding their supplies will not more be able to hide themselves from the public and especially their customers.

Conclusion

In the end, the Rana Plaza tragedy was one of the biggest human tragedy in this decade. In this tragedy the poor people who worked day and night to improve their financial status got killed and injured due to the collapse of the illegal building structure. The result was death of nearly 1200 workers and 2000 suffered injuries. Government bodies took appropriate actions after the accident by brining control over the wage rate and directing methods to follow safety at work. The government also passed regulations through which any employee could reject to work if he or she finds it to be unsafe for his or her life. However it is questioned that does the occurrence of this accident was necessary to make government come back from its sleep (Fray, 2007). The social media took over the responsibility and soon there were videos and message on social websites which gave the first hand information about the accident that led to the death of various people. Various regulations has been passed to improve the worker’s plight and support worker’s right in the company (Carroll, 2009). Finally the pressure of the various stakeholders helped in the application of reformation and reapplication process for manufacturing so that brand image of the multinationals can be saved from defamation

Bibliography

Burrel, G. & Morgan, G., 1992. Sociological paradigms and organization analysis elements of the sociology of corporate life. Ashgate: Suirrey.

Carroll, B.A., 2009. Business Ethics: Brief Readings on Vital Topics. Routledge.

council, C.l., 2006. Driving performance and retention through employee engagement. Corporate Leadership Council.

Crane, A. & Matten, D., 2003. Business Ethics. Oxford: Oxford University Press.

Fisher, C. & Lovell, A., 2008. Business Ethics and Values: Individual, Corporate and International Perspectives. Prentice Hall.

Fray, A.M., 2007. Ethical behavior and social responsibility in organizations: process and evaluation. Management Decisions., 45(1), pp.76-88.

Gifford, J. & Ansett, S., 2014. 10 things that have changed since the Bangladesh factory collapse.

 

Klein, L.C..C.E.J..&.C.R.M., 2006. The social costs of stress: How sex differences in stress responses can lead to social stress vulnerability and depression in women. In C.L.M.K.&.S.H. Goodman, ed. Women and depression: A handbook for the social, behavioral, and biomedical sciences. New York: Cambridge University Press. pp.199–218.

Koheler, I., 2014. Adventures in social networking with mom and dad parents. 

Oaten, J., 2014. Rana Plaza Factory Collapse: Australian clothing retailers yet to sign Bangladesh safety accord. 

Stewart, K.L., 2014. An ethical analysis of the high cost of low-priced clothing. Journal of Academic and Business ethics., 1(1), pp.1-9.

Trevifio, L.K. & Brown, M.E., 2004. Managing to be ethical: Debunking five business ethics myths. Academy of Management Executive., 18(2), pp.69-81.

 

 

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