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Case Study Of Rana Plaza Add in library

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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 recognise 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

This particular assignment entitled ‘Corporate Governance and Ethics’ is written in the form of report. It primarily emphasizes on the issues related to corporate governance and ethics and the extent to which it is necessary to maintain corporate governance. Special attention is laid on the collapse of Rana Plaza that has occurred in Dhaka in 2013. This report is segmented into two parts, thereby introducing the case and the investigation details along with the ethical issues involved and their complexities and/or uniqueness in the first part. Moving on, the second part concentrates on repercussions of the incident on the population of Bangladesh as well as the attempts that the MNCs in Bangladesh make. Influence of social media on the concerned MNCs in order to make sure corporate governance is also taken care of

This report explores through the different aspects of corporate governance and ethics in the present business scenario to stand upright in the domestic as well as the global market. The thesis statement for this report is to find out the effectiveness of corporate governance ethics and the extent to which it is maintained to which it is maintained in the business organisations. A special reference is made to the incident that has occurred at Rana Plaza in order to understand the level to which corporate governance and ethics are followed in Bangladesh.

Rana Plaza Incident

This part of the report focuses on the producing a brief summary on the incident that has occurred at Rana Plaza along with investigating the case minutely. In fact, an in-depth study of each of the ethical issues involved is done along with critically examining and understanding whether the ethical issues are specifically difficult or unique in context to the MNCs.

Brief Summary of Rana Plaza Case

In the year 2013, the collapse of the garment factory of Rana Plaza in the suburbs of Dhaka takes place upon its workforce, thereby bringing a huge disaster on the employees present at the workplace at that time (The Economist, 2013). In accordance to reports, more than 1,200 staff members are found to lose their lives whereas about 2000 have been extreme injuries. It is found that there is a huge part of the Bangladeshi population who is engaged as workers in the MNC companies established in Bangladesh. Reports suggest that there is an occurrence of the collapse of Rana Plaza because of the illegal construction of two consecutive additional floors. It is found out that Rana Plaza has already been in news due to its substandard quality of construction (the Guardian, 2014).

Investigation of the Case

This particular disastrous incident opens a clear picture in front of the entire globe regarding the threatening conditions under which the Bangladeshi workers tend to operate. Thousands of Bangladeshi people are found to work in the MNCs in order to improve their economic conditions. On the contrary, most of the first world countries tend to establish at least one of their operating stations in Bangladesh because of the cheap labour force available there (Yardley, 2015). They do take advantage of the availability of human resources at cheap rates, thereby outsourcing their manufacturing processes. However, it is to be noted that there is an inadequate working environment at Rana Plaza, where neither the health standards nor the working ambience of the workplace is taken care of. The infrastructure of the entire building as the investigations point out is undoubtedly in a bad condition, thereby threatening the lives of the workers. It is found that the Western apparel organisation tend to make low investments in regards to the payments for the workers irrespective of the fact that they tend to make high profits. Moreover, the giant organisations like Primark, Just Jeans, Dotti and Smiggle, and Jacqui E do not even take proper initiatives to improper the workplace ambience as well as the infrastructure of the workplace building for convenient working and safety of the workers (the Guardian, 2014).

Ethical Issues Involved

As this particular incident highlights, there is the involvement of a number of issues behind the collapse of Rana Plaza. One of the most important unethical issues behind the collapse is the substandard infrastructure of the entire building. It is found that the usage of raw materials in the construction of Rana Plaza has not been of good quality, which can certainly be one of the reasons behind its collapse (Column.global-labour-university.org, 2015). Thus, here lies the irresponsibility of the construction company as well as the construction department of the Bangladesh Government in sanctioning the application of such low quality materials along with low skilled labourers. Moreover, reports point out that, the construction of the two additional floors of the building is found to take place, irrespective of the fact the building does not have the potential to bear it (Arun and Turner, 2009).

 

Moreover, another ethical issue in context to the occurrence of the case is the unsafe working conditions the organisations offer to the working staff. As Alam (2009) points out in the work, the Bangladeshi workers need to function for strenuous and lengthy working hours for almost every day in a week. It is to be noted that even though the Western countries offer such unfair working timings yet the Bangladeshi population continue to work for them because of the problematic economic condition that they are subject into. They do not want to lose on the minimum amount of wages that they earn. Researchers like Tsamenyi and Uddin (2008) indicate that the Western nations tend to take advantage of the low cost of living and poor economic standards in Bangladesh, thereby outsourcing their manufacturing functions at cheaper rates and earning high profits themselves. Although most of the workers tend to blame the suppliers for the inadequate payments that they receive, it is important to state that the firms to pay limited amount of money to the suppliers, which in turn becomes a meagre amount, when it reaches to the employees, after the suppliers take their share (Arrigo, 2006).

Recent investigation done by Ahmed and Nicholls (2011) reveal that even though most of the Western nations do take an active part in raising their voice against child labour or child abuse, most of their outsourced work is done by children in the developing countries like Bangladesh who are less than 14 years of age. There are also quite a many children who used to work as labourers in Rana Plaza. In most of the situations, the contractors are found to make sure that the work is done appropriately by abusing on the employees, irrespective of the fact that the workforce includes men and women, adults and children. It is to be noted that even though there are adequate amount of employability regulations, thereby focussing on the working conditions as well as children rights, hardly any initiative is taken in order to make sure that the implementation of the laws and regulations is done suitably (Rahman and Moazzem, 2011). Neither the governmental administrative departments nor do the respective business organisations show much interest in maintenance of corporate governance and ethics. Harassments of women on verbal and physical basis have also come up in the Bangladesh business scenario, where the contractors or the suppliers do take advantage of the fragile economic conditions of the population (Tsamenyi and Uddin, 2008).

In fact, the workers at Rana Plaza also face ethical issue of operating in an improper sanitation environment without necessary facilities. It is realized in accordance to the illustrations of Haque et al. (2011) that the workers are hardly provided with sufficient time to eat their meals or visit the washrooms. Moreover, the employees do not even receive any form of medical assistance during times of need; rather a portion of their salaries tend to get deducted when unable to work due to illness.

Complexities and/or Uniqueness of the ethical issues

It is to be noted that the ethical issues as mentioned in the above section needs to be taken care and attempts need to be made not to continue working, thereby depending on the unethical standards. It is to be noted that such ethical issues are unique in terms of the functions of MNCs since at a point of time they do tend to believe that the human resources of the other nation can be exploited largely. In fact, underdeveloped nations like Bangladesh, with fragile economic standards do often fall prey to the small monetary offers that the MNCs provide (Singh and Newberry, 2008).

Repercussions of Rana Plaza Incident on Bangladeshi people

Rana Plaza incident occurring in Dhaka has not only stunned the people of entire Bangladesh but also the entire globe. In fact, the organisations operating in Bangladesh has realized the importance of maintaining corporate governance and ethics while running a business and involving human resources for the various operational functions (Rahman and Moazzem, 2011). The incident of collapse has undoubtedly made the people of Bangladesh much more conscious regarding the danger that they can subject to in case the organisation that they are working in, do not follow regulations based on ethics and corporate governance. Thus, they too have started becoming aware of the fact as to whether the firms they are going into do maintain ethical regulations and terms of corporate governance. Along with the employees, the management of the organisations too have become much more conscious regarding the maintenance of safety and security for the workers operating within the firms (Sobhani et al. 2009).

Moreover, it is to be noted that the government of Bangladesh delivers an increase of 77% in relation to the salaries of the garment workers, thereby amounting it to about $69. The Bangladeshi Government finally realizes that the population is actually a part of a disastrous economic position and this needs a financial hike (the Guardian, 2014). In fact, the market has also become much more conscious, thereby making sure that the employees need to be taken care in order to develop a good brand image as well as brand name, in order to acquire a wide customer base.

Attempts taken by MNCs in Bangladesh

Since the MNCs in Bangladesh realise the necessity to maintain ethical governance along with ethics, therefore they are found to lay emphasis on the Accord on Fire and Building Safety. In fact, it is due to the incident at Rana Plaza that about 150 global brands are found to sign the Accord on Fire and Building Safety for operating in Bangladesh. This particular accord undoubtedly provides suitable scope for the staff members to adjourn working in case they find that their working conditions are not appropriate enough or are under threat. As Sobhani et al. (2009) point out; the Accord on Fire and Building Safety concentrates on providing opportunities to the workers to form local as well global unions, examining the building and the fire-based safety paradigms independently. Nonetheless, it even equips the workers with the right to stop operating if they do not have suitable working conditions. On the other hand, Walmart, the famous US retail giant is found to create and sign the non-binding Alliance on Bangladesh Safety with The Just Group. Researches done by Arun and Turner (2009) put forward that even though non-binding Alliance on Bangladesh Safety adheres to the safety and security of the workers in terms of their working conditions, nonetheless it does provides the advantage to the employees in forming associations or unions whether at local or international level.

Apart from signing contracts or adhering to the safety policies, the MNCs even decides to create a fund in order to provide compensation to the injured victims or the families of the employees, who are dead. In fact, the fund has made sure to already make the first lot payments. On an average the family of a deceased worker is found to obtain about $650, which amounts to around 50,000 as per the Bangladeshi currency (Column.global-labour-university.org, 2015). It is to be noted that since Primark (the popular British fashionable clothing retailer) has also been one of those companies, who used to outsource their manufacturing operations in one of the five factories of Rana Plaza, therefore, it decides to contribute more than $630 to each of the 580 individuals, who are found to be the survivors or the relatives of the deceased employees (ABC News, 2014).

 

However, recent investigations done by Haque et al. (2011) reveal that IndustriALL, the global labour group stands out to be highly disappointed on the global retailers, because they are found not to contribute sufficiently to the fund for helping the victims of te incident. In fact, reports suggest that, even though retailers demand that they assured to pay a total of $16 million to the concerned proposed $45 million ILO handled trust fund, yet Mikail Shipar, the Bangladesh labour secretary estimates that a maxim of $ 40,000-45,000 will raise as compensation for the victims of the Rana Plaza collapse, which actually amounts to only three million taka (the Guardian, 2014). Nonetheless, studies also put forward that certain organisations, such as Jay Jays, Just jeans, Portmans, Jacqui E, Dotti and Smiggle, and Peter Alexander, which function under The Just Groups and Best and Less yet did not find it necessary to sign the international agreement or accord (Column.global-labour-university.org, 2015).

In addition to it, the Bangladesh Government also takes initiatives in allowing certain membership firms to operate in favour of garment workers. Bangladesh Centre for Workers Solidarity (BCWS) stands out as an appropriate example of such an organisation, thereby promoting a necessity for congenial working ambience in the workplace in order to enhance the rate of productivity, which also contributes in developing the national economy (Young et al. 2008).

Influence of social media on MNCs for corporate governance

It is important to mention that after the incident that Rana Plaza, not only the workers but also the organisations have become more conscious relating to the working conditions and the safety of the employees. Nonetheless, even the social media plays a significant role in reaching out the unaware population and letting know about the extent to which suitable working conditions is necessary and the fact that organisations are bound to follow ethical considerations and corporate governance policies (Arun and Turner, 2009). In fact social media does take initiative in recent times in order to make sure that by the upcoming ten years, there are not going to be any such organisations or suppliers in Bangladesh who can practice unethical business procedures, especially at the stake of the employees’ lives and safety. It also takes initiatives in making the respective shareholders realize that apart from possessing the corollary advantages of share ownership, they also do possess the responsibility of taking care of the substance of the firm’s management (Rahman and Moazzem, 2011).

Social media made sure to keep the news at heights in order to bring it into the eyes of each of the social service users so that people can understand the monstrous effect of the carelessness in the maintenance of business ethics and corporate governance principles. Modern researchers like Sobhani et al. (2009) put out that with the development of technology, there is also the emergence of the social media, based on which a wide part of a population can be reached, thereby passing on any message or putting forward an issue. In fact, social media in comparison to print media or other digital media tools prove its efficiency in addressing people in a cost effective and time efficient manner. It is found that the news has spread like ‘forest fire’ not only with the news channels on television or on radio but also via the social networking sites, such as Facebook and Twitter (Young et al. 2008). Online discussions are found to take place over this incident, thereby focussing on the significance of corporate governance and ethics and even on the fact that how do the giant and successful retail companies of the first world nations commit the recklessness or carelessness of not complying to the principles of corporate governance.

 

In addition to it, social media plays an active role spreading the news across the globe because people tend to put up the experiences online so that different people can get to know about it. In fact, just like word of mouth recommendations, updates put up on social media is considered by many people, especially potential customers to develop ideas about the company (Arun and Turner, 2009). Thus, it is with the help of the online reviews that they realize that the company may not be the right choice with which they can function. Social media undoubtedly can raise a raise along with asking the other stakeholders to provide pressure on the company to comply with the corporate governance regulations. Undoubtedly, since customers stand out as another important stakeholder of the respective organisations therefore it is also necessary to stress on the customers’ viewpoints, who do not want to conduct any form of business with a firm that carries on unethical business procedures (Francis, 2014). Nonetheless, even the Bangladesh government, which initially did not take many initiatives, has now considered it to be an important aspect to concentrate on the ethical aspects and corporate governance. It is to be noted that

In this era of technological advancements, there is an introduction of Smartphone, which helps in connecting with people across the globe. Moreover, in order to meet the expectations of people belonging to different economic segments, most of the organisations have come up with Smartphone at affordable price range, thereby earning a competitive advantage in the market. Hence, most people even belonging to the working class do use Smartphone, thereby having access to the social media (Zattoni and Cuomo, 2008). The low income employees are using social media to inform the rest of the world about the threatening working conditions that they are subject to with the help of the Smartphone. Social media do equip them with the power to tweet and post their professional experiences at workplaces on the social paradigm. Thus, it is evident enough that social media plays an active role certainly in making a free-flow of information across the industry. In fact, social media helps in making people aware of the different factories in which the clothes of different giant organisations are being manufactured along with the GPS co-ordinates in relation to the factories (Young et al. 2008). Thus, it can be stated clearly that the social media has not at all been passive in nature. In fact, it is the usage of social media tools and activities, which concentrate on more people, have become aware of the incident at Rana Plaza.

Conclusion

On the completion of the report, it can be concluded that the incident of the collapse of Rana Plaza in Bangladesh has undoubtedly emerged a huge alarming situation not in Bangladesh but also across the globe. Social media undoubtedly takes initiatives in spreading the news as well as raising public responses against such irresponsible acts. However, the fact that activists and garments do mark the anniversary of Rana Plaza incident by carrying a mock coffin substantiates the fact that there is a long way to go before the workers can get justice as well as financial compensation. The question as to how long do the Rana Plaza workers need to wait for attaining justice still remains unanswered.

References

Books:

Arun, T. and Turner, J. (2009), corporate governance and development, 1st ed. Cheltenham, UK: Edward Elgar

Tsamenyi, M. and Uddin, S. (2008), Corporate governance in less developed and emerging economies 1st ed. Bingley: JAI Press

Journals:

Ahmed, K and Nicholls, D (2011), "The Impact of Non-financial Company Characteristics on Mandatory Compliance in Developing Countries: The Case of Bangladesh". The International Journal of Accounting, Vol. 29, No. 1, pp. 60-77

Alam , S.A.K.M (2009) “Changes in Securities Regulations: One Step Forward or One Step Backward”, The Cost and Management , the Institute of Cost and Management Accountants of Bangladesh, July August, pp. 20-22

Arrigo, E. (2006). Code of Conduct and Corporate Governance. Symphonya. Emerging Issues In Management, (1). doi:10.4468/2006.1.07arrigo

Haque, F., Arun, T., and Kirkpatrick, C. (2011). The political economy of corporate governance in developing economies: The case of Bangladesh. Research In International Business And Finance, 25(2), 169-182. doi:10.1016/j.ribaf.2011.01.001

Haque, F., Arun, T. and Kirkpatrick, C. (2011), Corporate governance and capital structure in developing countries: a case study of Bangladesh, Applied Economics, 43(6), pp.673--681

 

Rahman, M. and Moazzem, K. (2011), Capital market of Bangladesh: Volatility in the Dhaka Stock Exchange (DSE) and role of Regulators, International Journal of Business and Management, 6(7), p.86

Singh, S and Newberry, S. (2008) Corporate governance and International Financial Reporting Standards (IFRS): The case of developing countries. Research in Accounting in Emerging Economies, 8: 483-518   

Sobhani, F.A., Amran, A. and Zainuddin, Y. (2009) Revisiting the practices of corporate social and environmental disclosure in Bangladesh. Corporate Social Responsibility and Environmental Management, 16: 167-183.         

Young, M.N., Peng, M.W., Ahlstrom, D., et al. (2008) Corporate governance in emerging economies: A review of the principal-principal perspective. Journal of Management Studies, 45: 196–220.

Zattoni, A. and Cuomo, F. (2008) Why adopt codes of corporate governance? A comparison of institutional and efficiency perspectives. Corporate Governance: An International Review, 16: (1): 1-15.


 

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