Rana Plaza: Ethical Issues, Social Media, Multinational Companies - Essay.

Background of Rana Plaza Collapse

Questions:

1. 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.

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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).

2. 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"?

On 24^th April 2013, around 1200 textile workers died due to the collapse of the Rana Plaza in Bangladesh. As per the records of The Guardian, the building collapsed due to the illegal construction of the additional two floors on the substandard building. The incident was a loop hole in the history of ethical issues. The report here deals with the identification of the ethical issue concerned with the incident. Moreover the report will also deal with ascertaining of the role of social media in relieving the Bangladeshi workers in this situation (www.theguardian.com, 2014).

The deadly industrial disaster of Bangladesh was essentially a case of corrupt system. The Rana Plaza building which was an eight storey building providing accommodation to several garment factories was situated in Savar, which is 24 kms away from Dhaka. Bangladesh is characterized as the second largest apparel exporter (Mohammadrezaei et al. 2012).

According to the media reports the workers at the Plaza reported of seeing cracks within the building before the collapse day and informed the authorizes about the same. However the authorities did not bother to take any precautionary steps n this matter. Moreover press reports suggests that on the day of collapse the workers were forced to work and threatened with a salary cut if they restrained from working. Although the industrial authorities had order the factory owners to keep the factories closed till restructuring of the building was done, however the order went unaddressed.

Major Western high street brands like Primark, Matalan, Benetton, Bonmarche, El Corte, Ingels and Mango were related with the garment factories of Rana Plaza. Although the brands are popular among the western customers however the supply chain of these companies are not ethical(openDemocracy, 2015).

After the great loss of the lives in the collapse of Rana Plaza the industrial authorities in Bangladesh focused on the proximate causes of the collapse. The following major reasons were highlighted

Investigating the Ethical Issues Involved

Planning permission: Siegle (2013) opined that the building had permission for six storey construction however the use of unethical political connections enabled the builder and the owner of the Plaza to extend it to around eight storey. The building owner Mohammad Sohel Rana was portrayed as an unscrupulous businessman having ties with the ruling party.

Competitive struggle: Bangladesh being a developed country is depended largely on the export earnings from the garment trade with the Western developed countries like London and USA. Around 82%of the total Bangladeshi employment is seen in the garment sector. With the increasing competition pace of the cheap high end clothing brands like H&M, Gap, Primark etc the Bangladeshi workers are pressurized to work under high speed and low time to produce fashionable and cheap clothes. As the demand of these clothes increases in the Western market the companies are pressuring the Bangladeshi workers to increase the supply. Hence they are forced to work in difficult and risky working conditions.

Lack of labor security: On investigation of the situation it can be suitably suggested that the lack of proper labor protection laws was the most important reason behind the industrial disaster of Rana Plaza. The Labor law 2006 executed by the Ministry of Labor and Employment, Bangladesh did not mention any rules against the tyranny of the garment show owners in Bangladesh. Hence the owner of Rana Plaza was able to force the workers to work even under the risky situations. The press reports suggests that the Accord on Fire and Building Safety act which was signed by the shop owners of different developed countries were not formulated by the Bangladeshi shop owners (Jia, 2014).

Unethical Global trading policies: The relaxation of the trade agreements, traffic rules, labor laws and the end of the Multi Fiber Arrangement which is an international quota system reduced the price of the fashionable garment industry to a large extent (Bracdart, 2013).  The companies by employing unethical trading practices created an urge for the cheap priced fashionable clothes among the western customer segment that purchased the clothes as a luxury item and not as a necessity. However the result of this unethical trade practice was the loss of more than 1000 Bangladeshi lives.

Poor supply chain process: Jo and Harjoto (2011) opined that the global retail companies should have a more transparent supply chain process. Majority of the retailers like Primark and Gap don’t have full control over the supply chain process. There is a lack of sustainable supply chain in the retail companies. They are not aware of the origin and the working conditions of the garment producers. The supply chain process is not monitored and the companies are only bothered about the procurement of the garments from the middleman rather than being concerned about the factories

Unethical supply chain system: The supply chain system was not transparent due to the lack of accountability in the Rana Plaza case. Emenalo (2012) opined that sub contracting is a common issue within the retail sector which presents both reputational and economic risk to the major clothing brands. The unethical practices are also seen in the low profit margins of the supply chain system. Although supply chain system is the most important element of retail industry however the brands like Primark, H&M, Mango and GAP spend relatively low investment in the supply chain management system. According to Simpson and Taylor  (2013) without a robust supply chain management maintaining confidence in ethical practice is a constant challenge.

Role of Multinational Companies (MNCs)

Infrastructural integrity: The immediate cause of the collapse of Rana Plaza was poor construction. As per the reports of Asian disaster Preparedness centre the building was solely constructed for retail stores purpose however the building hosted three unethical garment factories (Hossain et al. 2013). As per the Bangladesh National Building code Rana Plaza was not supposed to bear the pressure of thousands of workers and electric generators which were unethically placed within the building. Dhaka Metropolitan Building Construction Rules 1996 shows that the load bearing support columns were also constructed haphazardly which resulted in the rack of the building. Moreover the land experts have pointed out that the building was developed on a potentially soft ground which resulted in the collapse of the building. The high range of profits induced the building owner to overlook the situations and construct the building in an unethical manner.

Unethical labor practice: Simpson and Taylor (2013) suggested that due to weak and fragmented labor movement, physical assaults on the trade union leaders and maintenance of high degree of bureaucracy within the political system of Bangladesh, the labors were not able to protest against the workplace harassments and risks occurring in Bangladesh retail industry. The labor rights formulated by the government of Bangladesh are not enforced within the National Labor Law. The lack of opportunity of collective bargaining has increased the level of unethical trade practices in Bangladesh.

Poor working conditions:  The retail sector of Bangladesh pays very low wage rate to the garment workers and also spend around 11% of the total revenue in the improving the working conditions of the readymade garment workers. Siegle (2013) opined that the lack of social auditing system within the organizational context of Bangladesh is the major reason for the rise of unethical workplace conditions. Hence the lack of social audit system prevents the shop owners from analyzing the routine occupational problems of the labors and since they are not accountable to any higher authority hence they pay less focus on these matters. Some of the poor working conditions experienced in Rana Plaza includes gates constructed in locked floors, overcrowding of the factory floor, windows barred, exposed electrical equipments and non working fire extinguishers. Soltani and Maupeti (2013) stated that instances of falsified HR records for passing of the audit system are seen in case of majority of the organizations operating in Bangladesh. Moreover on viewing of the registration issues of the workers it was found that the garment companies employed around 100 unregistered employees to work illegally in order to meet the rising demands for the clothing products.

Lack of business ethics in global business scenario: In the present scenario the business organizations are only concerned about the financial outcome and are not bothered about maintaining the code of ethics within the business process. Open Democracy (2015) opined that cultural relativism is a concept where a moral value varies from one country to another. Hence business organizations in UK and USA may have a cultural value of ignoring ethical values for business purpose however the same is unacceptable in developing countries like Bangladesh.

Impact of Social Media on Improving Working Conditions

Jo and Harjoto (2011) opined that issues of unfair trading practices are not different or unique to the MNCs. The instances of unethical practices are also seen in Wal mart one of the biggest retail chains of the world. The employees at Wal mart complains of poor working conditions which includes lack of adequate fire alarm, long working hours in winters, excess work pressure and slippery floors at workplace.

Siegle (2013) suggested that the size and the financial power of the MNCs results in exploitation of natural and human resources, unfair competitions and control of countries. In another instance of BHP Billiton the company faced a global ethical issue in respect of human rights abuses. Again in the year 2012 a similar incident to Rana Plaza was seen in the Tazreen Fashion factory in Dhaka were a fire breakout killed around 117 garment workers and injured around 200 workers. The major MNCs who sourced clothes from Tazreen included Walmart, US marines, Dutch company C&A, Li and Fung and IKEA. On investigation the reason behind the fire was found that poor working conditions and unethical electrical structuring lead to short circuit within the building (www.abc.net.au, 2014).

Hence instances of highly unethical trading practices are common within the large business process of the MNCs.

A year after the collapse of the building the government of Bangladesh adopted a slow but steady process of improving the working conditions of the Readymade Garment  (RMG) workers.

Safety Policy formulations: The government revised the plan of action of the National Tripartite Plan of action on Fire safety (NTPA) to improve the working conditions of the RMG workers. Moreover the Accord on Fire and building Safety in Bangladesh was signed by the MNCs on May 2013 which establishes an improvement program for the building safety measures (openDemocracy, 2015). The Accord thus established provides for norms for the national and international inspectors to make independent inspections of around 1500 garment factories.

Moreover the North American brands had set up an alternative initiative called the Alliance for Bangladesh Workers safety which also provided regulations for voluntary loans and inspections for renovations o over 700 factories. However as per the Bangladesh Garment Manufacturers and Exporters Association the accord closes the factories without providing for any financial funding for renovation. This is leading to huge job loss in RMG industry of Bangladesh. Hence the establishments of the policies are not totally beneficial for the workers (www.theguardian.com, 2014).

The Accord has also successfully started to construct fire doors, lock gates, support structure, fire stairs, automatic alarms and enclosed electrical cables for the purpose of renovation of the working buildings. The rules of Accord also suggest that the factory owner should have to pay the labors for 6 months in the view of ongoing renovation within the factory premises.

Training program: The accord also mentions laws for including training programs for the selected trade leaders to make them better trade union representatives. Moreover the system plans to provide training on labor laws, employability issues, collective bargaining process, wage structure and occupational health and safety issue to the worker’s representatives so that they can fight for their own rights.

Changes Since the Rana Plaza Collapse

Labor laws: After the collapse case of Rana Plaza the amendments were made in the Labor law of Bangladesh. A positive change was seen in the amended section 178 subsection (3) of the law which made successful and compulsory registration of around 146 labor unions in Bangladesh. (Mohammadrezaei, et al. 2012) opined that the presence of an active labor union helps the employees to voice their opinions as well as gives them a collective bargaining power.

Compensation arrangement: The Rana Plaza Donors Trust fund was established by the International Labor Organization (ILO) with an expectation to collect around $40 million in order to provide reasonable compensation to the survivors and victims’. However due to the existence of subcontract with MNCs majority of the MNCs refused from contributing to the fund and hence the compensation was not sufficiently paid to the victims (www.theguardian.com, 2014).

Trade laws: The operations of RMG industry of Bangladesh are directly linked with the EU countries. Mohammadrezaei et al. (2012) opined that a duty free access offered by the EU countries and the low rate of wages in Bangladesh has helped Bangladesh to become the largest exporter of garments to Europe. However with the grave Rana Plaza issue the EU announced to stringent the trade conditions with Bangladesh so that the exporting demand can be reduced and the unethical work pressure can be reduced on RMG workers.

BSR initiatives:  To prevent any further calamities similar to that of Rana Plaza, the BSR took initiatives in remodeling the supply chain management practice, established a human rights commission group, build a HER project and established a center for sustainable procurement.

According to the reports of The Guardian the incident has triggered the sense within the consumers about the supply chain issues and the Bangladesh Centre for Worker’s Solidarity has been targeted by the Bangladesh government to operate freely on behalf of the garment workers (Hossain et al. 2013).

Major retail brands namely Primark, Wal-mart and ASDA had effectively contributed to the funds of compensation in order to make an ethical business practice.  However brands like Benetton, Store21, and Robe Di Kappa etc refrained from any kind of business sustainability. As per the reports of the Forbes the Canadian fast Fashion Brand Joe Fresh was one of the first brands to make initial visits to the collapsed place and also make initial contributions for the victim’s compensation. However some of the companies like Disney withdrew their operations entirely from Bangladesh due the pressures created by the social activists concerning with improvement of workplace safety (www.theguardian.com , 2014).

The rising death toll in the Rana Plaza collapse had forced the western brands to make a choice of either abandoning the country or stay and improve the economic situations. However Siegle (2013) opined that the abandoning would have been a financial loss for the brands as they would have source garments at higher costs, media criticisms for abandoning a poor nation and also poorer working conditions in other low wage countries. Hence majority of the retailers namely Wal Mart, H&M, Mango, Children’s Place, Gap and Benetton decided to continue the operations with Bangladesh however they decided to reduce the amount of export.

Lack of Labor Security and Unethical Global Trading Policies

Emenalo (2012) have commented that there are three different kinds of media namely collaborative projects (Wikipedia), Blogs and micro blogs (Twitter), content communities (Youtube) and social networking sites (Face book). Each of the media has a different effect on the society and the government rules.

On assessing the contribution of Brands for Rana Plaza victim compensations, it was found that majority of the MNCs performed this act due the pressure of the media. Jia (2014) opined that the dramatic rise of 24 hour news channels, online comment able sites like Twitter and Face book can make the minute business practices viral in minutes. The activists groups take the help of the social media to publicly convey information and voice their protests against company and government policies.

The collapse of the Rana Plaza building alarmed the Western brands and the visuals of the building rubble along with the injured victims created a diverse emotion in the minds of the western consumers. The Face book took the opportunity of posting the pictures of the disaster in the home page of brands like Joe Fresh, Mango and Benetton. The corporate reputation of the brands were hampered by this action and majority of the sales declined as the angry consumers who were unaware of the regime working conditions of the Bangladeshi workers came to know about the consequences.  Jia (2014) hence commented that media adds a fuel to the fire.

The news highlights in the Western news articles published by Forbes and Guardian also highlighted the facts that the brands associated with the Rana Plaza building were least interested about the safety of the workers as they sourced product on a sub contracted manner at a very negligible wage rate. This made the retailers face street protests from the consumers of the cheap western clothes.

Hence different media group took the opportunity to highlight the distress of the Bangladeshi workers so that the EU as well as the exporting brands pay concern about the distress and implement steps in order to improve the present situation of the workers. The You Tube videos showcasing the grievances and the pathetic conditions of the survivors made the situation serious in the mind of the customers (Siegle, 2013).

Conclusion

The report sheds light on the biggest industrial disaster of the century, the collapse of Rana Plaza in Bangladesh. From the above analysis it is clear that the unethical trade practices, opaque supply chain system, lack of accountability, low wage rate and high demand for cheap clothes, excessive work pressure and lack of proper infrastructural facilities were the major reasons behind the collapse of the building which resulted in death of around 1121 workers. Although the potential improvements have been made in the working system of the Bangladeshi workers however there is still no appropriate labor policy and no instances of workplace safety. The social media however helped in highlighting the issues and the tragedies which attracted the funds from the exporting brands as compensation or the victims. However there is still a scope of improvement of the social conditions of the workers.

References

Books

Simpson, J. and Taylor, J. (2013). Corporate governance, ethics, and CSR. London: Kogan Page.

Journals

Bracdart, X. (2013). Financial distress and corporate governance: the impact of the CEO. International Journal of Business Governance and Ethics, 8(4), p.289.

Emenalo, C. (2012). Corporate governance systems as dynamic institutions: Towards a dynamic model of corporate governance systems. Afr J Bus Ethics, 6(1), p.39.

Hossain, M., Nahar, N., Nayan, M., Jahan Ema, A. and Arafat Alve, M. (2013). Experience of Bangladeshi occupational therapists with “Rana Plaza Tragedyâ€Â survivors: recovery and rehabilitation phases of disaster management. World Federation of Occupational Therapists Bulletin, 68(1), pp.14-19.

Jia, X. (2014). Corporate Governance in State Controlled Enterprises. Journal of Business Systems, Governance & Ethics, 1(3).

Jo, H. and Harjoto, M. (2011). The Causal Effect of Corporate Governance on Corporate Social Responsibility. Journal of Business Ethics, 106(1), pp.53-72.

Mohammadrezaei, F., Saleh, N. and Banimahd, B. (2012). Political economy of corporate governance: the case of Iran. International Journal of Business Governance and Ethics, 7(4), p.301.

Soltani, B. and Maupetit, C. (2013). Importance of core values of ethics, integrity and accountability in the European corporate governance codes. J Manag Gov.