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Corporate Governance & Ethics: A Case Study Of Rana Plaza

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Questions:

Part A

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.

1. 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).

Part B

1. 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.

2. Describe the Role of social media for the workers of Bangladesh- Positive or quick “Twitter Moment”

 

Answers:

Executive Summary

The report will be dealing with the collapse of Rana Plaza garment factory that killed a large number of workers and injured a several number of workers. This report has focused on the investigation of Rana Plaza and its findings along with the ethical issues that the MNCs claims to follow and adopt while doing business within the country or globally. In addition to this, the social media influence and pressure on the MNCs will also be discussed along with the positive role that social media played for the Bangladeshi workers.  

Introduction

Workplace accident or occupational accident is a sudden and unplanned catastrophe that leads to the death and injury of a huge number of employees and workers. It may occur due to the fall or collapse of a business building, a sudden break out of fire, emission of harmful gases or due to electrical short circuits (Alpaslan and Schenck, 2014). This report will be dealing with the collapse of Rana Plaza garment factory on its workforce thereby killing nearly 1200 workers and injuring nearly 2000 workers. The collapse and fall of Rana Plaza building is considered to be one of the deadliest tragedy till date in the history of garment industry globally (Diermeier, 2014).

This report will focus on the background of the factory along with the investigations and important findings and the ethical issues involved. In addition to this, the report will discuss about the role of the MNCs associated with this factory had done for strengthening the ethical obligations to the workers of Bangladesh. The role and the pressure of social media on the MNCs as well as the stakeholders are also discussed vividly.

 

Part A

1. Background of Rana Plaza

The building of Rana Plaza Garment Factory was an eight storied building nearly having 5000 employees, bank and several other shops. The building was owned by Sohel Rana who was a member of Jubo League as well as Awani League. The MNCs for which this factory manufactured apparels includes Mango, Primark, Wal-Mart, Joe Fresh, Benetton, Matalan, Monsoon Accessorize, El Corte Ingles and Bonmarche (Henniker, 2014).

Investigations and Findings at Rana Plaza

On 24th April, 2013, one of the largest disaster in the history of garment industry happened with the collapse of Rana Plaza Garment Factory killing several people and injuring the same. According to Duncan-Daston et al. (2013) a huge amount of workers worked in Rana Plaza for manufacturing the clothes and garments for the branded multinational companies and shoppers of US, Europe and Canada. The majority of the workers were young men and women who nearly worked for 90-100 hours in a week and only had two days off in a month. After working for several hours, the young helpers earned only $10.56 a week or 22 cents an hour whereas the senior sewers only received $12.48 in a week or more precisely 24 cents an hour. Generally these Bangladeshi people were forced to work for long hours at a very nominal cost. Apart from this, the building where these people worked that is the Rana Plaza factory building was very old and was in a very bad structure. Morad (2014) commented on the fact that it was investigated and found out that the building had big and dangerous cracks in its walls and was not at all a safe place to work. Moreover it was also found out that on 23rd April, 2013, the TV channels recorded the footages that clearly depicted the cracks and holes in the walls of Rana Plaza which resulted in the evacuation of the building. The shops and bank on the ground floor of the building was immediately closed but Sohel Rana asked his workers to return back to their work on the next day since the building was safe (Diermeier, 2014).

It was found out through the investigation that on the very next day that is on 24th April, 2013 the workers refused to enter the garment factory since they were frightened of the large cracks that were clearly seen in the walls of the factory. According to Cavkoska (2014) Sohel Rana had to hire some local paid goons for beating up the men and women workers in order to force them to enter the factory. Moreover, the managers also frightened the workers that if they will not return back to work, they will not be paid for April and their wages will be withheld. This threatening forced the workers to reenter the factory building since they were poor and no money meant any food for them and their children. Further investigation and findings informed that at about 8:45 am the electricity went and the five generators of the factory were started. Immediately at that moment the workers felt that the building started moving and with a huge sound of explosion the building started falling down and later collapsed (Henniker, 2014).

This collapse resulted in killing a huge number of workers and injured a good amount of workers with many of the workers still missing. After the collapse, it was also investigated and found out that according to Bangladesh Fire Service and Civil Defense that the upper four floors were built without permission and authorization. According to Rana (2013) the architect of Rana Plaza building told that the building was meant only for offices and shops and not at all for factories. The structure of the building was not potentially strong enough for bearing the weight as well as vibration of the large and heavy machineries. After the collapse, the Bangladeshi home minister confirmed that the fire service personal’s, police, army, and Rapid Action Battalion troops all were engaged in the rescue mission for rescuing the workers those who were still alive. Morad (2014) had commented that further investigation found out that the building was unauthorized built on a pond, the building which was meant for commercial purpose turned to industrial usage, the upper floors were built without permit and the construction material that was used for building was substandard. These factors lead to the collapse of the building of Rana Plaza garment factory leading to a historic disaster.

 

Identification of ethical issues to the multinational companies that lead to the disaster

According to Ethical Trading Initiative (ETI) it is essential for the MNCs to follow the ethics, rules and regulations within the organization as well as outside the organization regarding trading with the suppliers. Kabeer and Mahmud (2004) had commented on the fact that the ethical issues are more or less similar to the MNCs and these companies are equally responsible to see whether the suppliers of the garment factory are bounded by the ethics of ETI. Alom (2012) also had a view that the multinational companies such as Mango, Primark, Matalan, Wal-Mart, Joe fresh, Bonmarche etc companies all suffered due to not considering the ethical issues that the Bangladeshi suppliers followed and trading with them. The ethical issues that needed to be considered by these MNCs before trading or continuing trading with Rana Plaza Garment Factory are discussed below-

People are free to choose their employment- According to the International Labor organization; the people are free to choose their employment. Moreover no one can force the people to get involved in the kind of employment where they do not want to get indulged. But, in Rana Plaza factory, according to Alpaslan and Schenck (2014) there was no such rules that the company head used to follow for the workers. The workers were a kind of bonded labors in the factory and were neither paid well nor were given proper leaves and were bound to work for several hours. This was an unethical practice which never came into the notice of the MNCs who were trading with the factory. Due to which the factory head never bothered to change the rules and the workers were forced to work irrespective of their choices. Duncan-Daston et al. (2013) added that before the collapse of Rana Plaza, initially the workers never wanted to enter the building after seeing the cracks but were threatened and beaten for entering the factory. If the MNCs used to follow the ethical rules and warned the factory head to follow the ethics, then maybe the mishap could have been avoided.

Working conditions need to be safe as well as hygienic- According to Kabeer and Mahmud (2004) it was investigated and found that the working condition within the factory was not at all safe. The building was initially built for the commercial purpose and shops which later turned into industrial purpose. Moreover the materials used for construction were of inferior qualities that lead to the collapse of the building. It was the responsibility and under the ethics of the MNCs to check whether their suppliers are maintaining a safe and hygienic workplace or not. Cavkoska (2014) commented that the building of Rana Plaza was built without permit and the upper floors were also built without proper authorization. After seeing the cracks in the walls of the factory, steps were not taken to mend it rather the workers were forced to go inside the factory for working that lead to the death of many workers when the building collapsed.

Limited working hours- According to Kabeer and Mahmud (2004) it was found out that there were no fixed working hours for the workers of Bangladesh. They were treated somewhat like a bonded labor having working hours nearly of 90 to 100 hours per week. The workers were badly paid against their service and had only two days off per month which violated the international standard of work. Alom (2012) had commented that the MNCs with which the factory traded could have seen whether the factory is maintaining the ethics as per international standards. But, due to their negligence, in the 21st century; the international laws of labors had been violated to a huge extent that was found out after the collapse of the factory building.

No inhumane treatment- According to Rana (2013) the law against the mistreating of the employees was also violated and never came into the notice of the multinational companies that were trading “ethically” with the Rana Plaza factory. The factory never treated its workers properly and moreover on the day of collapse, they were beaten up by the local goons that were hired by the factory head and were also threatened that their wages for the month of April will be withheld if the workers do not enter the factory. This kind of mishandling the workers which were against the internal laws was practiced in Bangladesh behind the ethical curtains of the MNCs who claim to trade ethically (Diermeier, 2014).  

 

Part B

1. Responsibility of the MNCs associated with Rana for recognizing and acting more upon the ethical obligations

The MNCs that were associated with Rana Plaza garment factory initially never took attention regarding the ethics, rules and regulations that the factory had adopted. Duncan-Daston et al. (2013) commented on the fact that before the collapse of Rana Plaza, none of the ethics regarding the wages, working hours and other ethical considerations were followed or taken into account and the MNCs were did not paid any attention to it. The collapse of the factory building was a curtain raiser to these companies because it showed how the workers were manhandled and maltreated to work for nominal amounts. According to Rana (2013) after the collapse of the factory building, the multinational companies like Primark, Wal-Mart, Mascot, Mango, ASDA etc have done enough contribution to the Rana Plaza Donors Trust Fund. But still there are many companies such as Benetton, Cato Fashions, Store 21, Lee Cooper, NKD, and Yes Zee etc have not yet contributed.

According to Alpaslan and Schenck (2014) the companies that traded with Rana Plaza garment factory had to give compensation for the loss of the lives of the people as well as to the live victims of the accident. It was the shortcomings of the multinational companies that they overlooked the critical conditions of the factory where the workers had to work for their livelihood. In addition to this, the workers were also maltreated and were not handled properly rather were given very low wages for their long hours work. Alom (2012) commented on the fact that these ethical considerations of the suppliers were never focused or given importance by these MNCs who rather claim that they have adopted ethics, rules and regulations in their business.

After the collapse of the factory building, the MNCs became aware of the ethical considerations that they need to follow while trading ethically. The responses of the multinational companies varied from one another. The European Government threatened the Bangladeshi government for altering the General System of Preferences (GSP) if they failed to obey the international labor standards.  Morad (2014) commented that this collapse of Rana Plaza factory building resulted that nearly 150 of the global clothing brands have agreed upon and signed the agreement on Fire and Building Safety in Bangladesh that allowed the workers and staff members to stop working if they feel that their safety is under threat. But it is still seen that two of the Australian companies didn’t sign up the agreement of crucial safety for the garment workers of Bangladesh. In addition to this, it is seen that Primark made a very huge contribution of nearly $640 dollars to nearly 580 people who were either the survivors or relatives of the victims of Rana Plaza factory. According to Alpaslan and Schenck (2014) the global labor group had criticized the global retailers for not funding enough for the crisis that Bangladeshi labors had faced. For the workers who have died, their payments are made according to their age, number of dependents and earning potential. The workers who had survived but were injured badly will also receive money as compensation. For many companies, the compensation giving speed is comparatively very less which on demand of the world unions have speeded up t a good extent. 

Pressure of Social Media on MNCs through activism and stakeholders

The social media played a very crucial role in placing pressure to these MNCs and stakeholders. Duncan-Daston et al. (2013) commented on the fact that specially, the social media adopted photography as activism in order to pressurize the multinational companies and stakeholders. This is because; visual journalism shows the people the real scenario of the actual happenings in the world. Several campaigns were held to put pressure on the MNCs and the stakeholders. The Clean Clothes Campaign that took place in April, 2014 had the agenda to show the world the activities and responsibilities of the MNCs in response to the disaster. The headline of the campaign was to show the world “Who has paid and who is dragging their heels” that showed the companies who had made contributions regarding the collapse and the companies who didn’t bother to help these victims (Siegle, 2014).

In addition to this according to Kabeer and Mahmud (2004) the Fashion revolutionary Day was also organized in order to use the consumer’s power for convincing the companies for the wellbeing of the workers as their primary priority. The NGOs and media played an important role in seeing and supervising the laws and regulations followed by the companies while trading within the country or importing goods from outside countries. Kabeer and Mahmud (2004) had commented that the constant vigilance of the media puts the multinational companies in pressure for following the ethics, rules and regulations while ding inside the country or doing with the business with the global countries. Due to the hostile media exposure and coverage, the multinational companies changed their business practices and thereby were forced to adopt ethical measures in reply to the activist demands from the media.

 

2. Role of social media for the workers of Bangladesh- Positive or quick “Twitter Moment”

The social media that played an important role for the workers of Bangladesh gave a very positive impact on the global world rather than a flicker or a quick “Twitter Moment” on the disastrous situation of the Bangladeshi workers on the Rana Plaza collapse. Cavkoska (2014) commented that the accident of Rana Plaza that lead to the deaths of several workers as well as injury of a large number of workers, the supply chain to the multinational companies faced a lot of problems due to the active participation of the social media The social media was abrupt and actively participated in raising their fingers to the corporate responsibility and ethics of the multinational companies that were supplied the garments from this factory.

According to Alom (2012) the direct intervention of the social media played a positive role for in favor of the Bangladeshi workers. This is seen that after the collapse of the factory building, the social media pointed fingers towards the MNCs for neglecting their responsibilities of knowing whether the suppliers follow the ethics, the International laws of Labor and trades ethically. Rana (2013) commented on the fact that due to the direct involvement of the social media, the multinational companies are compelled to sign on the Accord on Fire and Building Safety that allowed the workers to stop working if they find their safety is in danger. It has been broadcasted and published that after China, Bangladesh is the largest exporter of garments and have nearly 4 million garment workers in Bangladesh.

Duncan-Daston et al. (2013) had an observation that the salaries that they receive are far below the standards and their working conditions are pitiful as well as far below the living standard. These exposures of the media mainly after the collapse of Rana Plaza flamed up the global customers and were an eye opener to the companies who were not concerned with the ethics that their suppliers followed. According to Alpaslan and Schenck (2014) because of the activism of the social media, the buildings of Bangladesh that were unethically and unauthorized built up were closed due to safety reasons. This somehow helped to save the lives of the workers and thereby helped in improvement of the working conditions and adoption of ethical considerations within the factories.

Conclusion

The report focuses on the collapse of Rana Plaza garment factory in Bangladesh that killed and injured several numbers of workers and was an eye opener to the multinational companies. The report is based on the investigations and findings of the Rana Plaza case and also focused on the ethical issues that the MNCs claimed to follow. In addition to this, the case study also focused on the responsibilities that the multinational companies have increased and have starting acting on their ethical obligations. Moreover, the pressure on the MNCs and stakeholders by the social media are also discussed elaborately. The activism of the social media played a positive role for the workers of Bangladesh.

 

Reference List

Journals

Alom, K. (2012) “Capital Structure Choice of Bangladeshi Firms: An Empirical Investigation”, AJFA, 5(1), pp. 34-64

Alpaslan, N. and Schenck, R. (2014) “CHALLENGES RELATED TO WORKING CONDITIONS EXPERIENCED BY SOCIAL WORKERS PRACTISING IN RURAL AREAS”, Social Work, 48(4), pp. 54-74

Cavkoska, B. (2014) “Freedom of movement of workers as a condition for implementing the Europe 2020 strategy for employment and growth”, SEER, pp.393-401

Duncan-Daston, R., Hunter-Sloan, M. and Fullmer, E. (2013) “Considering the ethical implications of social media in social work education”, Ethics and Information Technology, 15(1), pp.35-43

Kabeer, N. and Mahmud, S. (2004) “Globalization, gender and poverty: Bangladeshi women workers in export and local markets”, Journal of International Development, 16(1), pp.93-109

Morad, M. (2014) “MEDIA CONCERN AND TRENDS OF FERTILITY IN BANGLADESH”, IIASS, 7(2), pp.99-112

Rana, S. (2013) “An Overview on Co-Efficient of Localization & Localization Curve and Their Application Opportunities in the Context of Bangladesh”, IOSR-JHSS, 12(3), pp.72-77

Websites

Diermeier, D. (2014) The Rise of Private Regulation in Global Commerce - Here's how business leaders can address the resulting risks, Insight.kellogg.northwestern.edu. Available at: https://insight.kellogg.northwestern.edu/article/the_rise_of_private_regulation_in_global_commerce/ [Accessed 25 Jan. 2015]

Henniker, E. (2014) The Bangladesh Factory Collapse: A Case for Intervention Policy Change, Seven Pillars Institute, Available at: https://sevenpillarsinstitute.org/case-studies/bangladesh-factory-collapse-case-intervention-policy-change [Accessed 25 Jan. 2015]

Siegle, L. (2014) We Are What We Wear: Unravelling fast fashion and the collapse of Rana Plaza - Guardian Shorts | 60-Minute Masterclasses, Guardian Shorts | 60-Minute Masterclasses, Available at: https://guardianshorts.co.uk/wearewhatwewear/ [Accessed 25 Jan. 2015].

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