Saturday, 8 June 2013

Regulating Corporations without Borders

As the recent tragedies in Bangladesh can attest, multinational corporations (MNCs) have been able to run a bloody racket – moving production from jurisdictions with relatively strong labour protections for workers (like Canada) to developing nations where workers have few, if any, labour protections. The result has been incredible profits for large MNCs and immense human suffering for workers around the world.

For workers and unions to respond to this particularly insidious aspect of globalization has proven difficult. As reported in an earlier post, the ability of MNCs to shift the means of production with ease undermines the negotiating power of unions and throws the balance between labour and capital severely out of whack. MNCs have, by and large, used this imbalance to exploit the desperation of workers from developing countries and to force concessions from unions from more developed nations. But the labour movement is not without hope and may yet have a strong a sustainable response to a situation which once seemed dire.

International Framework Agreements (IFAs) have been increasing in both use and popularity on the world stage, providing some counterbalance to the gross power MNCs have enjoyed since trade became internationalized. IFAs are agreements negotiated by companies and workers’ representatives. These agreements seek to address the imbalance by imposing international labour regulations. Of course, a slew of ILO Conventions and OECD Guidelines for MNCs have also sought to set international labour standards, but as we have seen via Canada’s blatant disregard for many ILO Conventions it has ratified, these attempts at setting international labour standards have met with limited success.

What sets IFAs apart from other attempts at regulation is their inclusiveness of workers in the regulation of labour. Where the ILO Conventions must be agreed to and ratified by governments, IFAs operate at the company level. IFAs represent an agreement between companies and workers’ representatives. This is not to say the ILO doesn’t play a pivotal role. It does. The ILO’s core conventions on labour standards are often incorporated into IFAs which seek to define basic labour standards for the workers involved.

Where IFAs can be an improvement upon the system of relying on governments to uphold their international labour commitments is found in the fact that IFAs directly involve workers. IFAs are agreed to by workers’ representatives and companies. Workers’ representatives are involved at every step, from implementation to monitoring. Workers have a voice and some say in their own treatment.   

Why, some wonder, would MNCs ever agree to involve the workers in the creation of IFAs that would limit the ability of MNCs to exploit the vulnerability of workers for their own gains? One crucial reason is public pressure. Tragedies like those in Bangladesh have amplified negative public perception of the practices of MNCs. This impacts their bottom-line - hence the willingness to negotiate IFAs.

The importance of IFAs cannot be overstated. Companies need the endorsement of workers in order to restore their public image and workers need companies to negotiate IFAs if they are to achieve the labour rights they deserve. The relationship is one of symbiosis. IFAs have the potential to bring a day when respect for the labour rights of workers will become synonymous with good corporate governance – when the value of company’s stock will be influenced not just by its quarterly financial statements, but also by the treatment of its workers. IFAs, in other words, may yet correct the imbalances brought about by globalization and restore the rights workers have lost in the turbid waters of the new economy.    

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