Coupling Labor Codes of Conduct and Supplier Labor Practices: The Role of Internal Structural Conditions

Abstract

In response to media exposés and activist group pressure to eliminate exploitive working conditions, multinational companies have pushed their suppliers to adopt labor codes of conduct and improve their labor practices to meet the standards set forth in these codes. Yet little is known about the extent to which suppliers are improving their labor practices to conform to codes of conduct, especially in organizations in which legitimacy structures like codes compete with productivity-driving incentive structures. We theorize that the presence of particular internal structures will affect the extent to which suppliers' labor practices will become more tightly aligned-or coupled-with their formal commitments to adhere to labor codes. Specifically, we theorize high-powered productivity incentives to be associated with less coupling, and being certified to management system standards and having workers' unions to be associated with more coupling. We also argue that these efficiency and managerial structures will moderate each other's relationship to coupling, and that certification and unions will each increase the other's positive association with coupling. Using social audit data on 3,276 suppliers in 55 countries, we find evidence that supports our hypotheses. Our focus on the internal structural composition of suppliers extends the decoupling literature by theorizing and demonstrating conditions under which suppliers' core organizational functions are likely to be buffered from change by legitimacy structures. Furthermore, our findings suggest important strategic considerations for managers selecting supplier factories and provide key insights for the design of transnational sustainability governance regimes.

Improving Working Conditions in Global Supply Chains: The Role of Institutional Environments and Monitoring Program Design

“…Our work builds on existing large-scale studies of coupling and labor codes of conduct in three important ways. First, we examine contingencies at the level of program design that other studies have overlooked (e.g., Toffel, Short, and Ouellet 2015; Bird, Short, and Toffel 2019) or have rejected as explaining compliance outcomes. Indeed, recent studies that explain coupling outcomes based on local institutions (Distelhorst, Locke, Pal, and Samel 2015) or social structures governing labor relations (Distelhorst et al 2017) explicitly note that monitoring system design is not driving these outcomes.…”

“…Second, we examine and find contingencies operating at multiple levels: from the details of program design to broad institutional pressures. Existing studies tend to focus on one level—for instance, either institutional (Toffel, Short, and Ouellet 2015) or organizational (Distelhorst et al 2017; Bird, Short, and Toffel 2019)—or they fail to identify hypothesized contingencies at multiple levels (Distelhorst et al 2015).…”

“…Others identify characteristics shared among small samples of firms that all improved their code compliance, but these studies fail to identify factors that explain why some factories improved more than others (e.g., Egels-Zandén 2007; Locke, Rissing, and Pal 2013). A few studies have revealed variation in improvement across factories based on the internal management structures in supplier organizations (Oka 2015; Distelhorst et al 2017; Bird et al 2019), but they do not look at influences outside the organization. Our study contributes to this literature by identifying both institutional and programmatic contingencies that explain variation in supplier improvement.…”

Freedom of Association and Collective Bargaining in Global Supply Chains: A Research Agenda

“…FOA and CB require employers to improve soft management skills such as leadership and human resource management, which have been shown to deliver better social sustainability results (Eisenbraun, Cohen & Brown, 2015), and consequently, supplier profitability (Brown, Dehejia & Robertson, 2018). A plethora of research shows that where FOA and CB exist in global supply chains, compliance with codes of conduct is significantly enhanced (Bird, Short, & Toffel, 2019; Oka, 2016; Bartley & Egels‐Zandén, 2016; Kuruvilla, 2021). Thus, FOA and CB constitute potential pathways to both decent work and meeting managerial goals of supply chain efficiency and risk mitigation.…”

Climate-Friendly Ethics Prescribed by Top World Airlines: Empirical Evidence

“…seems to be corporate document of utmost importance that formulates, fixes, and communicates the company's prescriptions for climate-friendly behavior. Not being a panacea, these codes contribute to organizational changes, strategy implementation, and ethics improvement [23][24][25][26][27]. Although following the prescribed climate-friendly behavior is necessary to cultivate climate change responsibility in a given company, the very prescriptions should also be regarded as implementation of this responsibility because these prescriptions reflect company priorities and make a clear distinction between what is "legal" and what is not.…”