Field Study of Corporate Codes Implementation at the Workplace

An international anti-sweatshop campaign launched a pilot project to monitor the implementation of corporate codes by TNCs in China, and this provided us with the opportunity to conduct this research. This study is based on an eighteen-month observation of the pilot project to promote fair labor and business ethics in China. Staff and workers’ views from two factories - one in the Pearl River Delta and the other in the Yangtze River region - were solicited to assess the labor codes practices and their influence on production politics. Interviews were conducted in the workplaces as well as workers’ dormitories between 2002 and 2003. These two enterprises were willing to provide me with systematic documentation and allow use carry out in-depth interviews because they had signed an agreement with the anti-sweatshop campaign and a European brand-name TNC to implement and monitor the corporation code program. In addition we had access to some general surveys, NGO documentation and mass media coverage that form background information for the study.

The two enterprises are China Miracle Garments (China Miracle) in the Yangtze River Region, and China Galaxy Apparel (China Galaxy) in the Pearl River Delta. Besides frequent exchanges with the directors, the production managers, the personnel secretaries, the social compliance officers and the trade union chairs, formal interviews were conducted mainly with production workers. These workers were selected on the shop floor by my research team, taking into consideration factors of gender, age, marital status, work position and work department, covering a range of departments including the design, cutting, production, quality control, and packaging departments.¹⁴. We chose a total of fifty workers in China Miracle, and thirty-two workers in China Galaxy for in-depth interviews. Night visits to the factory dormitories were also undertaken to crosscheck information provided in the daytime by the workers while in the workplace.

The goal is to be global

Global pressure on TNCs to raise labor standards comes down the global production chain and ends up putting pressure on manufacturers in China and elsewhere. Enterprises in the two Deltas were under pressure to enhance their company profiles by upgrading their production facilities, reviewing management practices and improving workers’ living conditions to varying degrees. Many large enterprises therefore set up new positions such as social compliance officers to enforce code implementation and raise workers’ awareness of code provisions. Social compliance officers were employed at China Miracle and China Galaxy under the requirements of the European corporation in mid–2002. To them, the adoption of corporate codes was an additional burden as a necessity to implement just-in-time production and production of high quality, but these enterprises hardly had any choice. Severe competition among them resulted in the loss of supplier factories bargaining power with the TNCs in the global production system. Directors complained that production order prices continuously dropped but the requirement for labor codes had been stringent in the previous few years. They took the implementation of these codes as market pressures and emphasized that:

What we can do is to let our enterprise be global, and live up to the international standard of codes. It is the only way to secure production orders from our clients, especially those from America and Europe.

Thus, China Miracle, a joint-venture enterprise owned by a Taiwanese company and a mainland private businessman, injected RMB 20 millions to build a new 40-acre enterprise factory in 2000. The new investment not only enlarged the size of and enhanced the facilities of the enterprise, but also the working conditions. Management strategy was to build a model enterprise in the Yangtze River region so as to attract more production orders. The new compound went into operation in March 2001 and consists of a three-story factory with an attached administrative block, a separate one-story canteen and a utility room for workers’ recreational purposes.¹⁵ Surrounded by a rectangular wall with gates policed by armed security guards, China Miracle is one of the largest garment factories in the high-tech development zone. In addition to an emphasis on product quality, meeting the TNCs corporate codes and international standards such as ISO 9000, ISO 14000 and SA8000 were also goals set by the management team.¹⁶

Like China Miracle, China Galaxy located in Dongguan had the ambition to establish itself as a model factory in Pearl River Delta. Established in 1993, the enterprise, belonging to a Hong Kong company, controlled by a Hong Kong director and five Hong Kong managers, supplemented by twenty supervisory staff members from the mainland who were in charge of the daily management and operation of production. In addition to production orders received from the European TNC, China Galaxy also produced sportswear for American brand companies. The Hong Kong company was well aware of codes of conduct issues and hence laid down strict guild lines for the management staff of China Galaxy as well as its other factories in Shenzhen to follow. Even when first established, China Galaxy already aimed at becoming an advanced and modern factory in the Delta, outshining the thousands of other plants in the same sector. It expanded quickly to a workforce of 1,500 in the mid 1990s. The company management claimed that it had introduced modern management models and international labor standards. Directors and managers were proud of having built up a new “factory empire” on the mainland, one which was not only physically grand and magnificent, but with modern and advanced production facilities and rationalized managerial practices.

To upgrade its company facilities to meet the code requirements, China Galaxy made another investment of RMB 5 million to build a new dormitory in 1999. The dormitory compound was like a modern boarding school, with facilities including two canteens, a dancing hall, a reading room, a shop and a small clinic. Surrounded by trees, there was an open area for workers’ recreational activities such as badminton, basketball and the like. The dining hall would also be filled by workers in the late evening for watching TV programs and film shows. It was just like a small community. Typical of a model factory in China, there was, however, a hierarchy of accommodation, serving to segment the labor force. The Hong Kong managers were provided with well furnished self-contained flats of three bedrooms. The production workers were housed in rooms with a shared toilet, and with a common room for hot water on each floor. Each dormitory room accommodates six to eight workers, with storage space provided for their clothes and personal belongings. By all standards, the physical facilities were unusually good compared to other Hong Kong owned factories in the Delta region.

All the dormitory facilities follow strictly the European corporation’s code, which states dormitory facilities meet all applicable laws and regulations related to health and safety, including fire safety, sanitation, risk protection, and electrical, mechanical and structural safety. It also strictly controls sex segregation of sleeping quarters, privacy of space, number of toilets and showers, sufficiency of water suppliers as well as the freedom of workers’ mobility. It also says that dormitory residents are free to come and go during their off-hours under reasonable limitations imposed for their safety and comfort.

The meticulous regulations of corporate codes on physical standards is an attempt by TNCs to address the critique of Chinese factory regimes as despotic or authoritarian. These detailed codes serve to raise Chinese factory regimes to reach global modernized standards. However, the effort to enhance the labor standards via codes implementation was not effective because in interviews the company directors kept complaining that the production order prices had been dropping continuously yet the requirement for labor codes had been stringent. The director of China Miracle remarked:

The code practice required by the European Corporation is a “market behaviour”. We are lost at the moment, but we hope to get a return in the long run. It’s the way to survive in the world market.

The factory owner had injected new capital to meet the code requirement on physical facilities in the hope of securing more production orders from European retailers and also fuel hopes of expanding into the American market. Compliance to the corporate code of conduct had little to do with improving labor rights. The supplier company was purely motivated by business imperatives.