Corporate scandals

Raj is a twelve year old boy working at a clothing production facility in India. He lives in a small room with five other co-workers where he is forced to stay while he is not on duty. The company promised Raj proper pay and that his family would be taken care off. Unfortunately like many other workers, he was deceived and forced into slavery.

child labour, india, sweatshops, unfair trade, unpaid workers, coroparate scandals, human rights

13 year old Sobuj works in a textile factory in conditions of extreme heat and noise. For this he earns about 1200 Taka a month (£10.00 GBP).

What are human rights?

The Universal Declaration of Human Rights (UDHR) is a milestone in history. It was drafted by representatives with different legal and cultural backgrounds in 1946 and stands as a common standard of achievement for all individuals and nations. The UDHR has a total of 30 articles that explain the various declarations such as recognition of equal and inalienable rights of all members of the human family as well as having the right of justice, fair pay, and that no one shall be held in slavery.

Raj is illiterate, so he convinced one of his roommates to write ‘help’ on a piece of cloth. Raj secretly stitched the help note into one of the shirts he produced hoping someone would find it. It is his only chance to raise his voice. There were many others before him that tried to escape the facility but failed. He has been threatened by the facility supervisors that they will not pay him anything if he tries to escape again.

Is it inevitable?

Many stories have come to light regarding forced labour and many organisations try to raise awareness to stop these practices, especially in the garment industry. These problems lie at the very core of a business. In the Global CSR Study (2013) released by Cone Echo Communications it states that 88% (of participants) believe companies share positive information but withhold negative information. There are only a small number of companies that provide transparent reports to the public, meanwhile the majority of them avoid the truth while publicly stating there are no such things happening in their organisation. When proven wrong, they accept their wrongdoings yet do nothing to rectify their unethical behaviour.

child labour, india, sweatshops, unfair trade, unpaid workers, coroparate scandals, human rights

A report from Wharton University (Pennsylvania) tries to explain why businesses get involved in scandals. Predominantly businesses push practices and ethical boundaries to their limits. Business leaders are under constant stress to deliver outstanding results and wind up making unethical decisions that may even be encouraged by the board of directors. At times, business leaders are misguided as to why a business exists; therefore they allow companies to achieve their goals through questionable means. The report finds corporate scandal is an inevitable consequence of a growing market.

Mike is a public relations agent that strives to overcome bad reputation through public statements. His work adheres to a strict code of ethics that helps to deal with ethical issues through immediate responses addressed to the media and public. Mike often has to deal with short-term PR disasters and once resolved, the company can continue with their business without taking responsibility for the problem.

How do companies deal with corporate scandals?

If corporate scandal hits a major company it can result in a severe backlash in the media and a poor public perception, which can hurt a company’s sales if not dealt with quickly. Some companies choose to tackle the problem immediately whilst others “let the dust settle” according to Bernd Schmitt, executive director of Columbia University’s Center on Global Brand Leadership. Schmitt adds “Depending on the company, it might be a month or a year. Then you would start the re-branding process.” Even so, a business unlikely to ignore the urgency to communicate with the public. Following a scandal, the company will receive attention from customers and other constituents, such as the media. Some companies acknowledge they need to address the media about their ethical issues, but without taking blame. Companies choose to openly state their fondness towards their customers but do not defend themselves for their wrongdoings. They prefer to wait until another ‘big story’ happens for consumers to forget their unprincipled policies and try to slowly advertise their way back into the market. If a company decides to repair its tarnished reputation through the media, it is an enormous opportunity for the company to concentrate on its business while it is the focus of attention. The Wharton University report shows that business leaders that launch communication programs secure a higher probability to rehabilitate a tainted corporate reputation; meaning that a successful comeback is ensured due to less criticism and society’s acceptance.

In a Financial Times report (2015), Richard Milne states many companies also decide to re-arrange their upper management and appoint new chief executives to silence stakeholders and shareholders. Removing an old organizational culture is important to implement ethical corporate governance. Companies believe that when making reputation-enhancing decisions such as redundancy at the higher management level, customers and investors were ready to believe the company’s rehabilitation motives and regain their trust.

A way to reduce the corporate scandal is to control production and create a secure environment in which people can work effectively. We compensate our staff with a salary and benefits that ensures they can have a good standard of living, whilst also keeping some cash in reserve for emergencies. This includes healthcare and education for their children. In this way there is little room for scandal, as running production means knowing how the clothes we sell are made.

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About the Author

Valentina is passionate in expressing her voice through her writing, which she hopes will have a social impact. She grew up as a third culture kid that always fought for what is right and achieved a BA Hons. in International Business in order to understand the business world more clearly and leave a possible mark on society. Currently she is working for an ethical start-up company called Chanzez. Chanzez has been set up to provide people with chances whether they are people who design clothes, people who work to make clothes or people who want to be able to buy ethically produced clothes.

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