Jacob

Plaster-Cast
Gergely J Tamsi
SKIB102 Academic Skills 2
Research paper
11 May 2014
Human rights abuses in the supply chain of multinational corporations
According to an investigation conducted by the Fair Labour Association, Apple
still continues to violate the human rights of the workers employed at one of its
suppliers, Foxconn, where employees are sometimes still expected to work over 60
hours per week (Guglielmo, 2013). Unfortunately, Apple is not alone in this respect;
many other companies in the supply chain of multinational corporations have been
routinely abusing the human rights of workers, even though strict guidelines exist for
the protection of human rights of workers in developing economies, drawn up by the
United Nations (United Nations, n.d.) and the Organisation for Economic Co-operation
and Development (OECD, 2011). The problem with these guidelines, however, is that
they lack enforcement. Therefore, the aim of the present paper is to argue that
multinational corporations should be liable for the human rights abuses that occur in
their supply chain. In the present paper, firstly the definitions of the most important key
terms will be provided, which will be followed by the arguments for and the refutation
of some arguments against the proposed action.
In order to better understand the argument, firstly, the definitions of the key
terms need to be clarified. A multinational corporation, according to OECD (2011),
usually comprise[s] companies or other entities established in more than one country
and so linked that they may co-ordinate their operations in various ways (p. 17). A
member of a supply chain shall be defined as any company that participates in the
manufacturing of the given product. Although a supply chain may also involve delivery

of a given product to the end-user, because the delivery companies operate in

developed countries, within legal environments placing a strong emphasis on human
rights, the argument will focus only on the members of the supply chain within
developing countries. A human rights abuse shall be understood as an infringement or
non-observance of the Universal Declaration of Human Rights (United Nations, 1948).
Finally, liability shall be defined as providing grounds for taking legal action against the
multinational corporation. This is not without precedent; in the United States,
multinational corporations have been sued on grounds of human rights violations that
they have been party to in developing countries (Muchlinski, 2001).
The first reason why multinational corporations should be held legally
responsible for the human rights abuses that occur in their supply chain is that human
rights abuses by multinational corporations are unacceptable. On the one hand, the
Universal Declaration of Human Rights (United Nations, 1948) applies to all human
beings, irrespective of whether they are born in a country with a high or a low level of
respect for human rights. As Quelch and Laidler (2003, cited in Li and Gaur, 2014, p. 13)
argue, human rights transcend national, cultural, religious, or ideological boundaries.
On the other hand, Arnold (2010), claims that it is not simply a legal or political but
rather a moral imperative for multinational corporations to respect human rights.
Indeed, multinational corporations also seem to be in agreement with this claim: more
than 3,500 companies have signed up to the United Nations Global Compact, which
includes a commitment to uphold the UN Declaration on Human Rights (Doing the
wrong thing, 2007). Thus, as it can be seen, human rights violations by multinational
corporations need to be stopped.
Although there may be a consensus regarding the fact that human rights
violations by multinational corporations need to stop, because national laws vary, in

certain cases developing countries may not effectively remedy what are considered to
be human rights abuses or actively promote abuses. Firstly, some multinational
corporations operate in developing countries with the explicit aim of taking advantage
of the cheap labour offered. As Santoro (2000, cited in Li and Gaur, 2014, pp. 14-15)
argues, these multinational corporations tend to be actively involved in human rights
violations themselves. Secondly, when operating in a country with a low respect for
human rights, multinational corporations may be forced, by the legal environment, to
lower their standards (Arnold, 2010). Li and Gaur (2014), for instance, cite the example
of a case dating back to 2007, when Yahoo! was forced by the Chinese government to
hand over the e-mail records of a Chinese journalist, a request that Yahoo! complied
with. Thus, because the legal environment that multinational companies operate in is
conducive to human rights violations, other means of enforcing the respect of human
rights is necessary.
If the governments of developing economies, thus, cannot be counted on to
address human rights violations, then the multinational corporations themselves need
to be held liable as this effect would trickle down to the last member within the supply
chain. Firstly, multinational corporations have come to represent a significant force in
the globalized economy. As it is pointed out in the World Investment Report (2008,
cited in Li and Gaur, 2014, p. 12):
These MNCs constitute about 11 percent of global GDP and employ more than 82 million people
worldwide. With such a pervasive presence, it is natural that MNCs have become very important
not only for economic activities, but also for fulfilling societal objectives such as upholding
human rights.

Secondly, the existing legal instruments (i.e., contracts) that govern the collaboration
between two independent companies could be used to enforce upholding human rights.
If a multinational corporation stipulated in their contract with, for example, a Chinese
company that they must provide good working conditions, a fair wage, and so on if they
3

wish to remain suppliers, then the chances are that the Chinese company would choose
to do so. These contractual obligations (Muchlinski, 2001) then could be applied to each
link within the supply chain, which would ultimately mean that human rights abuses
would decrease.
Furthermore, it would be a more beneficial solution to the problem if all
multinational corporations were forced to respect human rights through their shared
legal requirements instead of letting individual companies adopt their human rights
standards voluntarily. This would guarantee that suppliers could not switch to another
multinational corporation who tolerates sub-standard human rights conditions, which
would in turn lead to a situation whereby their survival as companies would depend on
them respecting human rights. This phenomenon has also been investigated by Li and
Gaur (2014), who found that in a society with a high level of human rights violations,
the combined benevolent efforts of all firms to refrain from violating human rights are
essential to ensure a stable human rights condition (p. 22). Moreover, they have
established that if there are several multinational corporations operating within the
same country, the behaviour of one will affect the others: violations will increase the
likelihood of violations in other companies, while showing a respect for human rights
will also have a positive effect on other companies (Li and Gaur, 2014). Therefore, as it
can be seen, a unified approach is a better solution to the problem of human rights
abuses by multinational companies, which could be guaranteed if all multinational
corporations were legally liable for the human rights abuses that occur in their supply
chains.
Lastly, if multinational corporations were held legally liable for the human rights
abuses in their supply chains, it would also boost the reputation of multinational
corporations. According to Muchlinski (2001, p. 38), businesses may justify the

adoption of human rights policies by reference to good reputation. As customers in

developed countries are becoming increasingly more conscious of human rights, there
may be backlash against the companies that are involved in human rights abuses,
although, as Muchlinski (2001) points out, not all corporations are affected equally by
public opinion from this perspective and there is no empirical evidence yet to translate
the loss of reputation into financial loss (e.g., drop in share prices, etc.). Conversely,
other initiatives by corporations, like Starbucks ethical sourcing scheme (Starbucks,
2014) or Marks & Spencers Plan A (Marks and Spencer, 2014), seem to point in the
direction that companies wish to appear ethical to their customers. Thus, in order to
sustain and/or improve their public image, multinational corporations need to be liable
for human rights abuses in their supply chains.
Opponents to making multinational corporations legally liable tend to point out
that it should be the responsibility of the government in the host country to address
human rights abuses. While this may be partly true, there are three important points to
raise in connection with this. Firstly, governments may not be incentivised to address
human rights abuses on their territories. If developing economies depend on the influx
of foreign direct investment from developed economies and their competitive
advantage is offering cheap labour, governments may be rightfully afraid that should
they demand better working conditions, multinational companies may decide to take
their production to countries where no such obligations exist. Secondly, governments
are sovereign entities, and thus no effective enforcement mechanisms exist to have
them extend the protection of human rights on their territories. Thirdly, as Muchlinski
(2001, p. 31) claims:
The traditional notion that only states and state agents can be held accountable for violations of
human rights is being challenged as the economic and social power of [multinational enterprises]
appears to rise in the wake of the increasing integration of the global economy that they have
helped bring about.

For all these reasons, trusting government agencies with the protection of human rights
is not a feasible alternative to halt human rights abuses in the supply chain. On the other
hand, because the multinational corporations are subject to regulations in developed
economies, using the protection provided by the judiciary could be a workable solution
in order to decrease human rights abuses.
Others will argue that passing the legislation would drive up prices as
multinational corporations, for instance, would need to pay fair wages to adults instead
of children. Indeed, some corporations have been complicit in human rights violations
in order to gain economic favours (Li and Gaur, 2014) and/or competitive advantage
(Bjorkman et al., 2008, cited in Li and Gaur, 2014, p. 22). While there is certainly truth
to these points, two important considerations need to be made. Firstly, keeping
production costs down is not a sufficient justification for abusing the human rights of
workers in developing economies. For example, when Nike restricted access to toilets
and drinking water during working hours, [employed] physical and verbal abuse to
those who refused to work overtime, [used] child labor, and [offered] payment of wages
below the required legal minimum (Li and Gaur, 2014, p. 22), they were ultimately
forced to pay a fine of 1.5 million USD. More importantly, however, only a few
multinational corporations are in a position that they need to be cost-efficient to the
extent that they need to employ children instead of adults to perform tasks in the
manufacturing process (Muchlinski, 2001). Thus, even if the legislation passed, the price
increase would be minimal, as it would be offset by the more efficient production that
adult workers may offer.
In conclusion, multinational corporations should be legally liable for the human
rights abuses that occur in their supply chain. Because human rights are provided for
every human being, irrespective of their origin, abuses to these rights must be stopped.

While multinational corporations may use the loopholes that are present due to
differing legal standards across borders, no viable solution may be provided other than
targeting these corporations. The effects of the legislation, possibly through contractual
obligations, could trickle down to the last link in the supply chain, and workers in
developing economies could thus benefit from the uniform treatment of human rights
violations, while the multinational corporations themselves could profit from the boost
in their public image. Although in an ideal world governments would take the lead in
protecting the human rights of their citizens, because governments are sometimes
financially incentivized to sustain violations and because no effective enforcement
mechanisms exist, targeting multinational corporations is a more feasible solution. Even
if it may incur an increase in production costs, however minimal these may be, the
legislation is a small price to pay when ultimately the working conditions of human
beings are raised as a result.
(2,007 words)

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