B. Corporate Codes of Conduct

Corporate codes of conduct are policy statements that define ethical standards for companies. Corporations voluntarily develop such codes to inform consumers about the principles that they follow in the production of the goods and services they manufacture or sell. Corporate codes of conduct usually address many workplace issues - including child labor -and, according to some observers, are part of a broader movement toward corporate social responsibility.⁵

1. Earlier Origins of Codes of Conduct

In the early 1970s, multinational corporations or multinational enterprises (MNEs) were widely criticized for their behavior in developing countries.⁶ Host governments, as well as labor organizations, said that multinational corporations failed "to operate in harmony with local economic, social and political objectives."⁷ For their part, many corporations resisted arguments that they had a social purpose to pursue in their overseas activities.

In response to pressure from developing countries and human rights groups, several international organizations developed ethical guidelines addressing the conduct of MNEs. Examples include the draft United Nations Code of Conduct for Multinational Corporations,⁸ the OECD Guidelines for Multinational Enterprises,⁹ and the ILO Tripartite Declaration on Principles concerning Multinational Enterprises and Social Policy.¹⁰ These multilateral codes of conduct covered MNE behavior on a range of topics, including labor standards.

Although the OECD guidelines and the ILO Declaration of Principles contain mechanisms for reporting abuses and problems, neither organization enforces its guidelines since they are voluntary and not legally binding.¹¹ However, both continue to serve as examples for efforts by private groups and corporations to develop codes of conduct. The U.N. Code of Conduct for Multinational Enterprises was never formally adopted and, therefore, remains merely a statement of principles.

Private groups have also developed voluntary codes of conduct aimed at the operations of U.S. corporations in specific countries or with regard to specific issues. Among these codes, the Sullivan Principles (South Africa)¹² and the MacBride Principles (Northern Ireland)¹³ dealt primarily with labor standards issues, while the Slepak Principles (Soviet Union)¹⁴ and the Maquiladora Standards of Conduct (Mexico/Central America),¹⁵ dealt with a broader set of topics, with labor standards playing a prominent part. As is the case with the multilateral codes, these privately developed codes of conduct provide models for corporations to develop their own codes of conduct addressing labor standards issues, including child labor.

2.Rationale for Adopting Codes of Conduct

United States corporations have adopted corporate codes of conduct for a variety of reasons, ranging from a sense of social responsibility to pressure from competitors, labor unions, the media, consumer groups, shareholders and worker-rights advocates. The U.S. Government has also encouraged U.S. corporations to adopt model business principles for their overseas operations.¹⁶

Companies that import products from countries whose labor conditions have received negative publicity regarding child labor or abusive working conditions may develop codes of conduct in order to prevent further criticism.¹⁷ A Hong Kong trade lawyer stated in a recent article that many importers "just think it's wrong to have their goods made under conditions considered offensive. Others...don't want to be exposed on 60 Minutes or 20/20."¹⁸

Companies who spend hundreds of millions of dollars on advertising and whose sales depend heavily on brand image and consumer goodwill are particularly responsive to allegations that their operations exploit children or violate other labor standards. Some have cited positive correlations between responsible business behavior and return-on-investment, stock price, consumer preferences and employee loyalty. The CEO of Levi Strauss & Co. has said:

I believe - and our company's experience demonstrates - that a company cannot sustain success unless it develops ways to anticipate and address ethical issues as they arise. Doing the right thing from day one helps avoid future setbacks and regrets. Addressing ethical dilemmas when they arise may save your business from serious financial or reputational harm.¹⁹

Some companies adopt codes as a direct response to public pressure. For example, when Starbucks Coffee Company received hundreds of letters from consumers and investors demanding an improvement in working conditions on Guatemalan coffee plantations, it decided to introduce a code of conduct for all of its coffee bean suppliers. A Starbucks executive admitted that the protesters had "prodded" the company into developing a code.²⁰

Corporations may adopt codes of conduct in order to demonstrate that they are good corporate citizens, or to earn the label of a "socially responsible" company.²¹ By incorporating the concept of social responsibility into their normal business dealings, companies may develop corporate philosophies that combine "altruism and enlightened self-interest."²²

3.Extent of Usage of Codes of Conduct

There is no information on the exact extent to which U.S. corporations have adopted codes of conduct governing their foreign operations. Press reports and other publicly available information suggest that a significant number of U.S. corporations and business organizations have done so. Most available information on codes of conduct is on large corporations.

For example, U.S. companies in such diverse industries as footwear (Nike, Reebok), personal care products (Gillette), photographic equipment and supplies (Polaroid), stationery products (Hallmark), hardware products (Home Depot), restaurants (Starbucks), and electronics and computers (Honeywell) are known to have corporate codes of conduct.

In addition, several business organizations have issued codes of conduct designed to be used by medium- and small-sized member companies whose corporate structures may not be sufficiently large to develop their own code of conduct. These business organizations include the Athletic Footwear Association, the Toy Manufacturers of America, and the Asia-Pacific Council of American Chambers of Commerce.

In the context of the current report, the Department of Labor has identified more than 35 U.S. manufacturers of apparel or retailers of apparel products that utilize codes of conduct regarding their foreign operations. In addition, two associations that bring together the bulk of U.S. apparel producers and retailers - the American Apparel Manufacturers Association (AAMA) and the National Retail Federation (NRF) - have also developed codes of conduct. These codes of conduct are discussed in more detail below.