Bangladesh and Beyond: Walt Disney’s Leadership

It’s been two weeks since Cambodian workers at a shoe factory south of Phnom Penh died after a ceiling cave-in. In the grim game of counting casualties, it was not the kind of massive disaster that befell Bangladesh in late April when a structure housing five garment factories collapsed, killing 1,127 people.

Yet the Cambodian tragedy had an awful resonance of its own if only as a reminder that such disasters in the developing world occur with predictable regularity – and that corporations will never escape the necessity to define how or if they can do anything about it.

So far we’ve seen a variety of responses. The Walt Disney Company resolutely announced its decision to pull out of certain countries altogether, including Bangladesh, until local standards improve. Others are weighing their options, which include remaining in problematic areas but actively engaged in efforts to ensure that local suppliers improve worker safety.

For well-intentioned companies, it’s a multifaceted quandary. Two business needs obviously clash: the need for lower-cost labor that enables them to stay competitive, and the need to maintain the loyalty of core customer sectors (and shareholders) for whom complicity in exploitation is intolerable.

Companies are quite justified in their insistence that final responsibility rests squarely on the shoulders of local governments. Whether companies decide to stay or go, the need is to intensify pressure on those governments to, say, guarantee the use of quality construction materials and require simple precautions like fire escapes.

Alas, even some governments that very much want to attract foreign investment are simply unable to comply. In some instances, their bureaucracies are intractable. In other instances, the corruption is pandemic.

The dynamics at play here are the same that corporations face with regard to the Foreign Corrupt Practices Act (FCPA) and its counterpart European laws. In both cases, a soul-searching risk assessment is the first step as “companies have to ask if they can actually do business in a country in a way consistent with their standards, and if it makes business sense to try,” as one lawyer specializing in FCPA counseling advises.

Do the cost benefits of a foreign investment outweigh both the cost of implementing a compliance program and the risks that ensue should such a program prove somehow deficient? Sometimes yes. Sometimes no.

The collapses of supplier factories in Bangladesh and Cambodia don’t tell the whole story of corporate exposure. As the dust was clearing from the Phnom Penh disaster, reports surfaced of over 1,000 underage workers at a separate supplier facility. Such potential issues abound way beyond worker safety: for example, are suppliers’ female workers treated equally? Are women allowed to work at all?

In fact, every industrial accident can set off a chain reaction on multiple human rights fronts with concomitant risks to corporate reputation. At the end of the day, it may not even matter if the corporation has compelled its suppliers to dramatically improve working conditions. Those conditions in a country like Bangladesh will in any event remain far worse than what most workers in the West enjoy. The corporate manufacturer may then find itself still accused of exploitation after a few stopgap cosmetic improvements.

Action is therefore not enough. At every juncture, the communications component is critical as a way to manage the expectations of customers and shareholders. Every engagement in a country like Bangladesh, every decision in one direction or another, needs to be explained in context. Long-term objectives must be articulated so that, whatever exigencies arise, there can be no doubt that the manufacturer was committed to material improvements all along – but that no company can write a check or two that magically transforms Bangladesh into a work environment conformant to Western standards.

For an example of what a shrewd, humane communications strategy looks like in this context, we need only consider what The Walt Disney Company has just accomplished.

Disney’s decision to cut production in five countries – Ecuador, Venezuela, Belarus, and Pakistan as well as Bangladesh – was well-covered in the media, a not insignificant public relations coup despite reminders that, since less than 1% of the factories used by Disney contractors are in Bangladesh, the corporate sacrifice, at least on that turf, may not have been particularly painful. According to reports, companies like The Gap and Children’s Place, presumably with more at stake in Bangladesh, were still mulling what to do.

Meanwhile, Disney seems to have taken a textbook communications approach. The company announced its decision two days after dozens of other companies, including Walmart, Carrefour, and Li & Fung, met with German government officials and NGOs to advance a plan ensuring safety at garment factories in Bangladesh. Intentional or not, Disney’s timing dramatically underscored its leadership.

Disney also aggressively directed its whole supply line to cut production in the five countries and nimbly let the world know it had so directed. Disney also provided a credible basis for its selection of which countries to disallow, advising that a World Bank report had guided its decision. To complete the balancing act, Disney told licensees that its decision not to disengage until April 2014 provided a transitional period that “mitigates the impact to affected workers and business.”

At the same time, Disney is also opting to pursue the alternative strategy of staying engaged in certain other countries ranked low in the World Bank report, including Cambodia and Haiti where Disney will do business but only with factories that participate in the Better Work program co-sponsored by the International Labour Organization and the International Finance Corporation. Should countries like Pakistan also participate in that program, they could be reinstated on the approved list. In 101 other countries, Disney will allow licensees to do business only if independent monitors approve the factories.

Source: Forbes

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