Here’s What You (Company, Shareholder, Consumer) Can Do To Help Improve The Bangladesh Garment Industry

Over 1,100 bodies (and one extremely hardy survivor, pictured above) have now been dug out of the rubble of the Rana Plaza building, which collapsed in one of the worst factory accidents in the history of Bangladesh’s nascent ready-made garment industry, which only in recent years rose to becoming the world’s third-largest sewing machine after China and Italy.

It’s easy for company executives, for shareholders and, most of all, for consumers to cast most of the blame for these tragedies -- there have been many and there will be more -- on the Bangladesh government itself, which is unambiguously the biggest culprit behind the Southeast Asian country’s dismal workplace safety track record.

In its cash-strapped desperate struggle to create jobs for an impoverished nation of 150 million, the administration of Prime Minister Sheikh Hasina is not doing enough to address the dangers to its garment workers. One very simple reason is because doing more would raise costs, thereby causing foreign multinationals to scour the rest of the developing world for a cheaper place to help widen margins, fatten profits, stimulate sales through cut-throat tactics against suppliers and give investors their expected ROIs.

The Gap Inc. (NYSE:GPS) paid $1.2 billion in stock dividends between 2008 and 2012, plowing right through a major global recession without skipping a beat to pay out a portion of its profits to people who own its stock. In the same period of time Wal-Mart Stores Inc. (NYSE: WMT) of Bentonville, Ark., paid out a staggering $21 billion -- that’s with a b -- in dividends.

Meanwhile, as illustrated recently in MacLean’s, using 2011 numbers from consulting firm O’Rourke Group Partners, 12 cents of a $14 shirt go to the people who make it, while more than $8 is the markup from wholesale price after the item makes it to the store.

Part of this profit comes as a direct result of hedging on the corrupt relationship between local industrialists and government inspectors. Companies see the opportunity to widen their margins by exploiting this relationship. The Rana Plaza accident underscores this problem.

Companies and shareholders should stop talking about how great it is they create jobs in the developing world and look at the death and mayhem they’re willing to enable in order to maximize their returns. Consumers, too, have to decide if they are fine with buying cheap clothes from a system that costs human life.

If it’s OK with these market participants to eschew these considerations, good for them; but they should also stop pretending they care about human rights and just embrace what many of them probably are at their cores: morally disengaged and selfish social Darwinists.

For others, here’s what they can do to help workers in the developing world actually come close to attaining the same rights and protections enjoyed by workers in regulated economies with strict rules and enforcement of labor standards.

For Companies

First, accept you are part of the problem.

Stop passing off the blame via plausible deniability regarding the sketchy behavior of local agents. If you can’t find middlemen you can trust to not cut corners, then work directly with factory owners.

Don’t simply move on to the next facility when you find infractions or safety concerns. Report any and all violations that your company’s officers observe to the authorities and non-governmental organizations. Follow up on that effort by ensuring the infractions you observe are fixed. Inform shareholders regularly about what you do to improve factory conditions. Offer statistics to them, such as the wages and benefits of these producers, and the condition of facilities. By all means, feel free to advertise your ethical practices to consumers to encourage them to buy your goods.

The Walt Disney Company (NYSE:DIS) recently pulled out of Bangladesh and blacklisted other countries in part by examining the World Bank’s Worldwide Governance Indicators. That’s a good place to start. The more likely a country scores low on fighting corruption, regulatory mechanisms and public accountability, the more likely its workers risk their lives to produce your cheap goods.

For Shareholders

First, accept you are part of the problem.

Whether you’re a pensioner, an institutional investor or someone with an E*Trade account -- you have to recognize that earnings per share and dividends are squeezed out of sourcing for work in the most messed-up emerging markets on the planet.

People who own stock in companies are partial owners of those companies. They personally profit off a system that -- by putting intense pressure on mid-level agents and primary suppliers to meet price points -- does more to incentivize dangerous working conditions than to dissuade them.

Shareholders who care should closely examine the companies in their portfolios and, when possible, screen out companies that participate in the system that leads to these accidents. Socially responsible investing, or SRI, services are available through most money managers. They are widely used by religiously minded investors who screen stock picks against gaming, weapons, porn, alcohol and tobacco. There are many SRI providers out there, such as Calvert Investments, offering various types of stock screening products for different considerations, including social justice and environmental concerns.

Shareholders can also be activists who organize and attend annual meetings. They can team up with likeminded co-investors to pressure companies to do more on behalf of their indirect employees in these impoverished countries. At the very least they can express their concerns to company top brass in the same fashion taxpayers can express their concerns to their elected representatives.

For The Rest Of You

First, accept you are part of the problem.

In February, the Journal of Organizational Behavior and Human Decision Processes published a fascinating paper by three business school professors regarding the so-called moral motivations behind shopping habits. The paper, cleverly titled “Sweatshop Labor Is Wrong Unless The Shoes Are Cute,” examines the cognitive dissonance in what consumers say and what they do.

“Given that consumers say they care about sweatshop labor and are willing to pay for products that are free of it, it remains vexing why there is continued demand,” the study said. “The context of sweatshop labor is a natural setting to study how people process ethical information in everyday situations where their beliefs many conflict with their actions.”

As the title of the paper suggests, the desirability of a product plays a major role in shoppers’ willingness to practice what they preach. If the product is highly desired (can you say iPhone?) a consumer is more likely to disregard his or her ethical stance on abusive labor practices that delivered the product to the market. And because the ethics of buying a product made by sweatshop labor is more “flexible” than, say, shoplifting a product, consumers are more willing to ignore their own beliefs on the subject.

Shoppers can and should take these ideas to heart and recognize their own moral disengagements with the marketplace (including those by the author of this article) and learn more about the history behind the products they choose to buy. As Walt Kelley’s Pogo famously said: “We have met the enemy . . . and he is us.”