[Viewpoint] Shift the management paradigmDeadly clashes at garment factories, including those owned by South Korean shoemaker Young One Corp,, in Bangladesh over the weekend have been making headline news. Young One had to close its production lines in Dhaka and Chittagong as labor protests over wages led to violent and deadly clashes with the police.
Labor disputes involving factory workers at the Chittagong Export Procession Zone, which manufactures garments and supplies to major Western stores, have been frequent this year.
In July, after months of violence, the government raised the minimum wage for garment workers by 80 percent. Workers for Young One, which supplies Nike, North Face and other major sportswear companies, have been exempted because they were paid more than the minimum wage levels. But the workers staged a walkout, demanding the same 80 percent hike. Their strike spread to other production lines in Chittagong run by Wal-mart and Tesco.
There are two reasons for the labor disputes at foreign ventures in Asia. The first is violation of human rights by ignoring local labor regulations and abusing local workers. A South Korean small trading company came under fire in the 1990s for keeping Chinese workers in a chicken coop to punish them for bad behavior. Taiwanese iPhone supplier Foxconn Technology also attracted attention in May after several Chinese industrial workers committed suicide.
To avoid such a predicament, companies venturing onto foreign soil should be fully aware of the local labor regulations and practices and strictly abide by them. They must be fair and flexible in treating local employees. They should also familiarize themselves with local culture and work ethics to connect with the locals.
Secondly, foreign companies can be vulnerable targets during social unrest. Even though workers enjoy better labor conditions and terms in foreign outlets than local companies, they tend to unleash complaints and protests against foreign companies. Outside forces unrelated to industrial workers get actively involved to damage and burn buildings at the industrial sites. Young One employees worked under better pay and labor conditions, but were cajoled by outside forces to join the labor protest.
Human rights have become less of a problem in Korean companies doing business in other Asian regions. They are increasingly being targeted for social protests, as was the case with Young One, which is a global brand name. Once disputes and violence erupt, they are covered at length by the Western press, hurting the corporate image and brand value.
Young One, with competitiveness on the global stage, came under particularly harsh criticism from the American press and textile companies. Its case provides a lesson that a passive response to local labor practices and relations can, in fact, work against the company.
To avoid a labor conundrum, Korean companies making inroads in overseas markets should reinvent their management paradigm. The international community now demands corporate global responsibility from companies doing business on foreign soil. It is similar to the demand for greater and wider roles of Korean companies in the domestic market by stretching beyond traditional corporate, labor and environmental practices to exercise social responsibility and management based on ethics, transparency and credibility.
They must abandon the rags-to-riches complacency of keeping to minimum labor regulations of underdeveloped markets when they do business there. The international community exacts a more responsible role from Korean companies.
They should respect the UN-chartered Global Compact on labor, environmental and human rights guidelines and practice management and leadership as well as empathy in foreign markets with behavior befitting the host country of the G-20 Summit.
*The writer is a professor of economics at Sungkyunkwan University.
By Cho Joon-mo