Muddy Waters: Human resource ethics and offshore operations
By Jennifer Dawson
Controversial US oil and military logistics company Halliburton announced on
March 11, 2007 that it was moving its corporate headquarters to Dubai.
Halliburton, long under scrutiny for ties to Dick Cheney and alleged
mismanagement of billions of dollars worth of federal contracts in Iraq, has
once again brought the ethics of offshore business practices into the
mainstream media.
According to a news release from Halliburton Watch, an offshoot of the
Center for Corporate Policy, "moving its corporate headquarters to UAE will
make it easier [for Halliburton] to avoid accountability from federal
investigators. The company has proven adept at using offshore subsidiaries
to circumvent restrictions on doing business in Iran and to elude
responsibility for paying benefits to former employees."
Halliburton is a big fish in the offshore ethical pond. But Sage Portfolio
Group recently had its own, albeit less splashy, encounter with the muddy
waters of offshore HR issues. We were recently presented with an exciting
multi-million dollar international leadership development opportunity, but
were eliminated from the bidding process because of our unwillingness to
hire male-only coaches. Such hiring practices, illegal in the US and Canada,
are permitted in other countries. Our experience prompted us to dive into
the issue of offshoring and the ethical implications of doing business in
developing countries.
In general, offshoring (or 'business process outsourcing', as it is
sometimes called) is motivated by the business bottom line. To save money,
businesses relocate aspects of their operations-be they product-oriented or
knowledge-based-to countries like India and China where there is an eager
pool of skilled and inexpensive labour.
The Conference Board released a study in December 2005 that clearly
demonstrates the disparity between US and Indian wages and benefits. "Payroll clerks in the U.S. earn $15 an hour but only $2 in India," notes a Newswise release on the Conference Board report. "While call center
employees in America have an average annual salary of $28,000, it is $2,000
in India. The average programmer in San Jose, California, earns $78,000, but
the salary for the same job in India is $11,000. Employers don't have to
worry about overtime pay in India because employees are paid a flat monthly
wage". The report authors predict offshoring will result in weaker unions,
more flexible labour rules, longer working hours, greater competition and
rising social tensions in Europe, and depressed wages in the US.
Consumers have become highly sensitized to the ethical issues of offshore
practices. North American companies that have received bad press due to
allegations that their offshore suppliers use child labour or have
discriminatory hiring practices are compelled to change their operations as
a form of damage control. According to Trudy Heller of Executive Education
for the Environment, "Consumers can easily become a 'stakeholder swarm' in
the Internet age."
Unfortunately, savvy consumers may have to look harder to find evidence of
human rights abuses and unethical hiring practices. Anthony Mitchell
reported in the E-commerce Times in October 2004 that a "swarm of bulletin
board attention" followed IBM's agreement to purchase 100% of an Indian
company that openly declared on its web site that it would not hire any call
centre employees over 27 years old. The result of the swarm? Mitchell states
that while the company's web site no onger openly advertised age
discrimination practices, it continued to collect the ages of all job
applicants.
A number of writers on the subject of offshore business practices identified
a similar lack of transparency and public debate about ethical issues as an
emerging problem. Rather than adhere to employment standards-either in their
own offshore operations or those of offshore suppliers- that the North
American public has come to expect, companies have chosen to stifle
discussion and sanitize HR communications. This strategy protects the
company's reputation at the cost of accurate formation upon which
consumers can base their purchasing decisions. It also means that open
dialogue between companies, which could result in widespread adoption of
best practices, is much less likely to occur.
Fortunately, we can finish this article on a positive note. BT Group
(British Telecommunications) commissioned an independent assessment of the
corporate social responsibility of its offshore operations, finalized in
February 2004. The report, called Good Migrations, applauded a number of
BT's policies and actions, including its purchasing code, called 'Sourcing
With Human Dignity", its commitment to onshore staff retention and
retraining, and relations with the main union. But the report noted BTs
offshore operations happened gradually, without an explicit strategy, which
meant corporate social responsibility considerations were more difficult to
incorporate.
The good news in Good Migrations is a 12 step process that companies can
utilize to maximize the social responsibility of offshore operations, both
at home and in the recipient country. The full report, containing the
12-step program, can be found at http://www.btplc.com/Societyandenvironment/Hottopics/Geographyofjobs/Goodmigrations.pdf. Kudos to BT for offering a bit of clarity on an otherwise
rather muddy topic.
Sources:
St. James Ethics Centre:
http://www.ethics.org.au/about-ethics/ethics-centre-articles/ethics-subjects /globalisation/article-0379.html
The Ethical Corporation: http://www.ethicalcorp.com/content.asp?ContentID=4080
Good Migrations: BT, corporate social responsibility and the geography of
jobs, February 2004
http://www.btplc.com/Societyandenvironment/Hottopics/Geographyofjobs/Goodmig rations.pdf
Aligning the Organization: Management and Human Resource Concerns
Report #1370-05-RR, The Conference Board http://www.newswise.com/articles/view/516647/
Offshore Environmental, Labour Practices Challenged, Oct 26, 2004: http://www.technewsworld.com/story/37586.html
Companies Try to Fly Below Radar on 'Offshoring' http://hr.blr.com/news.aspx?id=9517 April 28, 2004
Frog Pond: Reflections from a values-based organization is a monthly column
that explores the connection between business and social responsibility. The
title for the column comes from the last, but perhaps most profound, of the
five values upon which Sage Portfolio Group has been built. We call it "frog
pond". Sitting beside the frog pond at Sage Portfolio Group's head office in
Dundas, Ontario on a warm summer evening with a glass of wine and meal made
from locally grown organic produce has taught us to value local roots and
global consciousness, quiet contemplation and sharing with others, dreaming
big and common sense. Articles written for this column take the abstract
principles of Sage Portfolio Group's "frog pond" value and make them both
real and useful. Dip your toe to test the water ... or dive right in!
