Factory Rules versus Codes of Conduct: Which One Makes Sense for Business?

October 6, 2000

While visiting a Chinese factory producing goods for a well-known multinational company, an Asia Monitor Resource Center (AMRC) researcher noticed something peculiar. In contrast to the warning and safety signs in Chinese that dotted the factory, a solitary sign in English hung on a wall in one of the plant’s major production line divisions. Upon closer examination he realized it was a copy of the company’s workplace code of conduct. Speculating on the possible benefits for workers literate only in Chinese, he asked the manager why the company chose English to communicate to these workers its commitment to human rights and fair employment practices. If the message wasn’t in Chinese, he argued, then the code was failing in one of its primary purposes–to inform workers of their rights. The manager agreed, but confessed that he had never really thought about it.

This episode is not surprising. On the contrary, it confirms what the AMRC has been saying for several years: Corporate codes of conduct are not written for workers. They are written about workers, for an audience elsewhere—in shopping malls, on university campuses, or in cyberspace. Codes of conduct are not written by Chinese or Thai workers. Managers in Chicago or Los Angeles write them in a language that engages protest movements and consumer action groups. Codes are not the result of consultations with workers or freely elected representatives. They are the result of media campaigns that publicize wages and working conditions beyond the imaginations of most European and North American shoppers. They are the product of consumer threats and boycotts. They are not designed to transform Asian workplaces. They are designed to protect and promote brand names and markets.

AMRC is an independent NGO that focuses on Asian and Pacific labor concerns. It provides information, research, publishing, training, labor networking, and other related services to trade unions, pro-labor groups, and other development NGOs in the region. AMRC first conducted research on the working conditions of factories in China producing exclusively for Mattel, Inc. in 1995 and 1996. We discovered that employees worked long hours for low wages and in conditions that put a substantial number of them at risk. At the same time, Mattel issued a directive to its subcontractors to abide by decent standards of safety in production and to provide a working environment consistent with the high standards the parent company expected. In 1997 the company went further and announced that its production facilities and contract manufacturers would be required to comply with Mattel’s own global code of conduct, the Global Manufacturing Principles (GMP). It then invited a New York business school professor, Prakash Sethi, to organize an independent group capable of developing systems and procedures for implementing and monitoring compliance with the GMP.

The Mattel Independent Monitoring Council for Global Manufacturing Principles (MIMCO) released its first audit report in November 1999. In line with our own research, the MIMCO report detailed workers’ ignorance of Mattel’s corporate code at their factory in Changan in Southern China. “There appeared to be confusion about the GMP,” the authors write. “During interviews, workers exhibited a cursory knowledge of GMP and what it meant for them.” Furthermore, “where workers were able to explain elements of the GMP, it appeared to be memorization of certain facts.”

This is an interesting finding. More interesting to us, however, is the amount of information—and degree of cognizance—workers have of factory rules and regulations in relation to what they know about their rights. They may be ignorant of Mattel’s GMP—which cover wages and hours, child labor, working conditions and freedom of association—but they are fully aware of the detailed factory rules that govern their working lives. Mattel’s code of conduct, which can be found on the company’s Web site, runs fewer than 1,000 words. In contrast, every one of the 6,000 worker at the Changan plant receives upon securing employment a 93-page book that outlines every facet of factory life except the code of conduct.

This book, Mattel’s Number 2 Toy Factory in Changan, Dongguan: A Brief Introduction, 1999, covers topics from geographical location to management systems, from the factory hierarchy to essential characteristics of management personnel. A two-page chapter explains the rights and obligations of the enterprise and the workers. Although it does cover some of the same ground as the code of conduct (such as briefly outlining the company’s policy of nondiscrimination and workers’ rights to health and safety protection), the section on rights is as short on detail as Mattel’s code.

The book is much more comprehensive in its discussion of worker conduct and obligations. Several chapters describe human resource management regulations and encourage workers to safeguard public order and traffic safety. Chapter 2 specifically deals with regulations and is titled “Factory Rules and Discipline.” It is divided into five sections: factory rules; the employee dormitory system; canteen regulations; Mattel's high-quality policy; and wages and hours.

Unlike the factory handbook, Mattel’s workplace code of conduct avoids specific details and instead offers vague statements. For instance, on product safety and quality it declares: “All Mattel, Inc. business partners must share our commitment to product safety and quality and must adhere to those operational and workplace practices that are necessary to meet our stringent safety and quality standards.” The factory handbook is much more detailed. For example, the section on factory rules lists 26 regulations, ranging from requirements to display official identity cards correctly to a stipulation that workers arrive at their work stations 15 minutes before their shift starts. Another informs workers that if after a three-month probationary period their pronunciation is not coherent (that is, they are unable to speak Mandarin fluently), their contract will be terminated. The 19 rules for worker dormitories are equally rigorous, ranging from curfew times to safety concerns.

Factory regulations are not only spelled out in great detail, they are also strictly enforced. When AMRC researchers talked to workers in 1999, the most frequently heard complaints concerned the fines levied for breaches of rules. Other common complaints concerned fines for not wearing or losing factory identification cards, leaving work stations without permission, or arriving late to work.

Workers in Mattel’s Changan plant are either unaware of the codes of conduct written for them, or fail to see what codes mean in their lives. In handbooks or on walls they are more likely to see factory rules than codes of conduct. They are more likely to know the rules and regulations of factory and dormitory life, and the punishments for transgressing those rules, than to be aware of their rights under a workplace code dreamed up in corporate USA.

At the AMRC, we do not argue that corporate codes of conduct fail to make any impact whatsoever. We have made trips to Changan since the MIMCO Report was released and it appears that there have been some improvements in working conditions. Employees at the Changan plant now work in a more effectively ventilated environment, and receive pay slips that are easier to understand. While these improvements are significant, they fail to address core concerns such as workers' rights to associate freely and negotiate with management. These improvements do not provide workers with the freedom and dignity that they need to take an active role in determining their future.

Some activists believe corporations are making sacrifices to implement codes, but in view of the situation at Mattel’s Changan plant, it seems clear that corporations could in fact be doing much more. To businesses, levying fines for lateness makes sense, enforcing codes of conduct doesn’t.