Small Business and Social Irresponsibility in Developing Countries: Working Conditions and “Evasion” Institutional Work

Undermining assumptions and values

Owner-managers sometimes disrupt institutional demands by undermining associated core assumptions and beliefs through contrary practices, or by employing adroit but superficial or misleading presentations of conformity, designed to create a favorable impression and to avoid any further demands. In the global supply chains literature, this work is referred to as “window-dressing” (Amazeen, 2011; Lin, 2010).

We found that some owner-managers work to corrupt government authorities who are responsible for monitoring labor regulations. Owner-managers attempt to bribe them to stop any further demands. We found corruption to be common in Tirupur. It is also a primary reason for the lack of implementation of appropriate labor standards (Belal, 2008; Olken & Pande, 2012). Owner-managers appear to use corruption as a disruption effort to escape regulative penalties:

The factory inspectors ask for this and that . . . They come and say “This is wrong, the factory is not good, the toilet is not clean . . .” and so on. They stop bothering you once you give them money and whatever else they need . . . (Owner-manager: OK)

In addition, some owner-managers attempt to undermine the foundations of monitoring institutions by grooming the factory and training workers, thus avoiding penalties from government inspectors or social auditors following inspections. Inspections should ideally be unannounced and unexpected, so as to monitor the actual maintenance of working conditions. However, owner-managers are usually informed 1 or 2 days in advance:

No sudden visits. Mostly, they inform one or two days before the visit. So that we keep the factory clean when they arrive. (Owner-manager: OA)

With this information in hand, some owner-managers prepare their workers to appear satisfactory to the inspectors. Interviews with workers are a mandatory component of government inspections and social auditing, and a strong emphasis is placed on workers’ experiences. To avoid being penalized, owner-managers coach workers and at times problematic workers are removed:

We are instructed on what to say and what not to say to the inspectors . . . We would no longer be working for the company if we failed to cooperate. (Worker: W16)

Besides preparing their factories and workers, some owner-managers keep fake records or double records (as owner-managers refer to them)—that is, a falsified record of inspections and the original record for their own purposes—again to escape penalties. For example, inspections of working hours, wages, and social security are based upon information presented in the records, which are normally maintained by owner-managers:

Only 30% of my workers are covered by social security schemes such as ESI and PF . . . So, in order to deceive inspections, I prepare double records . . . (Owner-manager: OB)

Furthermore, some owner-managers attempt to undermine the values and assumptions of monitoring institutions by providing falsified versions of valuation documents that legally define the size of the firm, misrepresenting a larger firm as a small firm. As the definition of small and medium firms in India is based upon investments in plant and machinery, owner-managers tend to exploit variations in real-estate value and resort to corrupt authorities to develop such falsified documents:

I see this every day . . . Factory evaluation documents can be easily tailored. (CSR officer: CSR1)

By appearing, on paper, to be in charge of a small business, an owner-manager can disregard legal obligations only applicable to large firms, and enjoy the benefits associated with running small firms in India.

Some owner-managers also operate multiple units (or firms) registered under different ownerships. Here, the owner-manager is the investor, but registers some units in the names of trusted friends and family members. In this way, some of the units are separated from the owner-managers’ legal obligations, perhaps allowing them to showcase just one unit with better working conditions to attract buyers. For example, it was found that owner-manager OA legally owns a unit certified by Sedex and BSCI but controls another noncertified unit registered in the name of one of his cousins. Although production activities are often swapped between these two units, only the certified one is made known to buyers. Other respondents also confirmed such practices:

There will be multiple factories with different names. Out of these, the owner will only have obtained certifications for one small factory with 50 seats or so. He will show only that factory to the outside world. This is how it is done here . . . (Buying agent: BA2)

In sum, we found owner-managers, to avoid penalties, attempt to disrupt institutional demands by engaging in a variety of practices that undermine the core assumptions and values of those institutions.

Dissociating consequences

In the process of managing standardization demands from monitoring institutions, owner-managers dissociate the consequences of their planned or accomplished actions so as to defend or restrict the harmful effects of disrupting monitoring institutions. This disruption work is often performed by creating a negative image of actors associated with such institutions, or by carefully suppressing the negative aspects and emphasizing the positive aspects of their actions. This eventually results in redirecting the public away from the consequences of owner-mangers’ disruptive actions, thus “lowering in some way the impact of those social controls on non-compliance” (Lawrence & Suddaby, 2006, p. 238).

Some owner-managers work to emphasize the nonoccurrence of harmful effects to dissociate the consequences of their disruptive activities. According to them, their actions are acceptable as long as no one is harmed. For example, health and safety conditions in some firms are clearly substandard. Lighting and ventilation are inadequate. Employees work without shirts because of the heat and to avoid excessive sweating. Owner-managers are aware of such conditions, but are not willing to accept them as improper or immoral, defending them on the basis that no one has so far been harmed. When asked about first-aid facilities, one owner-manager said,

We don’t have first-aid facilities. We have a fire extinguisher but, unlike large units, we do not provide training for handling it . . . We are not prone to big accidents. No accident has happened yet . . . Workers have not asked for anything so far. (Owner-manager: OF)

In addition, owner-managers will create a negative image of actors associated with institutional demands so as to demonize their normative foundations. Some work to demonstrate that they are not in control of their own actions or are often pressurized to engage in certain activities. For example, every owner-manager interviewed stated that while the government tries to behave responsibly toward workers, it behaves irresponsibly toward employers. Owner-managers tend to link their nonconformity to the nature of the government in two ways: first, by stating that the government does not appreciative contemporary changes in the field of garment manufacturing, and that higher production costs mean they cannot spend more on adequate working conditions; and, second, by claiming that government policies do not address the real needs of workers, and investment in working conditions is neither mandatory nor useful. For instance, one owner-manager said,

There is not one politician in India who is concerned with worker welfare . . . We would be willing to do business according to standards, provided the government supported us with the necessary infrastructure. When even they don’t care about this, they just can’t expect us to. (Owner-manager: OF)

Owner-managers also demonize buyers by claiming they are two-faced, showing one face to the public and another to suppliers. They argue that, while attempting to appear publicly as socially responsible—by marketing their responsible sourcing activities, as symbolized by social standard certifications such as BSCI and SA8000—buyers pressurize suppliers to combine prompt delivery, high quality, and low cost. Therefore it is impossible for suppliers to align their business practices with institutional demands:

They [the buyers] don’t understand our situation. They don’t care about anything we say. All they are interested in is that their stuff is delivered on time and with the required quality . . . They don’t compromise on anything. They want us to have all these certifications but, to get them would cost us money, right? So, this would automatically result in an increase in production costs, which they are not willing to pay. They don’t compromise on the price either. So, eventually, I have to rework costing to meet their prices by altering every process . . . This, of course, reflects on what I can provide for my workers. (Owner-manager: OB)

Over time, these negative representations of government and buyers become the norm, such that even genuine development efforts are often met with distrust. In sum, we found owner-managers attempt to disrupt institutions by creating a negative image of associated actors, or by prudently overemphasizing the positive aspects of their actions.

Accumulating autonomy and political strength

Owner-managers’ “evasion” work also entails accumulating autonomy and political strength to simplify disruption efforts, often involving removing troublemakers or adversaries. In doing so, they no longer need to conform to, or be concerned about further, demands regarding the standardization of working conditions.

Some owner-managers remove troublesome workers during social audits. As mentioned, interviewing workers is a mandatory part of the social auditing process. Auditors ask workers about how they are treated and the nature of working conditions. Some are submissive and tend not to speak out against their owner-managers, but, as a precautionary measure, owner-managers will terminate the employment of those whom they perceive might be a threat to a successful audit:

They know that they cannot stop me from opening-up during such audits. That is why I was actually removed from my previous company. They asked me to go back after the audit, but I refused. Now I’m doing contract work . . . This situation is normal in Tirupur. (Worker: W16)

In addition, owner-managers try to get rid of demanding buyers or buying agents. Some buyers and agents stress the need for social standards certifications and/or compliance with codes of conduct, sometimes as a requirement for placing a production order. However, not every buyer or agent does this, so owner-managers will detach themselves from those whom they perceive to be too demanding. They will terminate trade relationships with those buyers or agents who insist on maintaining appropriate working conditions and move to less demanding ones. As a trade union leader noted,

There are numerous options available for them [small suppliers] to work with. They can carefully select the buyers based on the requirements and their capability to meet such requirements. (Trade union leader: TU1)

To further enhance autonomy and political strength, owner-managers form or associate themselves with certain groups based upon attributes associated with their background or with social stratification criteria, such as religion and caste. For example, there is a growing population of workers from North India in Tirupur. Although some owner-managers do not want to employ them, pointing to linguistic differences, others are increasingly in favor of employing them, and take advantage of their perceived passive, detached, and vulnerable nature, thus avoiding pressure from local workers.

In addition, some owner-managers use religious or caste affiliation as a tool to enhance their autonomy. The traditional stratification of Hindu society is a hierarchy of hereditary groups called “castes” or “jatis” (Dirks, 2011). Caste is determined by birth and, historically, each caste is linked to an occupation. In practice, Hindu society includes large numbers of castes, generally of a local or regional nature. Each has its own philosophical agenda, history, values, and customs (Dirks, 2011). Around 90% in Tirupur are Hindus, belonging to a wide array of castes. Some owner-managers prefer to employ workers who belong to their own religion and/or caste to create a group sympathetic to their often business-centric decisions, perceiving these affiliations as a symbol of trustworthiness. Furthermore, in terms of their close circle of workers, they prefer to employ those from their own caste and believe this will help prevent workers from speaking out against them:

Personally, I feel that my close circle of workers should be from my own caste. It is better because I very often meet their families. When I give them some financial freedom, I should be able to feel that I can trust them. If they are from my caste, I know that they will not fail to live up to my trust. (Owner-manager: OB)

When it comes to my close circle of workers, I employ only Hindus. I do not employ Christians or Muslims because their way of working is different from ours. Moreover, I want to keep my workers under my control. (Owner-manager: OJ)

Furthermore, intermediaries such as buying agents are used by owner-managers to gain autonomy and political strength. Intermediaries are said to offer “more business opportunities,” a “low-level of risk,” and “require less investment.” Although intermediaries work for both parties, they belong to the context of the owner-managers, providing scope for owner-managers to gain their sympathy and some leeway concerning the maintenance of working conditions:

We source through buying agents. They are like our partners. We can’t do business without them. Even they can’t do business without us. They don’t put a lot of pressure on us for compliance [with respect to demands for working conditions]. They request us to show minimum compliance. But, they will be very strict with quality and time. They will get angry otherwise. (Owner-manager: OD)

In sum, we found owner-managers disrupt institutions by enhancing their power using a variety of elimination strategies.

“Void” in labor welfare mechanisms

In Tirupur, regulatory systems and enforcing mechanisms that facilitate improvements in working conditions are either absent, premature, or not functioning as expected because of infrastructural gaps and corruption. Since the 1970s and the growth of subcontracting-based firms, trade unionism has drastically declined. During the recent post-Multi-Fiber Agreement (MFA) era of economic liberalization of the textile and garment sector, freedom of association and collective bargaining have come under further heavy strain. There are six active trade unions: the All India Trade Union Congress (AITUC), the Centre of Indian Trade Unions (CITU), the Indian National Trade Union Congress (INTUC), the Labour Protection Force (LPF), the Hind Mazdoor Sangh (HMS), and the Anna Trade Union (ATU). However, only 8% to 10% of workers are union members. Most workers consider unions to be unnecessary or unhelpful:

I have never visited unions in my life. They don’t have a good image now in Tirupur. 10 to 20 years back, communist unions were really famous. People really believed that communists will bring real changes into the lives of workers. But, nothing changed yet. There are some improvements in how we are treated, but it is not because of them. Now, unions are corrupted. All they want is money . . . money . . . We are tired of such people. Why should we give them money? Instead, we can solve things ourselves. (Worker: W21)

Moreover, unlike large firms, these small exporters do not have any collective bargaining arrangements. In fact, not one of the workers interviewed is a member of a trade union. Workers are fragmented and have no representation or collective voice, and so rely on informal problem solving mechanisms such as direct discussion with owner-managers. This gives owner-managers a high degree of control over their workers and extensive scope to engage in “evasion” work.

“Contradictions” between value systems

Contradictions are evident between the values and beliefs underpinning local ways of organizing working conditions and formal bureaucratic prescriptions. For example, language, gender, and caste play a major role in employment decisions in the research context. These favor those who can speak Tamil and male workers, who are predominantly employed in the highly technical and value-added parts of the production process, whereas migrant and female workers are mostly employed in low paid, simple processes:

Both [male and female workers] are doing [checking] in large units. But when you take small units, only female workers are employed in the checking department. It has been like this since the beginning of knitwear production in Tirupur. (Worker: W19)

When you look at it from the outside, there is no discrimination in Tirupur. But, when you go inside and look, you can find differences in the payment systems, interactions, support systems, bonuses, and so on between local and North-Indian workers, between people of different castes, and so on. (CSR officer: CSR1)

These language, gender, and caste-based practices are taken for granted in the research context, reducing the effort required to engage in “evasion” work.

Furthermore, owner-managers’ attitudes toward their workers consist of a mixture of authority and responsibility. The demands and expectations of various actors—government, buyers, workers—are seen as inappropriate or irrelevant, as they believe they are the only ones who completely understand their workers’ needs. They tend to assume the role of a “father figure” (in practice they are all male), and this paternalism increases their resistance to any external intrusion into their relationship with their workers. Employees’ attitudes enhance this, and are closely linked to the philosophy of Nishkam Karma, which advocates working earnestly without worrying about the outcome (Saini & Budhwar, 2008). In addition, workers’ education and skill levels are normally low, and they are financially vulnerable, and are hence inclined to look upon owner-managers as symbols of authority and providers of sustenance.

Under such conditions, it is difficult for workers to act against owner-managers. For example, one worker said,

We get a relatively good salary in Tirupur, and we get continuous work, so I came here . . . The situation here is better than it is at home . . . If I made too many demands, I would have to go back. (Worker: W4)

Owner-managers are aware of this, and will use workers’ emotional and economic dependency to ensure compliance and avoid conflict. Traditional ways of organizing thus act as a cultural-cognitive framework through which individual interests are defined, negotiated, and contested. This is not only a subjective belief system but also a symbolic one perceived to be objective and independent. Local practices encapsulate the local license to practice and can be an objective tool supporting owner-managers and facilitating their “evasion” work.

“Distance” from institutional monitors

The final condition that favors “evasion” work relates to the physical distance between regulators and suppliers, and the size of firms. Exporting firms process small production orders and are located at the bottom of the supply chain. Intermediaries, such as large exporters or agents, who are the main customers of these firms, are not even aware of the final buyers and their expectations. Also, the intermediaries tend not to explicitly declare most of these small firms to their customers—that is, the global buyers—to protect themselves from penalties, thus providing the firms themselves with further scope to avoid scrutiny. Local firms are de facto hidden in the supply chain, and their workers are “hidden hands” in the making of valuable garments. In addition, these firms experience high pressure for timely delivery and quality, and see lower profits, and their main concern is to meet deadlines and quality requirements, rather than maintain adequate working conditions. When asked about the lack of in-house first-aid facilities, one of the workers said “. . . that is how our work is. We have a heavy workload and cannot set them up. We do not have the time to set them up” (Worker: W26). This allows owner-managers to hide discrepancies from their global buyers and consequently avoid sanctions.