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Even when adequate protective legislation exists, states may fail to ensure employer compliance and respect for labour standards. There has been a significant decline in the political acceptability of strong institutional standards. 1980s experienced the rise of certain features: market deregulation, neo-liberal policy, restrictions on collective bargaining, e.g. governments were coming to power that invalidated the labour standards that previous governments had ratified – UK Conservative government in power between 1989-1997 (Pearson and Seyfang, 2001). There are problems with the ILO’s effectiveness, and ILO violations are widespread. There has also been a significant growth in the number of trans-national companies (TNCs). The enforcement of labour standards has been weak. Response by many companies to increasing challenges regarding global labour practices has been to create voluntary codes of conduct (Radin, 2004).

Corporate codes are voluntary codes (not required by law), they are undertaken by corporations and they apply to employees of a particular company rather than a whole country. In contrast, ILO conventions are binding, they are undertaken by nation states, and they apply to all citizens/workers. ILO member states must respect the principles underlying the four core labour standards (CLS) – right to collective bargaining & freedom of association, freedom from forced/compulsory labour, freedom from exploitative child labour and equality of opportunity.

CSR is a “softer” voluntary approach to business regulation which attempts to improve aspects of company performance that relate to social and sustainable development and human rights (Utting, 2005). These ‘softer’ approaches are designed by business interests and non-governmental organisations (NGOs), and are often couched in discourse that proclaims their superiority in relation to legalistic, “harder”approaches.

PR exercise is one dimension of CSR, but there are many more other motives that encourage companies to ratify voluntary corporate codes (Pearson and Seyfang, 2001).

First of all, consumer campaigns supporting workers’ rights motivate companies to show a more social dimension of their labour practices. One such example was that of Nike when a magazine published a picture of a 12-year-old boy stitching a ball. Initially, Nike refused to take responsibility for the actions of its suppliers, but then it started taking action in 1992 by formulating a Code of Conduct (Locke, 2004). An additional argument for companies to introduce corporate codes was a study that has shown the following: where there is a collaborative process between a global firm and a contractor, there can be improvement of labor standards, worker’s well being and enhanced workplace performance, which is beneficial for all participants of the process (e.g. Frenkel & Duncan’s study, 2002, comparing two Adidas contractors). Employees are motivated by improving wages and working conditions, and by introducing uniform rules. Thirdly, corporate codes are seen as a way of formalizing, encouraging, and guiding employee behavior. They imply the importance of maintaining a good reputation and in creating or maintaining trust with stakeholders. If they want to survive in today’s globalised market, they need to work hard on preserving a reputable public image (Bondy et al, 2004), or else the customers will spend their money elsewhere.

And last but not least in the line of arguments, research suggests that corporate codes may be used primarily for self-regulation, and not necessarily for CSR. Codes of conduct as they are currently used may in fact represent more of a desire to control the actions of groups within and outside the corporation for risk management purposes and not an attempt to become more environmentally, economically, and socially responsible (Bondy et al, 2004).