Juan Zarruk Cohort 4

ASSIGNMENT 3
Third World Families at Work: Child Labor or Childcare?

Dear Timothy & Thomas CEO
1
,

After having analyzed the situation that Mr. Jonathan Stein (VP of International
contracts) has reported about the situation of the Pakistani plants in Lahore, we are glad
to present our assessment and opinion on the current situation, as well as possible
alternatives to solve and mitigate this situation under a perspective of Corporate Social
Responsibility.
We conjunctly analyzed the companys Global Guidelines for Business Partners, and
were able to conclude that undoubtedly the situation in Pakistani plants do not comply
with them, as in most of them we could evidence the presence of child labor.
After conducting several interviews with the plants workers and their children, we found
concluding evidence that in more than 95% of the cases, the mothers and their children
consider that they are better working at the plants than being left alone at home, and
taking into account the risks that children face in their villages, we completely agree with
this affirmation.

Under the current circumstances, the immediate enforcement of the companys
policies will probably result in the following undesired situations and consequences for T
& T, the contractors; its employees, and their children.
Situation Consequence (s)
The kids will be forced to be
away of their mothers
They will be left with the option of taking another
work probably riskier somewhere else. Or even
worse, be left alone at their villages, where they
will be exposed to risks such as: abduction,
violence, drugs, and prostitution, among others.
High social cost for the

1
This recommendation is built under the assumption that Jonathan Stein has reported the
situation of Lahores plant to the CEO
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The employees will have to
make arrangements with
neighbors to take care of the
kids, wake up earlier to prepare
food for them, and remotely
being worried and taking care
of them
This will result in lower productivity of the
employees. Higher costs for the company.
Overall, plants will have less
employees
Less total output per plant. Higher costs for the
company.
Contractors will choose to
work with other, more
flexible companies
T & T will possibly face a shortage in suppliers,
having to move to other plants/countries with
higher costs.

Although we understand that from a business perspective, complying with the guidelines
will leave T & T out of business, companies have to act in ways that are consistent with
their values to ensure their long-term existence, as it was the case of Yahoo in China.
As a company that holds a reputation for its social responsibility, not complying with the
guidelines is jeopardizing the reputation that might arise with a public scandal that could
completely destroy the brand, and possibly lead the company to bankruptcy as a
consequence.
Finally, as it was concluded in the Mercks case, employees are critical moral claimants,
and it would lead to an internal trust crisis that a company that promotes employee
empowerment and diversity, is supporting child labor.

To guide the discussion on the next steps and how the company should proceed,
we present an analysis of the situation under the Five Rs framework, as suggested by
(Beardsley, Bonini, Mendonca, & Oppenheim, 2007).

1. Risks:
-The future of the kids is uncertain if they dont stay in the plants. If they stay in the
plants they are being denied the opportunity of going to school and have social mobility.
- The company is already fighting to survive in the North American and European
markets. Rising costs with the current products will leave the company out of the market.

Juan Zarruk Cohort 4
2. Renewal:
-After prohibiting child labor in their plants, T&T will not be able to compete with other
brands that will keep the costs low. This is an opportunity for them to develop, launch
and produce new higher end product lines, on a market where cost is not the only factor
that drives sales. This product lines usually have higher profit margins.

3. Regulation:
-In general, local governments are also concerned about the problematic of child labor,
and the lack of education and opportunities for children. Working closely with the
governments, the company can make partnerships to be part of this solution, but most
important, it can encourage governments to enforce regulations, thus ensuring that other
companies dont get any competitive advantage by using child labor.

4. Relationships:
-The contractors and their employees will feel affected by the decision taken of not
allowing child labor. The company needs to maintain its good terms with both of them, to
ensure long-term relationships that are favorable for all of the parties. These relationships
have to be built more on the premise of creating shared value, than as social
responsibility with limited connection to the business.

5. Reputation:
-Good companys actions will result in admiration from all the stakeholders: customers,
employees, contractors, governments, and suppliers.

As a result of the previous analyses, our recommendation for T & T, is to develop
a CSR policy and guidelines that have a positive effect in the community and specially in
the children, but that also make of the company a better and more profitable business. As
expressed by (Vogel, 2005), corporate social responsibility makes business sense: it
gives firms access to the capital of socially concerned investors, it prevents consumer
boycotts and promotes brand loyalty, and I can help attract more motivated employees
The companys CSR plan will consist of three phases as detailed below, with a main
social goal of providing alternative opportunities to kids, focused on education as the
Juan Zarruk Cohort 4
solution to child labor. In line with (Bachman, 2000), compulsory education laws, as
well as the implementation of those laws and the provision of schools, help reduce child
work simultaneously and arguably are a precondition for later, rapid economic growth.

T&Ts Plan to end child labor in Pakistan
Phase Risks Opportunities
Immediate & Short term:
-Require contractors to stop
child labor in the plants
-Assign areas in the plants
where children can stay and
be taken care off while their
mothers work
-Contractors work with
other companies that dont
impose this restriction
-Workers get angry because
they are not allowed to stay
with their children, and try
to find jobs in other plants
-Immediate compliance of
guidelines and possibility of
getting positive media
-Other companies following
T&Ts initiative and make
the same requirements to
contractors
Medium term:
-Partner with government to
help design education
solutions located near the
plants. Urge current
regulation enforcement
-Provide on-site basic
education for kids
-Financial stress of the
company supporting higher
costs than competitors if
they dont follow
-Kids stop going to the
plant and take another work
-Start leveraging on the
companies actions to
segment and differentiate
their products from
competitors, as sweat-free,
education empowerment
products
Long term
-Help get funding to support
government efforts of
building schools and
primary education
institutions near the plants
-Position the company as
the pioneer of sweat-free
products
-Start
-Customers dont respond
accordingly, and the new
products and higher prices
fail from a market
perspective
-Competitors hire the
skilled workers after T&T
has trained them and
invested in their education
-New restrictions will foster
innovation and the possible
development of new / better
products
-Education will contribute
to more productive workers
in the future

Although it is unclear and difficult to quantify the exact benefits and the payback might
not come immediately, and there are many risks, this plan is the only way to ensure long
term continuity of the business, while producing in Pakistan and other third world
countries.

Wordcount: 1322
Juan Zarruk Cohort 4
Bibliography

[1] Bachman, S. L. (2000, July). The Political Economy of Child Labor and Its Impacts
on International Business. Business Economics , 30-41.

[2] Beardsley, S. C., Bonini, S., Mendonca, L., & Oppenheim, J. (2007, Summer). A New
Era for Business. Stanford Social Innovation Review , 57-63.

[3] Vogel, D. (2005, September). The limits of the market for virtue. Ethical Corporation
, 44-46.