Big Business is Watching
Monitoring codes of conduct has become a growth industry. In addition to using internal corporate monitors — usually members of a firm’s quality-control staff — corporations often hire external monitors to verify compliance. These monitors-for-hire include consulting and financial auditing firms such as PricewaterhouseCoopers (PwC); domestic compliance firms such as Cal Safety Compliance Corporation, which ...
Monitoring codes of conduct has become a growth industry. In addition to using internal corporate monitors -- usually members of a firm's quality-control staff -- corporations often hire external monitors to verify compliance. These monitors-for-hire include consulting and financial auditing firms such as PricewaterhouseCoopers (PwC); domestic compliance firms such as Cal Safety Compliance Corporation, which carried out between 2,400 to 3,000 labor audits in the Los Angeles area alone last year; and private certification agencies such as Swiss-based Société Generale de Surveillance.
Monitoring codes of conduct has become a growth industry. In addition to using internal corporate monitors — usually members of a firm’s quality-control staff — corporations often hire external monitors to verify compliance. These monitors-for-hire include consulting and financial auditing firms such as PricewaterhouseCoopers (PwC); domestic compliance firms such as Cal Safety Compliance Corporation, which carried out between 2,400 to 3,000 labor audits in the Los Angeles area alone last year; and private certification agencies such as Swiss-based Société Generale de Surveillance.
The cost of monitoring can add up, particularly as the practice expands worldwide. Consider the case of Gap Inc., which spends $10,000 a year on monitors for Charter, the Taiwanese-owned factory in El Salvador originally named Mandarin International. If Gap Inc. duplicated these efforts with its 4,000 subcontracting factories around the globe, the annual bill would amount to nearly $40 million, or some 4.6 percent of the company’s total 2000 profits.
Orders from U.S. footwear and apparel makers alone support between 40,000 and 80,000 production sites around the globe. Under the Fair Labor Association’s (FLA) certification program, only 30 percent of a company’s manufacturing sites must undergo inspection in the first two or three years to obtain FLA approval, and only 5 to 15 percent must be inspected each subsequent year to maintain a company’s affiliation. Individual inspections run from $1,000 to $6,000 apiece. Companies foot the bill for their own inspections, although the FLA reimburses firms for up to half of the inspection costs.
PwC, the largest accounting firm involved in the monitoring business, conducted some 6,000 factory audits around the world in 1998 (compared to zero just two years earlier). The firm’s global reach allows it to carry out labor-conditions audits efficiently for its main clients, including Liz Claiborne Inc. and Nike. Because of the intensely competitive nature of the compliance market, PwC announced last May that all of its monitors in the United States will leave the company and form a new firm called Global Social Compliance LLC.
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