Reassessing the Role of Private Actors in the Global Supply Chain

459 Pages·2017·5.76 MB·English

by  Mark Toshiaki Kawakami

Flawed strategies to reducing labor exploitations
Citation for published version (APA):
Kawakami, M. T. (2017). Flawed strategies to reducing labor exploitations: Reassessing the role of private
actors in the global supply chain. [Doctoral Thesis, Maastricht University]. Datawyse / Universitaire Pers
Maastricht. https://doi.org/10.26481/dis.20170517mk
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Published: 01/01/2017
DOI:
10.26481/dis.20170517mk
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Flawed Strategies
to Reducing Labor Exploitations
Reassessing the Role of Private Actors in the Global Supply Chain
Mark T. Kawakami
U

P
M

ISBN 978 94 6159 704 5
UNIVERSITAIRE
Production, print: Datawyse | Universitaire Pers Maastricht PERSMAASTRICHT

© 2017 by Mark Toshiaki Kawakami
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in
any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior
consent in writing from the author.
Flawed Strategies to Reducing Labor Exploitations:
Reassessing the Role of Private Actors in the
Global Supply Chain

DISSERTATION
to obtain the degree of Doctor
at Maastricht University,
on the authority of the Rector Magnificus,
Prof. dr. Rianne M. Letschert
in accordance with the decision of the Board of Deans,
to be defended in public
on Wednesday 17 May 2017, at 12:00 hours

by

Mark Toshiaki Kawakami
Supervisor:
Prof. dr. J.M. Smits
Co-Supervisor:
Dr. G.W.L. Low, Singapore Management University
Assessment Committee:
Prof. dr. M. Olaerts (Chair)
Prof. dr. L.C. Backer, Penn State University
Prof. mr. A.J.A.J. Eijsbouts
Prof. dr. F. Hendrickx, KU Leuven/Tilburg University
Table of Contents
Chapter 1 Introduction 11
1.1 Problem 13
1.1.1 Made in the USA Case 14
1.1.2 Cobalt Mining in the DRC Case 17
1.2 Research Question 21
1.3 Methodology 22
1.3.1 Structure 22
1.3.2 Interdisciplinary Approach 23
1.3.3 Limitations 24
A. Primary Focus on the Private Sector and Private Law 24
B. Limited Assessment of Public or International Law 27
1.3.4 Preferences and Perspectives 29
A. International Perspective 29
B. Mediating between Keynes and Hayek 30
1.4 Normative Framework 33
1.4.1 Capabilities Approach 33
A. Capabilities Approach v. Economic and Utilitarian Arguments 34
B. Picking the Relevant Capabilities 37
1.4.2 Adapted Capabilities Approach 38
A. Right to Self-Preservation and Freedom of Choice 38
B. Opportunity to Participate in the Decision-Making Process 41
C. Ability to Learn, Think, and Adapt 41
Chapter 2 Labor/Employment Law Perspective 45
2.1 Sweatshops and Exploitative Labor Practices in New York 46
2.1.1 Relevant New York State Labor Laws 46
A. Relevant Laws 47
B. Apparel Industry Task Force 48
2.1.2 AITF: Facts and Figures 48
2.1.3 New York Labor/Employment Laws and Their Limitations 51
2.2 Sweatshops and Exploitative Labor Practices in the Netherlands 51
2.2.1 Relevant Dutch Labor Laws 53
A. Relevant Laws 53
B. Inspectie Sociale Zaken en Werkgelegenheid 54
2.2.2 Inspectie SZW: Facts and Figures 55
2.2.3 Dutch Labor/Employment Laws and Their Limitations 56
2.3 Problems with the Labor/Employment Law Approach 57
2.3.1 The Competence Problem 58
A. Laws Can Be Slow, Ineffective, and Unenforced 59
B. Lobbyists and Money’s Corrupting Influence 61
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C. Governments’ Conflict of Interest 63
D. Flawed Assumption of the Rational Actor 65
2.3.2 The Goldilocks Problem 67
A. “We are operating in a U-shaped world” 68
B. Risk of Overregulation and When Laws Backfire 70
C. Risk of Underregulation and Collective Laissez-Faire 72
2.3.3 Uberized Economy Case 73
A. Independent Contractor Classification as Labor Exploitation 74
B. Labor/Employment Law v. Sharing Economy 75
C. Uber’s Legal Battles 76
2.4 Conclusion: Labor/Employment Laws Are Necessary, but Not Enough 83
Chapter 3 Tort Law Perspective 87
3.1 Foreign Victims in US Courts 88
3.1.1 Alien Tort Statute: Foreign Victims in US Federal Courts 88
A. Brief Summary of Seminal ATS Cases 90
B. Subject Matter Jurisdiction and Causes of Action Under the ATS 91
C. Personal Jurisdiction 95
D. Forum non Conveniens, Acts of State, and Political Question
Doctrines 97
E. Neutering the ATS: Kiobel v. Dutch Royal Petroleum (Shell) 100
F. The ATS Only has Limited Utility for Foreign Plaintiffs 104
3.1.2 California Civil Code: Foreign Victims in US State Courts 107
A. Applicable Law, Venue, and Other Preliminary Matters 107
B. Relevant California Tort Law 109
C. State Law Options are Limited as Well for the Alien Plaintiffs 112
3.1.3 Class Action and Representative Litigation for Transnational Cases 112
A. Class Action 113
B. Representative Litigation 114
3.1.4 US Tort Law and Their Limitations 115
3.2 Foreign Victims in Dutch Courts 116
3.2.1 “Dutch” Law: Foreign Victims in The Hague 116
A. Dutch Law and European Harmonization on Venue and
Applicable Law 116
B. Shell and the Nigerian Farmers: Akpan v. Royal Dutch Petroleum 120
C. Respondeat Superior: Shell in Nigeria and Shell in the Netherlands 125
D. The Dutch Courts Allow More Access to Foreign Plaintiffs 128
3.2.2 Dutch Alternatives to US-Style Class Action Lawsuits 129
A. BW Article 3:305(a) and the Representative Groups 129
B. Wet Collectieve Afhandeling Massachade [Collective Settlement
Procedure] 131
3.2.3 Dutch Tort Law and Their Limitations 132
3.3 Problems with the Tort Law Approach 133
3.3.1 The Territoriality Problem 133
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A. Globalization as a Disruptor of Traditional Governance 134
B. Difficulty of Enforcement at the International Level 136
C. Filing Claims Abroad is Cost-Prohibitive and Time Consuming 136
3.3.2 The Externalization Problem 137
A. Severing Liability: Outsourcing, Third Parties, and Respondeat
Superior 138
B. Piercing a Different Type of a Corporate Veil 139
C. Firm Disaggregation and Fragmented Enterprises 142
3.3.3 FIFA in Qatar Case 144
A. Exploiting Migrant Laborers for the Beautiful Game 144
B. Potential Implications of the Case 149
3.4 Conclusion: Tort Law Offers Limited Opportunities for Exploited Laborers 152
Chapter 4 Company Law/Corporate Governance Perspective 155
4.1 Corporate Social Responsibility Umbrella 156
4.1.1 What is Corporate Social Responsibility? 157
A. CSR: The Definition(s) 158
B. CSR as a Hybrid Regulatory Mechanism 160
C. Untangling Laws, Social Norms, Values, and Morals 161
4.1.2 Why Corporate Social Responsibility? 163
A. Businesses Have a Vested Interest in CSR 163
B. Grounds for Skepticism 165
4.2 Company Law/Corporate Governance Measures to Reduce Labor Exploitations 166
4.2.1 CSR and Its Impact on Corporate Governance 166
A. Shareholder Value Model and Its Focus on Share Value 168
B. Stakeholder Value Model and Stakeholder Involvement 171
C. Enlightened Shareholder Value Model and Shareholder Activism 173
4.2.2 Incorporating as a Benefit Corporation 179
A. What is a Benefit Corporation? 180
B. The Benefits of a Benefit Corporation 180
4.2.3 Integrated Reports, ESG Metrics, and Sunshine Policies 182
A. What are Integrated Reports? 182
B. Stock Markets with ESG Listing Requirements 184
C. Transparency Legislations 185
4.3 Problems with the Company Law Approach 189
4.3.1 The Enforcement Problem 190
A. Costs of Implementing CSR > Benefits of CSR? 190
B. Risk of Isomorphic Mimicry and Greenwashing 191
4.3.2 The Incentive Problem 192
A. Matter of Extrinsic and Intrinsic Motivations 193
B. Ego Depletion: Being Socially Responsible Takes Continuous
Effort 194
C. Intrinsic Motivation through Telos and Phronesis 196
4.3.3 The Causation Problem 198
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A. Being Socially Responsible ≠ Better Working Conditions for
Workers 198
B. Legalizing CSR Initiatives ≠ Higher Compliance and Better
Outcomes 200
C. Laws can Crowd Out Voluntary Incentives and Much More 201
4.4 Conclusion: Plenty of Problems with the Company Law Approach 204
Chapter 5 Contract/Consumer Law Perspective 207
5.1 Ethical Consumerism and CSR 208
5.1.1 What is Ethical Consumerism 208
A. Consumerism and Capitalism in the Age of Proliferation 209
B. Reassessing Consumerism and Capitalism 213
5.1.2 Contract Law as the Enforcer of Justice? 214
A. Origins of Contracts and Notions of Justice 215
B. Proximus Egomet Mihi and the Corruption of Contracts 216
C. Redemption of Contracts? 218
5.2 Contract/Consumer Law Measures to Reduce Labor Exploitation 219
5.2.1 Codes of Conduct 220
A. What are Codes of Conduct? 220
B. Codes of Conduct: Between Downstream and Upstream
Businesses 222
C. Monitoring, Auditing, and Enforcing Codes of Conduct 224
D. Codes of Conduct: Between Downstream Businesses and
Consumers 227
5.2.2 Certification and Labeling Schemes 230
A. Differentiating Between Standards, Certifications, and Labels 230
B. Certification and Labeling: The Cost Benefit Analysis 233
C. The Proliferation of Certifications and Labels 237
D. Preventing the Race to the Bottom with Smarter Logos? 240
E. Foreseeable Limitations of Certification and Labeling Schemes 241
5.2.3 Vitiating Factors and Consumer Protection Based Arguments 242
A. Defects of Consent: Fraud, Misrepresentation, and Mistake 242
B. Immoral Contracts Contrary to Public Policy 246
C. Consumer Protection Laws in the EU (The Netherlands) 247
D. Consumer Protection Laws in the US (California) 251
5.3 Problems with the Contract/Consumer Law Approach 256
5.3.1 The Proliferation Problem 256
A. We are What We Own: Cathexis and Our Instinct of Acquisition 257
B. Cognitive Dissonance and How We Lie to Ourselves 261
C. Numb and Desensitized about Labor Exploitation 264
5.3.2 The Complexity Problem 266
A. Fundamentally Unidentified Questions 267
B. Bounded Rationality Revisited 268
C. System 1 and System 2 272
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D. Biases and Heuristics 274
E. “Companies are People Too” 280
5.3.3 The Communal Problem 281
A. Our Herd Mentality and the Various Shades of Conformity 282
B. We are Attention-Seekers: The Costly Signaling Theory 285
C. We Care Less About What We Do Not See 286
5.3.4 Proliferating Complexity: Emerging Trends 290
A. Emergence of Micropowers and the Shifting Power Paradigm 290
B. Consumers are Thinking Less Before Buying 297
C. Consumers from the East 300
D. Protean Supply Chains 303
5.4 Conclusion: Contract/Consumer Law Approaches are Double-Edged Swords 307
Chapter 6 Recommendations for the Path Forward 311
6.1 Lessons Learned from Our Existing Measures 312
6.1.1 Private Actors are Flawed 312
A. Our Framework Should Acknowledge Our Flaws Better 313
B. Our Framework Should Adopt a More Holistic Approach 314
6.1.2 Private Actors are Operating in a Sub-Utopian World 316
A. Our Framework Should Be Adaptive to an Increasingly Complex
Future 317
B. Our Framework Should Refrain from Absolutes 317
6.2 Call for an Alternative Framework 318
6.2.1 Private Global Norm Production, Reflexive Governance, and Adaptive
Management 319
6.2.2 Adopting a More Holistic Approach that Employs Social Norms 321
A. What are Social Norms? 322
B. Benefits of Social Norms vis-à-vis Legal Norms 326
C. Cost of Over-Legalization: When the Law Crowds Out and Spills
Over 329
D. Private Global Norm Production: Its Feasibility and Desirability 336
6.2.3 Adopting Reflexive Governance and Adaptive Management 341
A. What are Reflexive Governance and Adaptive Management
Strategies? 342
B. Benefits of Reflexive Governance and Adaptive Management 347
C. Reflexive Governance and Adaptive Management: Its Feasibility
and Desirability 355
6.3 Pragmatic Application of the Alternative Framework 360
6.3.1 Recommended Role of the Governments 362
A. Strategic Use of the Law and Nudges 362
B. Ensuring a Level Playing Field 366
C. Special Districts, Charter Cities, and Seasteads 370
D. Open Source Governments 373
6.3.2 Recommended Role of the Businesses 375
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