Textbook Contracting International Employee Participation Global Framework Agreements 1St Edition Felix Hadwiger Auth Ebook All Chapter PDF
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International Law and Economics
Felix Hadwiger
Contracting
International
Employee
Participation
Global Framework Agreements
International Law and Economics
Series editors
Stefan Voigt, Germany
Anne van Aaken, Switzerland
Andrew T. Guzman, USA
Stefan Oeter, Germany
Joel P. Trachtman, USA
Naigen Zhang, China
More information about this series at http://www.springer.com/series/13428
Felix Hadwiger
Contracting International
Employee Participation
Global Framework Agreements
Felix Hadwiger
Institute of Law & Economics
University of Hamburg
Hamburg, Germany
I am very grateful to my family and friends who helped me during the course of
this research. To name only a few of them: Fanny E. Schories, Farzaneh Badiei,
Mariia Parubets, Sarah Lee, Marek Endrich, Melina Bärwalde and Enrico Cairola
helped me with invaluable comments and suggestions and I highly appreciate the
guidance and recommendations of Professor Eger and Professor Basedow. More-
over, I am grateful to the Deutsche Forschungsgemeinschaft (DFG), which
funded the Graduiertenkolleg “The Economics of the Internationalization of the
Law” (GRK 1597/2). The generous funding enabled me to present different
chapters of this book at international conferences and to receive comments and
suggestions.
Presentations took me to conferences organized by the World Interdisciplinary
Network for Institutional Research (WINIR), the Italian Economic Association,
the American Public Choice Society, the Scandinavian ReMarkLab research
network, the Bundesvereinigung Deutscher Arbeitgeberverbände (BDA), the
International Organization of Employers (IOE), BusinessEurope and the Interna-
tional Training Centre of the International Labor Organization (ILO). Further-
more, I am grateful for a fellowship from the Public Choice Society supporting
my stay at the 53rd Annual Meeting of the Public Choice Society in Fort
Lauderdale, Florida.
Two chapters of this book were pre-published in peer-reviewed journals.
Condensed versions of the chapter “The Implementation of Global Framework
Agreements at Subsidiaries, Suppliers and Subcontractors” were published in the
International Journal of Labour Research (Vol. 7, pp. 75–94) and as a longer
background paper by ILO-ACTRAV (ISBN 978-92-2-131147-8). The findings of
the background paper informed a report for discussion at the ILO’s International
v
vi Acknowledgements
Labor Conference 20161 in Geneva. The chapter “Looking to the Future: Media-
tion and Arbitration Procedures for Global Framework Agreements” has been
accepted for publication in the journal Transfer: European Review of Labour
and Research.
1
International Labor Organization (2016): Report for the International Labour Conference. Decent
Work in Global Supply Chains, Geneva, pp. 55–56.
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Global Framework Agreements . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 The Need for International Governance Structures . . . . 1
1.1.2 Emergence of Transnational Industrial Relations . . . . . 2
1.1.3 Future Regulatory Potential of Global Framework
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1.4 The Economic Analysis of Law . . . . . . . . . . . . . . . . . 3
1.2 Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2.1 Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2.2 Effects of Global Framework Agreements . . . . . . . . . . 5
1.2.3 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 The Added Value of This Book . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3.1 Creation of a New Data Set . . . . . . . . . . . . . . . . . . . . 6
1.3.2 Prominent Contributions . . . . . . . . . . . . . . . . . . . . . . 6
1.3.3 Focus on the Question as to Why Companies
Conclude Global Framework Agreements . . . . . . . . . . . 7
1.3.4 Methodological Approach . . . . . . . . . . . . . . . . . . . . . 7
Part I Foundations
2 The Internationalization of Law: The Evolution of Labor
Standards in Response to Globalization . . . . . . . . . . . . . . . . . . . . . 11
2.1 The Predicament: Governance Gaps . . . . . . . . . . . . . . . . . . . . 11
2.2 The Evolution of Labor Standards in Response to Globalization:
Towards a Global Labor Governance Regime . . . . . . . . . . . . . 12
2.2.1 Responses by International Organizations: Defining
International Standards . . . . . . . . . . . . . . . . . . . . . . . 13
2.2.2 Government Responses: Increasing Market
Transparency and Corporate Accountability . . . . . . . . 16
2.2.3 Company Responses: Corporate Social Responsibility . . . 17
vii
viii Contents
Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
List of Abbreviations
xiii
xiv List of Abbreviations
Fig. 3.1 Development of GFAs, broken down by GUF (This graph of the
development of GFAs is cited and re-printed in the ILO’s report
on “Decent Work in Global Supply Chains”, which was the
basis for a discussion in a committee at the ILO’s 105th
International Labour Conference in 2016, p. 56). Note: IFJ
International Federation of Journalists, BWI Building and Wood
Workers’ International, IUF International Union of Food,
Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied
Workers’ Associations, UNI UNI Global Union, IndustriALL
IndustriALL Global Union. Source: Graph created and updated
by the author (n ¼ 115). Based on Hadwiger, Felix (2015):
GFAs: Achieving Decent Work in Global Supply Chains? In:
International Journal of Labour Research, ILO-ACTRAV,
Geneva, p. 77 . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 24
Fig. 3.2 Number of GFAs, broken down by headquarters location
(n ¼ 115). Source: Graph created and updated by the author
(n ¼ 115). Based on Hadwiger, Felix (2015): Global
Framework Agreements: Achieving Decent Work in Global
Supply Chains? In: International Journal of Labour Research,
ILO-ACTRAV, Geneva, p. 78 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Fig. 3.3 Development of GFAs, broken down by geographical region.
Source: Graph created by the author (n ¼ 115) . . . . . . . . . . . . . . . . . . 27
Fig. 3.4 Development of GFAs, broken down by European countries.
Source: Graph created by the author (n ¼ 93) . . . . . . . . . . . . . . . . . . . 28
Fig. 3.5 Size of companies (number of employees). Source:
Figure created by the author (n ¼ 59) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Fig. 3.6 Development of EFAs 2000–2011 [This figure by Müller et al.
(2012) indicates a higher number of concluded GFAs than the
previous chart “Development of GFAs, broken down by GUF”
in this chapter. The previous chart in this chapter shows the
xv
xvi List of Figures
xix
List of Boxes
xxi
xxii List of Boxes
In the last two decades, multinational companies (MNCs) and global union feder-
ations (GUFs) have started to negotiate so-called global framework agreements
(GFAs). These agreements are instruments of private governance for regulating
labor standards and industrial relations within companies worldwide.
The content of the agreements is developing continuously. While the first
agreements were tentative steps in the direction of internationalizing labor stan-
dards and industrial relations, more recent agreements include increasingly detailed
provisions and address additional and more complex issues. This points to great
future potential for GFAs in the long run, able to reshape the international regula-
tion of labor standards. Up to now, international organizations—inter alia the
International Labor Organization (ILO)—and states have had an almost exclusive
mandate for the international regulation of labor standards. This public regulation is
now complemented by GFAs that represent a bottom-up approach and directly
involve the private parties concerned. Although these agreements represent no
more than “soft law”, they have the potential to influence working conditions for
millions of employees worldwide.
The starting point and overarching research interest of this book is the emergence of
transnational industrial relations, observable at regional and global levels. How-
ever, though the number of companies signing GFAs has been steadily increasing
for more than 15 years, the majority have not signed one and have no intention of
doing so. While GUFs assign major importance to GFAs in their policy agendas,
only few companies are willing to negotiate such an agreement. The answer to the
question whether the use of GFAs can be expected to increase in the future,
resulting in a wider unfolding of transnational industrial relations, therefore
depends on the interests and incentives of MNCs.
This is the reason why I decided to specifically focus on their interest in and
incentives for concluding GFAs, while only cursorily analyzing those of GUFs.
Though the book includes an analysis of GUFs from a public choice perspective in
order to gain an overall picture of the incentives and interests of the bargaining
partners, the main research interest is: why do MNCs sign GFAs? At first glance
this seems puzzling, as in principle, the conclusion of a GFA can mean a loss of
competitiveness. Labor standards such as the right to collective bargaining are
likely to result in higher labor costs. Ceteris paribus, MNCs should prefer a
situation with weaker labor standards and lower costs.
The overarching question about the incentives of companies is connected to
several sub-questions also explored in this book. Do MNCs sign GFAs for public
relation purposes? Why are European companies more likely to conclude a GFA
than companies from other parts of the world? Why do companies and GUFs decide
to create international dispute resolution mechanisms in most GFAs? Do companies
conclude GFAs to better regulate their supply chains? How can compliance with
standards set forth in GFAs be improved?
In the existing literature, the answer to the last question is often a call for legal
enforcement. However, this book argues that the discussion about the legal status of
1.1 Global Framework Agreements 3
GFAs is largely theoretical and of little practical relevance because the bargaining
partners simply do not enforce GFAs in courts. If this were to be the case, their
cooperative framework would have already failed. Therefore, when looking at the
question of the enforceability of the agreements, I do not focus on legal action but
on retaliatory actions such as public campaigns and the resulting reputational
sanctions, i.e. private enforcement measures. With regard to improving enforce-
ability, this book endorses alternative dispute resolution mechanisms such as
mediation. This decision is based on the observation that mediation fits better into
the cooperative long-term framework of GFAs than judicial enforcement, which
constitute one-shot interactions, often with adversarial and disruptive effects.
All these specific questions are embedded in the general research interest to analyze
the emergence of transnational industrial relations and new forms of an interna-
tionalization of laws and labor standards. In this work, GFAs are perceived as the
result of the limited capacity of states to regulate internationally, leading to an
institutional convergence driven by private actors regulating labor standards and
industrial relations within companies worldwide. The book thus ends with an
outlook on the future regulatory potential of GFAs. Based on the foregoing analysis
the question is asked whether the incentives for the bargaining partners are likely to
be strong enough to successfully achieve a self-regulatory regime in this field. Their
ability to bargain in a consensual manner to achieve efficient outcomes determines
the answer to the normative question of whether private ordering should prevail
over public ordering.
This book uses the framework of the economic analysis of law, employing a
rational choice approach. Behavior is predicted by looking at the incentives of the
actors which are assumed to be rational decision-makers who act to further their
self-interest subject to the constraints they face. Therefore, this book focuses on the
incentives and motivations of GUFs and particularly MNCs to conclude GFAs. To
identify the bargaining partners’ interests and incentives, large parts of the analysis
rest on an evaluation of case studies and a comprehensive content analysis of recent
GFAs. A research sample was created for this book, made up of all agreements
concluded during January 2009–October 2016 (n ¼ 59). The computer program
used to code the agreements is MAXQDA, a software program designed for
computer-assisted qualitative and mixed methods data, text and multimedia
4 1 Introduction
analysis. In total, some 1500 single coding points were created for the evaluation of
the agreements in the research sample.
In the law and economics literature, different methodological tools are fre-
quently used to analyze the effects of legal rules. This book applies some of these
tools to GFAs. Chapter 4 models the incentive structure of the bargaining partners
in a continuous prisoners’ dilemma game with an unknown end period. This helps
to clarify the degree to which GFAs represent self-enforcing long-term contracts. In
Chap. 5, which takes a public choice perspective on GUFs, the tool of principal-
agent relationships and the consequential difficulties are used to analyze the
incentives of GUFs to sign GFAs. Moreover, the concept of signaling is applied
in Chap. 6 to analyze ways of overcoming information asymmetries.
However, the majority of the chapters employ a mixed methods approach. Case
studies are used to illustrate the analysis and make abstract reasoning more tangible.
In Chap. 6 a case study illustrates how a particular company makes use of its GFA
for public relations purposes on its website. Consequently, the case study is
supplemented by a content analysis of 59 corporate websites. The information
collected is then analyzed with descriptive statistics, while a regression model
analyzes variations between different groups of companies and the likelihood that
they will use a GFA on their corporate website for signaling purposes. A case study
in Chap. 7 illustrates an effective example of the implementation of a GFA in
Colombia. This is supplemented by a content analysis of the agreements in the
research sample to evaluate their formal scope of application to suppliers, sub-
contractors and subsidiaries and an evaluation of 29 case studies from the literature
to analyze their implementation in practice.
1.2 Outline
1.2.1 Foundations
The aim of this section is to familiarize readers with GFAs. It starts with a general
introduction looking at the internationalization of law, showing that GFAs are part
of a more general development towards an internationalization of law that increas-
ingly includes private parties. The third chapter gives an overview of the prolifer-
ation of GFAs, looking at their basic features and the characteristics of the
bargaining partners in view of the subsequent analysis. The typical content of a
GFA is analyzed, showing a development over time towards more complex agree-
ments. The fourth chapter discusses the legal relevance of GFAs, revealing that the
bargaining partners rely on non-legal measures to enforce the agreements. The last
1.2 Outline 5
The second part of the book focuses on the effects of global framework agreements,
analyzing selected incentives considered to play a dominant role in the decision of
companies to conclude GFAs. The first chapter analyzes the public relations effect
of GFAs, illustrated by a case study of the Belgian MNC Solvay and a content
analysis of the corporate websites of all 59 companies that concluded a GFA during
the last 6 years. Contradicting the conventional wisdom found in the literature, the
results indicate a limited value of GFAs for external gestures. Moreover, when
analyzing the incentives for MNCs to conclude GFAs, it is crucial to make a
distinction between actively sending a signal and passively safeguarding a corpo-
rate reputation.
Chapter 7 discusses in depth the incentive to achieve better management of
global production networks by standardization, part of incentive group (1). It starts
with a case study highlighting several good-practice examples in the implementa-
tion of a GFA, revealing a shift from a public to a private guarantee of compliance
with ILO Conventions (case study on Carrefour). The chapter goes on to take a
broader look at how GFAs influence working conditions, conducting a content
analysis of the agreements in the research sample to evaluate their formal scope of
application to suppliers, subcontractors and subsidiaries. Consequently, this is
supplemented by an evaluation of 29 case studies identified in a structured literature
review. These reveal several examples of how suppliers, subcontractors and sub-
sidiaries can be effectively brought under a GFA umbrella. However, the existence
of a GFA is often unknown to local subsidiaries, suppliers and subcontractors and
also within the ranks of local trade unions.
Chapter 8 examines another part of incentive group (1), analyzing why the
bargaining partners include international dispute resolution mechanisms in GFAs.
It is found that their inclusion allows MNCs and GUFs to replace adversarial local
dispute resolution with international cooperative dispute resolution. Moreover,
dispute resolution mechanisms make the agreements more flexible. Their goal is
to identify when a company or trade union is in breach of a GFA provision, and to
find a mutual solution allowing continued cooperation.
6 1 Introduction
1.2.3 Outlook
The last part presents an outlook on the basis of the foregoing analysis. Chapter 9
continues the analysis of dispute resolution regimes created by GFAs through a
forward-looking view, developing procedural suggestions for alternative dispute
resolution mechanisms between GUFs and MNCs. In the long run, a procedural
framework for mediation and arbitration could improve the effectiveness of the
agreements and corporate accountability, while at the same time inspiring GUFs
and MNCs in the design of GFAs. The last chapter analyzes the future potential of
GFAs, outlining avenues for further research and discussing the general implica-
tions of this work and its contribution to the research field of the economic analysis
of the internationalization of law.
The value this book adds to the existing literature involves four main groups,
necessarily interrelated in various aspects.
The first group combines new insights resulting from the above-mentioned creation
of a new dataset containing the characteristics of 59 GFAs. This up-to-date over-
view of the contents of the most recent GFAs reveals a continuous and rapid
development in recent years, advancing the literature in different chapters of this
book. First, compared to older agreements, it reveals a more comprehensive
inclusion of international instruments and principles such as the OECD Guidelines
and the UN Universal Declaration of Human Rights. Second, it adds to the literature
by supplementing or even contradicting previous findings with regard to legally
relevant clauses in GFAs. Third, it shows that references to suppliers and sub-
contractors which extend the scope of application of GFAs are becoming more
frequent and binding. Fourth, the dataset shows that an increasing share of the
agreements include a reference to alternative dispute resolution mechanisms, a
subject not previously discussed in the literature.
The second group comprises prominent contributions that add to existing literature.
I would like to highlight three particularly important contributions. First, the
1.3 The Added Value of This Book 7
analysis of the public relations effect of GFAs which rigorously examines how
companies make use of GFAs in the public relations section on their corporate
websites. The creation of comprehensive descriptive empirical evidence adds to the
individual evidence presented in case studies in the existing literature, helping to
assess the public relations value of the agreements in a more nuanced way. Second,
the case study on the implementation of Carrefour’s GFA in Colombia advances the
existing literature. Compared to other case studies, which analyze the implemen-
tation of GFAs in subsidiaries and suppliers, the study of Carrefour’s GFA in
Colombia represents a particularly successful example in terms of increasing
trade union membership and enabling local unions to bargain their own collective
agreements with local MNC management. The third unique contribution refers to
the development of mediation procedures. As yet, no framework for alternative
dispute resolution for GFA-related issues has been developed. Compared to schol-
arly publications about the legal nature of GFAs, the opportunity to resolve disputes
through alternative dispute mechanisms, namely mediation and arbitration, is
generally terra incognita in the existing literature.
The third value-adding group concerns the distinctive focus on the question as to
why companies conclude GFAs. Prior research into GFAs has mostly been
conducted from government and trade union perspectives and thus provides only
limited insights into this question. Reasons as to why companies sign GFAs are
gleaned from the scattered evidence in case studies and other publications and are
substantiated and complemented by the above-mentioned content analysis of the
agreements in the research sample, own case studies and in-depth analyses of
selected incentives. A prominent contribution to the existing literature is the
identification of four groups of incentives of relevance for MNCs to enter into
GFAs. Based on these incentives, this book attempts to predict under which
conditions GFAs can be expected to proliferate in the future.
The last group combines the added value of the chosen methodological approach.
Law and economics literature has so far neglected GFAs as a recent phenomenon in
the internationalization of law. The added value to the existing literature by the
methodological approach used in this work is that methodological tools and con-
cepts from economics are employed for the first time to comprehensively examine
GFAs. Examples were already given in a previous section: modelling the incentive
8 1 Introduction
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