Bangladesh Factory Disaster Stirs Criticism of American Retailers
ROMANS: I want to introduce you to a woman named Reshma. Maybe you heard her speak and maybe you've already heard her story. But we're not going to forget it here. Last week recovery workers pulled the 19-year-old woman from the rubble of a collapsed garment factory in Bangladesh. She had been buried underneath the debris for 17 days. Cracks in the building had previously been detected, but Reshma says no one told her it was unsafe.</s>RESHMA, SURVIVOR OF SAVAR DISASTER (via translator): No. No warning. No one told me. Everyone was looking to see which parts are cracked and I went in and see there is a wall where a little is cracked. The managers said it is water damage and you guys can work.</s>ROMANS: More than 1,100 people were killed when that building, home to five different garment factories, crumbled to ground, burying those people alive. They died making clothes for brands that are very likely hanging in your closet. Americans have short memories, and retailers know that. That's why we're going to remember Reshma, because U.S. companies have an opportunity here. They can make garment producing in Bangladesh safer and they are balking. More than two dozen European clothing companies have agreed to a new five year legally binding safety agreement that requires independent inspections and safety upgrades. Only two American companies have signed on, Abercrombie and Fitch and PVH, the maker of Calvin Kline, Tommy Hilfiger, and Izod. The rest are saying no thanks. Wal-Mart says it is hiring its own inspectors and will make the results public. Companies like Wal-Mart don't want to lose control of the supply chain or the inspection process. But I am here to tell you they already have. Wal-Mart just found out a year ago a supplier used one of the factories inside that collapsed building to produce jeans. Before this devastating collapse it had no idea production ever happened there. And this is not the first time Wal-Mart has been caught unaware. Gap has a different reason for not signing on. It's worried about legal exposure. Gap doesn't want to end up dragged into court and potentially liable if there is another preventable tragedy in Bangladesh. Other companies aren't offering much reason at all. Here is the statement we got from Sears, quote, "Sears intends to continue participating in discussions on the accord as updates are made and more information is available but is not prepared to sign the current proposal as it is written today." This goes on like this for 18 more words before ending with this. "Meanwhile we will continue ongoing efforts to work collaboratively with other brands and retailers to improve working conditions in Bangladesh," 71 words in all to essentially say it is status quo for Sears in Bangladesh. We invited all companies to come to talk to us on camera, Sears, Wal-Mart, Target, J.C. Penney, Gap. All declined or didn't respond to our request. The National Retail Federation declined as well. So let's bring in Dana Telsey and Dara Ward. Dana is the CEO of Telsey Advisory Group covering retailers and their business for years. Dara is a professor of environmental and labor policy at University of California, Berkeley. Dana, let's look at these numbers, multibillion dollar businesses who have made a ton of money chasing the cheapest labor in a race to the bottom. Look at some of the profit number. Wal-Mart made $17 billion last year. Target made $3 billion. Gap more than $1 billion. How can a company that knows everything about me at the point of purchase, know exactly what I am doing, how can they not know where their jeans are being stitched?</s>DANA TELSEY, CEO, TELSEY ADVISORY GROUP: I think one of the things that happens with these companies, they're very large companies. They are subcontracting out some of the garments that they make, and it could go from an agent to a subcontractor. Certainly the agents, there is lots of legal issues and lots of legal stipulations in the contract about worker safety. But even saying that, worker safety can be enhanced by all.</s>ROMANS: How can Wal-Mart or Sears, how can they say we'll do our own inspections if they don't know where it is being made? That's what I don't understand.</s>TELSEY: Because what's happening is sometimes if this happened through one of the agents, they take it back themselves. There are higher costs to do it themselves and put the inspections in themselves. But they do value the safety of the workers that the garments are being produced at.</s>ROMANS: A lot of people, Dara, are asking do they value the safety of the workers more or less than they value the low input costs of making that garment. When I buy something, when American consumers buy something, I think you assume it's not being made with slave labor. The European trade commissioner said "This is slave labor in Bangladesh." Do American consumers, Dara, do they make the assumption or not care?</s>DARA O'ROURKE, ENVIRONMENTAL AND LABOR POLICY PROFESSOR: No, I think American consumers do care when they learn, when they know, when these types of tragedies occur and becomes kind of front and center and connects us from the stylish, quality, low price garments we think we're buying with the reality of these supply chains and the reality of Bangladesh, which, as you point out, lowest apparel wages in the world, horrendous conditions, building conditions, infrastructure conditions, that when they see it I think they are shocked and I think they really do care. But what you just point out is this is a system that has been set up for the outsourcing of production and, quite frankly, the outsourcing of responsibility. This is not an accident that Wal-Mart doesn't know whether these factories are producing their goods. This is part of a system of pushing down prices, speeding up delivery times so that the industry can drive what they call "fast fashion." That is stylish products changing very quickly at reasonable quality but at low prices in the stores. So this really is an industry problem driven by the brands and the retailers, and this really is a situation where the U.S. brands and retailers are shirking their responsibility.</s>ROMANS: Are they or, let me ask, I have been very closely watching and no one is going on camera for me. I have been closely reading these long PR department written statements, policy statements that they have and this is a lot of we want to continue the ongoing dialog. You know, many people, myself included, say that dialog should have happened before a bunch of people died, right? You should already have a grapple, an idea of what's happening in your factories. But could it really be that Gap and Wal-Mart and others, maybe they don't like the European deal and there will be some sort of North American deal that will make things safer?</s>DARA: So the North American retailers came together and made an announcement this week which you probably already read which was a four-page press release rather than a plan for safety in Bangladesh. If one of my under graduate students had turned that plan into me I would give it an f. It was so vague, noncommittal, and filled with self-congratulatory platitudes with no detail about what they are actually going to do. It continues a program of voluntary self- monitoring with no binding, no enforceable agreements. And this is what the Gap is saying. The code word, we don't want liability. The real thing is they don't want responsibility. They want flexibility, which is, again, what the Americana peril and footwear said. They want flexibility. They don't want to commit to the real solution, a binding and enforceable agreement that would involve them committing to contracts, not to cutting and running, not to voluntary auditing, which has failed over the last 10 years, but to them committing for the next five years to actually commit to improving conditions in Bangladesh.</s>ROMANS: Let me bring Dana back in, because the issue here is do they have a responsibility? The responsibility is to the shareholders, these retailers right? If there is a public outcry that's big enough, do shareholders start to say, hey, you have to do a better job? You can't just let people subcontract and subcontract and subcontract, it's bad press.</s>TELSEY: I think you have seen retailers over the past few years and frankly over the past few decades enhance their operations, whether it comes from the systems side, whether it comes from labor and payroll costs.</s>ROMANS: By enhance their operations, do you mean make things better safety-wise?</s>TELSEY: I think they got it in the U.S. I think the agents part of the business given how much so many of them use the subcontractors and agents, I think now it is going to come onto a new level, and I think you will see retailers address the issue.</s>ROMANS: Do they know? Do the retailers know when they are signing the contracts, do they everyone there is not a lot of transparency and so much corruption with the local governments? Do they close their eyes and hope for the best?</s>TELSEY: I think you have seen retailers over the past few years, whether U.S., Mexico, Cambodia, Asia, you name tons of different countries they diversified into, many of the different annual reports and discussions that these CEOs talk about is here is how we diversified our sourcing. And they can be able to know more about what is being produced in each country so they're not solely dependent.</s>ROMANS: Bottom line, does the American consumer pull back?</s>TELSEY: Bottom line, they don't pull back. If there is something new they to want wear, they'll keep buying it.</s>DARA: I would absolutely say the American consumer shopping at the Gap, Abercrombie, the stores we're talking about not searching for the cheapest garments. They're searching for stylish, quality garments at a good price. They are willing to pay more. They will pay more. What we're talking 25 cents for to cover the cost of renovation and improving the buildings in Bangladesh. American consumers will pay when they know and they will punish these brands that don't sign.</s>ROMANS: We'll watch. Thanks so much to both of you. Have a great weekend. Up next, the have and have-nots and the bull market run.