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QUE ES COVERCO?
 
In 1,997 a group of professionals, leaders in Guatemala's civil society, came together to create the Commission for the Verification of Corporate Codes of Conduct (COVERCO).

COVERCO is a pioneering effort in the independent monitoring of working conditions in Guatemala's garment factories and agricultural export industries.

 

 
¿WHAT IS A CODE OF CONDUCT?

Consumers increasingly demand that the goods they buy be produced under decent working conditions. Businesses find that good working conditions stimulate increased quality and productivity. Corporations adopt Codes of Conduct as a public expression of the minimum standards that will be met in their own operations and by those in their supply chain.

Most Codes of Conduct commit to ensuring protection of the workforce in line with internationally recognized standards such as the International Labor Organization (ILO) Conventions in addition to requirements of national law.

CODES OF CONDUCT USUALLY ADDRESS THE FOLLOWING AREAS:

•  Child, bonded or forced labor.

•  Freedom of association and collective bargaining.

•  Health and safety conditions in the workplace.

•  Acceptable levels of wages and benefits.

•  Excessive working hours.

•  Non-discrimination.

•  Regular employment.

•  Harsh or inhumane treatment, sexual or other forms of abuse.

A Code of Conduct is a statement of intent. Like any business strategy, it needs adequate policies and procedures to ensure implementation. This process includes effective monitoring of compliance with the existing codes and remedial or corrective action when conditions fall short of the stated standard.

This study is different from most of COVERCO's work in that neither the Guatemalan coffee industry nor most major buyers hold themselves to a Code of Conduct.

This diagnostic study seeks to document the urgent need to create a culture of compliance in coffee and other agricultural export industries in Guatemala.
 
COVERCO AND BUSINESS IN GUATEMALA  

To date, COVERCO’s work has focused on the garment and agricultural export industries. 

Through independent monitoring and verification of Codes of Conduct, COVERCO seeks to foster a new vision of how business in Guatemala can be successful in the global economy while bringing greater benefits to workers, their communities, and all of society.

COVERCO believes that, to respond to the demands of global consumers and to thrive in the global economy, business  in Guatemala must develop a competitive advantage by providing decent working conditions in addition to product price and quality.

COVERCO AND INDEPENDENT MONITORING

Many corporations have their own internal control systems to identify and rectify breaches of their Codes of Conduct.  In addition, many hire  accounting firms to audit the financial components of their Codes.  Increasingly, corporations are looking to independent monitors capable of providing a social and financial audit
that is both independent and recognized as independent by their consumers and by advocacy groups.

COVERCO provides independent monitoring and verification that meets rigorous standards of accuracy, transparency and non-partisanship.  As a not-for-profit, non-governmental organization (NGO) with a multi-disciplinary approach, we can provide authoritative and trusted monitoring that can give customers the confidence they demand.

HISTORY OF THIS PILOT PROJECT

In1996, Liz Claiborne Inc. (LCI) initiated conversations with a number of representatives of Guatemala 's civil society about the possibility of beginning independent monitoring in Guatemala .

These conversations motivated several of the Guatemalans to crystallize their preliminary reflections about independent monitoring. In 1997, they created the Commission for the Verification of Codes of Conduct (COVERCO).

By mid-1998, COVERCO began talks with LCI about implementing a pilot project in independent monitoring at their supplier factories near Guatemala City .

The terms of the study were negotiated over the next several months, and COVERCO began to visit one factory in November, 1998. The pilot project came on stream in January, 1999.

LCI agreed that COVERCO would have uninhibited access to the factory, would be able to set up occasional meetings with factory management and would have full access to factory records.

COVERCO agreed to provide LCI with regular updates on the situation at the factory, highlighting cases of non-compliance with LCI's Standards of Engagement. In addition, COVERCO committed itself to presenting periodic public reports summarizing our findings. This is the second such report.

  In return, LCI agreed to maintain fluid communication with COVERCO and with management of the local factory, and to take appropriate measures to ensure compliance with their Standards.

  PROJECT FACILITATORS

  L CI invited Business for Social Responsibility (BSR) and the International Labor Rights Fund (ILRF) to be key resources and facilitators for the pilot project. These two institutions provided resource materials for training events, participated in a number of meetings with LCI, COVERCO and factory management, and provided valuable advice to LCI and COVERCO throughout the pilot project.

BSR is a US-based non-profit business organization whose purpose is to serve as a resource to businesses interested in being commercially successful in ways that demonstrate respect for ethical values, people, communities and the environment.

ILRF is a Washington D.C.-based human rights organization that advocates and litigates on issues of international labor rights, often on behalf of workers and worker organizations in the developing world.

    COVERCO's RELATIONS WHITH LCI AND THE LOCAL FACTORY

  C OVERCO affirms that, during this pilot study, we have had regular, cordial and business-like meetings with representatives of LCI. After an initial period of difficult communication with the local factory, COVERCO now enjoys a similar relationship with factory management. These conversations have been frank and wide-ranging and have led to a variety of concrete actions by LCI and local factory management. These actions include:

•  LCI management has met with factory management and has carried out their own inspections of the local factory.

•  During the first reporting period, we discovered that neither workers nor management at the local factory were familiar with LCI's Standards of Engagement. LCI has implemented training workshops for both workers and management since the program began. In light of the high turnover rate at the factory, we have recommended that such training become a regular event. Furthermore, since most workers have not completed their primary education, we recommended that LCI prepare an illustrated pamphlet describing the Standards in clear, simple Spanish. We put LCI in contact with a local graphic design team who prepared a comic book version that has recently been distributed to workers.

The "Code Comix" outlines the LCI Standards point-by-point, assuring workers that they have the right to free association and proper remuneration, as well as freedom from abusive treatment or the obligation to work in dangerous circumstances. The Comix also insists that workers are expected to be honest and punctual, must not to use drugs or alcohol on the job, and must not damage their tools.

The first printing of the booklet was quickly exhausted. LCI has ordered a reprint and we have recommended that it be distributed to all current and future employees and that line supervisors take time to answer any questions that might arise.

•  LCI management has had detailed meetings with factory management outlining the need to strengthen the chain of command. During the first reporting period, the parent company changed the factory manager. After several months on the job, the new manager is beginning to make his imprint on the factory's management style. We note that, for several months, middle management was unable to fulfill simple commitments on compliance issues. In the last months of this reporting period, we have seen progress on a number of concrete issues ranging from improved washroom maintenance to the introduction of detailed pay vouchers. For more details, see the Findings section of this report.

•  During this reporting period, we received constant complaints about Ms. B, a non-Guatemalan supervisor noted for her intimidating and abusive management style. Her case is especially illustrative because she was lauded by factory management as being their most productive supervisor. LCI made quite clear to factory management that this supervisor's abusive behavior was not acceptable. The supervisor's contract was not renewed.

In a number of areas where violations have not yet been remedied, LCI has expressed their commitment to work with the factory toward compliance. Future COVERCO public reports will continue to document compliance or non-compliance. For more details, see the Recommendations at the end of this report.

One additional comment: COVERCO owns the information we have gathered. As a courtesy, we submit an advance copy of our public reports to LCI and give them the opportunity to make editorial comments. They are also free to attach a formal response or comment to our reports. But all the information gathered is the exclusive property of COVERCO and we write and edit all reports. LCI has respected this arrangement and has not attempted to influence the content of our reports in any way.

DESCRIPTION OF THE FACTORY

The factory that is the subject of this monitoring program lies 30 kilometers from the center of Guatemala City . The site itself includes two large factory units, one more recently built, two canteens, a parking lot and a number of outbuildings.

Each factory unit contains a number of production lines, each consisting of about 30 workers. These lines process the cloth from the initial cutting and marking up, through the sewing and trimming stage, to final ironing and packaging, ready for export. These lines have their own weekly production targets and supervisors. The main production areas have high ceilings and are well lit. Music is played over a PA system.

The factory is foreign-owned and employs mostly non-Guatemalans at middle and senior management positions. All the line supervisors are Guatemalans. At the beginning of the project, the factory employed about 550 workers.

At the time of our audit of payroll and personnel records in September, 1999, the labor force had grown to 985 workers. 88% were women and 31% were minors, under eighteen years of age. Of the 304 minors, 88% were women, reflecting the same gender balance as in the labor force as a whole.

Many of the production line workers live in a poor community with dirt roads and limited access to public services that lies on a hill opposite the factory; others come from similar nearby communities.

Guatemala is a developing country. The current legal minimum wage for factory workers is Q23.85 per day. During the reporting period, the rate of exchange was about Q7.70 = $1.00, giving a total of $3.09 per day. This works out to an hourly rate of Q2.98 ($0.39). Overtime must be paid at Q4.47 ($0.58) per hour.. We have found that most workers work about ten hours of overtime weekly.

The factory has experimented with several systems of production bonuses and penalties that have been calculated on different combinations of production levels, attendance, tardiness and worker attitude. Most workers' paychecks include a production bonus, although amounts vary significantly.

METHODOLOGY

arly in the project, COVERCO carried out an informal survey to document the general characteristics of the workforce. Our survey design did not sufficiently take into account the low academic level of the workers and their unfamiliarity with the world of surveys. The results were not statistically significant. However, the survey did offer us a clear picture of a workforce that is overwhelmingly female, of about 21 years of age, where less than half had completed a primary education.

The same day as the survey, COVERCO handed out to workers a pocket calendar and a pocket-sized brochure describing our function as independent monitors. This visit also permitted us to circulate freely among the workers during their morning break and to introduce to them the principal investigator.

From the beginning of the project, we established a variety of communication channels with the factory workers:

Off-site meeting places - We arranged with a local women's group and a local church to use their facilities at designated times each week to talk with workers. These sites were never used by the workers. At the same time, a number of workers began to request meetings at other sites near the factory (a public park, a restaurant, a worker's home). We have acceded to these requests to make sure that workers felt confident and secure enough to share their stories.

  Telephone calls and visits to the COVERCO office - Despite the added expense of calling or visiting our office in Guatemala City, these have proved to be the most popular options. Workers who took advantage of these channels seemed to be very comfortable sharing their particular stories. Some of these workers chose to leave signed, written complaints for COVERCO's files.

(For reference, a phone call from the factory to COVERCO's office costs about Q.0.40 or $ 0.05 per minute. Round-trip bus fare is about Q.6.00 or $0.80).

In addition, COVERCO placed two padlocked suggestion boxes in the factory as well as a number of posters describing the different communication channels. The boxes were placed at the main entrance to each of the two factory buildings. On sixteen occasions, workers complained that they felt intimidated by management when they deposited comments in these boxes and, in recent months, they have fallen into disuse.

Since the other communication channels have proved to be rich and reliable sources of information, and to encourage workers to make use of a new factory grievance system, COVERCO decided to remove the boxes at the end of this reporting period. (See Findings , Item C.1). Upon removing the boxes, COVERCO also handed out a second brochure to the now much larger workforce describing our function and listing our address and phone number.

In the course of the pilot project, COVERCO has noted that workers come to us with high expectations that we will intervene on their behalf in disputes with management, especially in the calculation of wages and benefits. We have clearly and repeatedly stated that this is not our role.

This ongoing misconception led COVERCO in February to recommend to LCI the posting of information that would respond to the frequent complaints related to the calculation of benefits. We also suggested posting information on how to contact sources of assistance such as the Ministry of Labor, and the legal aid offices of the local universities.

When workers have asked COVERCO to intervene in particular circumstances, beyond documentation of alleged violations of the Code, we have referred them to the Legal Aid Office of the University of San Carlos, Guatemala's national university. About 40 workers have taken complaints to this office. However, none of these workers has gone through the necessary procedures (compiling official documents and preparing affidavits supported by witnesses) to bring a formal complaint to court.

The coordinator of this Legal Aid office credits the lack of follow-though to a dearth of effective local advocates for workers and lack of confidence in the Guatemalan justice system. The coordinator said that some of the complaints were undoubtedly without merit, but that the lack of documentation made it impossible to say how many.

COVERCO began submitting regular reports to LCI on January 15, 1999. The first quarterly report covered the period from November 2, 1998 to February 26, 1999. The period covered is longer than three months due to the end-of-year vacation period and initial delays in the implementation of the project.

In the negotiations that led to the implementation of this pilot project, COVERCO and LCI agreed that the regular reports on the situation in the factory should be submitted weekly. As local management irons out problems with its new grievance procedure, we may agree to change the basic reporting period to bi-weekly or monthly.

This second report covers the full period from November, 1998 through July, 1999. This report was extended to the end of July so that we could include the results of a key meeting with LCI and factory management. This extension was especially important to broaden the breadth of information reported, since COVERCO was not granted access to the factory's financial and administrative files until late June. LCI's cooperation was key in finally getting COVERCO unconditional access to these records. (See Appendix 2).

In the first months of this study, COVERCO had limited communication with factory management and was not granted access to factory records. Near the end of this reporting period, the factory's parent company changed plant managers. With this change, COVERCO was granted full access to factory records and began regular, ongoing conversations with factory management.

LCI has agreed to extend the pilot study for an additional quarter to compensate for the time lost in the first two reporting periods.

hroughout the pilot project COVERCO has engaged in an ongoing process of refining and perfecting our reporting procedures. In the early months, we relied mostly on brief, written and verbal summaries of worker complaints and the observations of our monitors. More recently, we have developed standardized forms to register all worker complaints, as well as the on-location observations of our monitors. These forms are keyed to the items listed in LCI's Standards of Engagement.

Once allegations were made, COVERCO tried to document the specifics of the case from as many sources as possible: the worker or workers presenting the complaint, other workers on the same production line, middle and senior management, and, in some cases, the factory manager.

In the case of serious allegations, COVERCO made tape recordings of all interviews.

Most of the complaints have centered around remuneration issues and overtime. The preliminary audit performed in June tended to sustain some of the complaints, and demonstrate that others were the product of widespread confusion over the criteria employed to calculate production and other bonuses. This audit also left us unable to verify a number of complaints due to incomplete or poorly organized files. (See Findings, items G and H).

Despite documentation problems, in this report we try to employ as much precision as possible. In the Findings , we refer to the number of times an alleged violation was mentioned by workers. This is not meant to be a precise or exhaustive measure, but rather a general indicator of issues that require ongoing observation.

A number of variables come into play here: most conversations were with one to three workers, but one was with fifteen workers; some anonymous written complaints were drafted in plural, suggesting multiple sources; finally, most of the contacts with workers, whether by phone, in writing or in person included multiple complaints.

In the first three months of our study, our methodology did not exclude the possibility of duplicate complaints by the same worker.

One further disclaimer: the number of times an alleged violation is mentioned does not necessarily reflect the seriousness of the complaint.

As CVERCO improves our documentation procedures, future reports will contain more precise information.

Once allegations were made, COVERCO tried to document the specifics of the case from as many sources as possible: the worker or workers presenting the complaint, other workers on the scene, middle and senior management, and, in some cases, the factory manager.

In summary, the information contained in the Findings is derived from the following sources:

•  Confidential interviews or informal meetings with individual workers and groups of workers

•  Confidential interviews and meetings with Guatemalan and non-Guatemalan factory management

•  Regular monitoring visits to observe factory facilities and operations

•  Examination and audit of factory administrative files and payroll records.

 
 
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