Governance by Contract? The Impact of the International Finance Corporation’s Social Conditionality on Worker Organization and Social Dialogue

What are the effects of market incentives made by public financial institutions on worker organisations and social dialogue according to ILO key labour standards?

Summary

In the context of the global financial and economic crisis, the International Labour Organisation (ILO) has identified the encouragement and protection of independent worker organisation and social dialogue as being of particular importance. In its Global Jobs Pact, it argues that participatory mechanisms are vital in times of heightened social tension and are critical to recovery.

However, the capacity of treaty-based international organisations to effectively promote social and environmental sustainability has been questioned. In reply to the difficulty to comply to formal transnational regulations, new forms of governance have emerged that include market incentives to promote compliance with voluntary standards.

While a great deal of research exists on “private” governance on this model, such as corporate codes of conduct or certification and labelling schemes, less attention has been paid to regulatory approaches in which public international financial institutions make assistance or investment conditional on compliance with technical and normative standards set by other international agencies. The most significant example of this kind of approach is the International Finance Corporation IFC), the private sector lending and investment arm of the World Bank.

Over 1750 loans have been made in the past years that include this contractual condition. This research project seeks to evaluate the effectiveness of this type of contractual governance mechanism with respect to the ILO’s key labour standard of freedom of association.

It will furthermore permit an assessment of the degree to which contract conditions on labour standards have affected worker organisation and social dialogue in IFC client firms, and to describe the means by which labour organisations have – or have not – been able to leverage labour standards conditionality in pursuit of goals related to the principle of freedom of association.

Keywords

  • Transnational governance
  • Labour standards
  • International financial institutions

Disciplines

  • Development
  • Human rights
  • Political science
  • Sociology

Collaborations

International Organisations:

  • International Labour Office

Non-Governmental Organisations:

  • Building and Woodworkers International Union

Relevant Countries

  • Developing countries

Status

This projects, started in autumn 2012, has been completed.

Contact the project team

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Research team

Jean-Christophe Graz
Coordinator
University of Lausanne

Conor Cradden
Co-Coordinator

Frank Hoffer
Associated Member
ILO

Layna Mosley
Associated Member
University of North Carolina at Chapel Hill

Fiona Murie
Associated Member
Co-Coordinator
Building and Woodworkers International

Christoph Scherrer
Associated Member
Universität Kassel