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More bad press for Wesfarmers and Woolworths

The horrendous working conditions of some of the world’s poorest people in Bangladesh’s garment industry were the subject of last night’s ABC “Four Corners” program. The reporter appeared to face closed doors at every turn, including from two of Australia’s largest retailers, Wesfarmers (ASX: WES) and Woolworths (ASX: WOW), as she tried to uncover the truth about which retailers were using which factories in the poverty stricken country.

Since the building collapse in May that killed over 1000 workers, Wesfarmers’ Kmart and Woolworths’ Big W along with privately owned stores including Rivers (which blatantly refused to be interviewed by Four Corners), have signed an accord on fire and building safety in Bangladesh.

The speed and effect of social media has created a need for a different approach by companies, not just when handling delicate issues but also general communication and advertising to customers. No doubt in the next few days we will see a number of Australian clothing retailers come out and answer questions regarding their social compliance requirements and audit processes.

It won’t just be companies that are using factories in Bangladesh either, with Vietnam, China and Indonesian facilities no doubt under the spotlight too. This could mean retailers, including Myer (ASX: MYR) and David Jones (ASX: DJS), who source private label product from overseas, may provide information regarding the safety record and factory conditions of their suppliers.

Foolish takeaway

Investors elect a board which in turn appoints a management team to run the company on behalf of the shareholders. Cutting costs to boost profits is obviously not in the long-term interest of shareholders where those cost-cuts put lives in danger and the company’s integrity at risk.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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