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Wednesday, September 12, 2012

Strategic CSR - Unintended Consequences

The article in the url below identifies an interesting problem that caused Tennier Industries, a military clothing manufacturer from Tennessee, recently to lose a $45mn U.S. Defense Department contract:

Tennier lost the deal not to a private sector competitor, but to a corporation owned by the federal government, Federal Prison Industries.

Needless to say, Federal Prison Industries (also known as Unicor) does not represent ‘fair competition’ for Tennier:

Federal Prison Industries … does not have to worry much about its overhead. It uses prisoners for labor, paying them 23 cents to $1.15 an hour. Although the company is not allowed to sell to the private sector, the law generally requires federal agencies to buy its products, even if they are not the cheapest.

As a result of losing the contract, Tennier was forced to fire 100 workers and lost a sizable portion of annual revenues. What is interesting to consider, therefore, is the idea that, in spite of the economic hardship imposed on Tennier’s workforce, Unicor provides great social value in terms of prisoner rehabilitation:

According to the Bureau of Prisons, inmates who go through the program are 24 percent less likely to return to jail and 14 percent more likely to find employment upon release because of the skills and experience they receive.

Nevertheless, that doesn’t make losing the contract any more palatable for Tennier and other firms, such as Campbellsville Apparel from Kentucky, that are unfortunate enough to find themselves in competition with Unicor:

‘My employees just cannot believe the fact that a prisoner who should be paying a debt to society is being promoted through the federal government to take a job from an American taxpaying citizen,’ [Chris Reynolds, president of Campbellsville Apparel] said.

Take care

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Competing With Prison Labor
By Diane Cardwell
March 15, 2012
The New York Times
Late Edition – Final