Working Paper | HBS Working Paper Series | 2014

Monitoring the Monitors: How Social Factors Influence Supply Chain Auditors

by Jodi L Short, Michael W. Toffel and Andrea R. Hugill

Abstract

Outsourcing firms increasingly rely on social auditors to provide strategic information about the conduct of their suppliers to manage the reputational risks that can arise from dangerous, illegal, and unethical behavior at supply chain factories. But little is known about what influences auditors' ability to identify and report poor supplier conduct. We find evidence that private supply chain auditors' reporting practices are shaped by several social factors including their experience, gender, and professional training; their ongoing relationships with suppliers; and the gender diversity of their audit teams. By providing the first comprehensive and systematic findings on supply chain auditing practices, our study suggests strategies companies can pursue to develop more credible monitoring regimes to reduce information asymmetries between themselves and their suppliers.

Keywords: Monitoring; transaction cost economics; industry self-regulation; auditing; Codes of conduct; supply chains; corporate social responsibility; globalization; Accounting Audits; Developing Countries and Economies; Supply Chain; Operations; Corporate Social Responsibility and Impact; Safety; Social Issues; Social Enterprise; Labor; Working Conditions; Law Enforcement; Globalization; Corporate Accountability; Fashion Industry; Forest Products Industry; Manufacturing Industry;

Citation:

Short, Jodi L., Michael W. Toffel, and Andrea R. Hugill. "Monitoring the Monitors: How Social Factors Influence Supply Chain Auditors." Harvard Business School Working Paper, No. 14-032, October 2013. (Revised September 2014. Previously titled "What Shapes the Gatekeepers? Evidence from Global Supply Chain Auditors.")