Excellent observations and the two articles I originally cited might lead one to the conclusion that this is the very reason that regulation is so important.

Better Work indicated that they would not become involved in Bangladesh until the country’s government intervened by implementing better worker protection laws (Greenhouse, 2013). Though not immediately apparent, Better Work’s decision not to enter that market without government support may serve to protect any organization that would implement better working conditions.

The importance of government regulation in these environments cannot be understated: corporations cannot be expected to make decisions that reduce competitiveness by driving up production costs voluntarily. In the case of the Bangladesh factory conditions, if any single factory wanted to significantly improve the working conditions for its employees, the costs of making those changes would have to be passed on to shareholders in the form of reduced profits, to stakeholders in the form of lower wages or other benefits, or by increasing prices to customers, thus reducing competitiveness in the market.

Government regulation, in this case, would serve as the catalyst to coerce all manufacturing facilities in this market to implement standard safety policies and improvements to employee working conditions. A regulatory requirement to improve working conditions ensures all factories share similar burden to make improvements, reducing the impact to competitive advantage caused by increased operational costs (O’Toole & Vogel, 2011).

Greenhouse, S. (2013, May 2). Some retailers rethink roles in bangladesh. The New York Times

O'Toole, J., & Vogel, D. (2011). Two and a Half Cheers for Conscious Capitalism. California Management Review, 53(3), 60-76.