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Foxconn Agrees to Clean Up Its Act

By Rachelle Dragani MacNewsWorld ECT News Network
Mar 30, 2012 12:55 PM PT

Apple supplier Foxconn agreed to make significant changes to its working conditions and compensation practices after a Fair Labor Association report found instances of labor violations in the Chinese factories.

Foxconn Agrees to Clean Up Its Act

Foxconn employees are overworked and undercompensated, the FLA found. Over the past year, employees at all three factories the FLA visited reported working more than 60 hours per week -- above the Chinese legal limit of 49 hours per week. During peak production, workers often did not receive a day off during a seven-day period, and more than half the employees reported working 11 or more days in in a row.

In response, Foxconn agreed that by July of 2013, no employee would work for more than China's legal limit, 49 hours per week.

The company also pledged to improve housing and safety conditions. In one of the factories, 54 percent of employees said they had witnessed or been involved in an accident. In the other two factories, 32 and 35 percent of workers had experienced or seen an accident.

Insufficient Wages

The most prominent complaint among employees was about compensation. The average monthly salaries at the different locations varied from 2,257 yuan, or about US$360, to 2,872 yuan, or about $460.

Forty-eight percent of employees said their working hours were "reasonable," the auditors found. Nearly 34 percent said they wanted to earn more money.

Although workers expressed concern about working excessive hours, more than half felt that their salary wasn't enough to cover basic needs, and they were worried that tougher restrictions on working hours would lead to a drop in pay, the FLA noted.

Foxconn said that the new working-hour limits would not result in a decline in pay, according to the report.

FLA auditors visited Foxconn facilities in Guanlan, Longhua and Chengdu, surveying more than 35,000 employees.

Foxconn makes parts for major tech companies such as Dell, HP, Amazon, Motorola and Sony. However, Apple is the company taking the most heat for the labor violations. It was Apple that asked the FLA to conduct the investigation.

In January, Apple started releasing a list of its suppliers, an unusual move for an electronics giant and one the company hadn't made before. On Wednesday, Apple CEO Tim Cook visited a Foxconn factory in Zhengzhou as part of his trip to China.

Neither Apple nor Foxconn responded to our requests to comment for this story.

Stick This Time?

The FLA's report isn't the first instance of Foxconn -- or other major factories in Apple's supply chain -- being called out for unfair labor conditions and practices. In 2006, Apple used a different monitoring group, Verite, to audit the company and reported at the time that Foxconn was set to enforce the legal overtime limits.

This time around, though, Apple's growing power as a market leader might give it more sway.

"Apple has great power over its suppliers because of its ability to go elsewhere," Wayne Eastman, professor in the department of supply chain management at Rutgers School of Business, told MacNewsWorld. "Doing so with a major supplier like Foxconn would not be simple, but the fact that Apple can do so gives it major leverage over Foxconn."

Photos of Tim Cook visiting the Foxconn factory this week are an indication Apple will strongly apply that leverage to make sure the company stays in line with regulations, said Eastman.

Besides threatening to switch suppliers, though, Apple doesn't have much sway over Chinese or Taiwanese authorities.

"The simple fact of the matter is, historically, China has not been very vigilant as far as enforcing these regulations," Robert Lieb, professor of supply chain management at Northeastern University College of Business Administration, told MacNewsWorld.

Since China is thousands of miles away, keeping pressure on the country to enforce its labor laws becomes much tougher, especially when a portion of the workers would like to see more wages.

"When the report gives the reaction of workers, a good percentage of people wanted more work, so Foxconn and Apple are in a tough situation," said Lieb. "For a lot of workers, this is more money than they've ever seen, and they don't want to do anything to jeopardize that.

If Foxconn does make labor improvements, especially in regard to worker compensation, it's unknown whether the pay upgrade would cause a rise in price for iPads or iPhones. Even if it did, said Lieb, Apple's PR issues with Foxconn right now aren't likely to have much of an effect on the company's bottom line.

"This is a quasi-luxury good where prices are already high to begin with," he pointed out. "Even with this kind of economy, people are still flocking to buy them. Right now, the consumer sentiment doesn't really have the voice that tells a company, we're not going to buy your product."

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