Austin Chan

Section 9

Professor Aya Tanaka

May 11th, 2014

Cycle 3 Paper

Chinese factories have had a long history of worker abuse and although external entities have attempted to implement change, the hard reality is that the workers are in almost the same conditions they were in before these external entities attempted to intervene. From the string of Foxconn suicides in 2010 to various violations of ethical and legal statures in Samsung’s Samkwang Science and Technology factory, China and corporations who outsource their manufacturing to Chinese factories, such as Apple and Samsung, still have a long way to go in reaching their optimal working conditions standards. Some of these violations include “military style drills, verbal abuse by superiors” and “excessively long working hours, exhausting rates of work, and more (CLW).” In order to mitigate the widespread problem of inadequate working conditions in China, several different solutions—individual solutions through different parties—must be synergized. Only through collaboration between several different parties can the condition of the workers be changed for the better. In 2012, Apple Inc. and its main manufacturer Foxconn collectively arranged inspections for Foxconn’s major Chinese factories due to pressure from the Fair Labor Association (“FLA”). What is the FLA? Who does it belong to etc. According to the Chicago Tribune, this was a “response to one of the largest investigations ever conducted of a U.S. company’s operations outside of America (Gupta).” In order to placate critics of Apple and Foxconn, the two companies were obligated to bow to the pressure from the Fair Labor Association (“FLA”) and go through with the probe. After inspecting three separate Foxconn plants and 35,000 workers, the FLA discovered several violations of labor law, most noticeably extreme hours and unpaid overtime. In response to these publicized violations, Apple has, within the past several years, amped up its corporate responsibility programs in regards to their workers. According to the official Supplier Responsibility 2014 Progress Report, Apple launched the Apple Supplier Environment, Health, and Safety (“EHS”) Academy, which is focused on raising the level of EHS expertise in Apple’s supply chain. In 2013, “over 240 personnel—representing more than 270,000 workers—enrolled in the program.” In addition to this program, Apple more importantly drove its suppliers to achieve a 95 percent compliance rate with the standard sixty-hour workweek, a feat worthy of praise.
However, despite these perceived successes, Foxconn facilities still have a lot of room to improve. In order to create an optimal working environment, Apple Inc. needs to look at the larger picture and find the root of the problem, which in the case of Foxconn is the extreme production demand from the foreign contractors. Managers are forced to weigh labor standard violations against not meeting production quotas and when profits are on the line, they will almost always choose to push employees to meet the stringent production quotas set forth by Apple no matter the human cost. They mercilessly sacrifice labor rights of their subordinates and so long as standards don't address profit margins, true change cannot happen. Because of the heavy demand from the contractors, the main blame cannot be placed on the factory managers, because their actions are only extensions of the cutthroat nature of the electronics manufacturing industry in China. Thus, the inherent problem comes not from the managers but from the way business works. If Apple truly wants to help the workers they must decrease production by a couple percentage points or designate more manufacturing stations and hire more workers to lessen the load on each individual unit. This would lead to a less hectic schedule for workers as well as less stress on managers, the ones who are ultimately responsible for meeting deadlines.
Fixing the problem at Apple’s factories require drastic change that will take several years to put in place. According to Apple’s most recent quarterly financial statement, the company took in quarterly revenue of approximately $45.6 billion dollars, quarterly net profit of $10.2 billion, with a profit margin of 42.1 percent as of March 31, 2014. The manufacturing cost of an iPhone 5 is $226.5 dollars, but retails for $650. A billion dollars is barely over two percent of this quarter’s net profits. In light of the situation, it would be wise and much more efficient for Apple to reinvest a small portion of their profits into hiring independent, full time teams of auditors from external organizations such as the Fair Labor Organization. In December 2013, the FLA printed its final Foxconn verification report, “detailing assessments conducted by the FLA at three facilities of Apple’s largest supplier, Foxconn.” According to the official FLA website, FLA assessors reportedly spent more than 3000 hours inside the three factories, evaluating conditions based on “visual observations and review of policies, procedures, and documentation.” Throughout the years, only incidents that reach international news have been catalysts for change. From the spree of Foxconn suicides of 2010 to the brawls and explosions of 2011, these incidents have brought attention and change. However, these incidents should be prevented before they ever happen, Apple is reactionary but they need be preemptive. Below is a simple pictogram that tracks the annual and cumulative participation in workers’ rights training, which just so happens to spike in 2010—the year of the suicides.
The FLA investigations are a reaction to these incidents. However, these investigations do not really solve the problem at hand—they only apply a bandage to the problem. Instead, Apple should prioritize forming a partnership with the FLA with the intent of using their auditors as middlemen between the managers of the workers at Foxconn and Apple. These auditors will be paid full time to be stationed at Foxconn facilities in order to evaluate the working standards in the facilities, based on the standards of the FLA, namely, the standards detailed in the Fair Labor Association’s Workplace Code of Conduct. This document details labor standards “that aim to achieve decent and humane working conditions (FLA),” which include statutes that involve nondiscrimination, harassment or abuse, forced or child labor, and safe and healthy workplaces for workers. More importantly, the document also includes clauses that are relatable to the most common grievances of Foxconn workers over the years, such as hours of work and compensation (both regular and overtime). If the auditors are well trained and familiar with all aspects of the Workplace Code of Conduct which they should be, they will be able to report to Apple, the FLA, and media sources at any given time, acting as the watchdogs of the Foxconn facilities. Although this program provides an accurate means of measuring working conditions, it alone would not guarantee adequate working conditions, as working conditions are still enforced by employee managers and additional solutions must be explored.
Money is the ultimate source and solution to the problems. By incorporating the idea of rewarding good actions with money, working conditions will improve. In addition to auditors, a meritocracy can alleviate many problems faced by Apple and Foxconn: Apple should allocate a small percentage of their profits every quarter as reward money for the most standard-compliant employee managers. This way, the most standard-compliant employee managers would have something to gain from treating employees fairly and accordingly to the FLA Workplace Code of Conduct and have an incentive to treat workers fairly rather than harshly. Employee managers would be subject to objective evaluation by the FLA assessors, who would in turn rate them based on criteria in the Code of Conduct as well as possible additions from Articles 23 and 24 of the United Nations Declaration of Human Rights, which address conditions of work and reasonable limitation of working hours, respectively. Consequently, managers who average above a certain percentile of ratings (say, the twenty fifth percentile and over) across all standards and categories during a calendar year would be entitled to an extra monetary bonus consisting of several months’ pay. Not only would this come at a comparatively small cost to Apple, but also drastically improve the current situation of workers in Foxconn facilities. If there currently existed one manager for every hundred workers, Foxconn would currently have 12,000 managers, so rewarding the top quartile would mean that the top 3,000 managers would be entitled for bonuses. All in all, Apple would need to allocate $6 million from its profits every quarter for these 3,000 managers, which is an approximate 0.05 percent of Apple’s profits this quarter. Other scenarios, like rewarding improvements in rating, could also be viable options.
Admittedly, this plan may initially cost Apple millions of dollars, a figure that may be unprecedented in the fight for Chinese labor rights. But these millions will bring about a new era in Chinese working conditions and ease the lives of millions of workers if implemented correctly—a sound investment. More importantly, if Apple partners with the FLA in the long run, working conditions will continue to improve even in the absence of public scrutiny and media attention. Incidents like the series of suicides and the plethora of riots will dwindle and perhaps even cease and Foxconn factories will become a place that people are content to work in. Combined with Apple’s consciousness to corporate social responsibility, there are not many reasons for the company not to take this opportunity to improve the lives of its workers in its supply chain. An issue with this plan is the fact that auditors may be subject to bribes from employee managers. Employee managers may want to cheat their way into the top twenty five percent in order to receive bonus compensation. A way to prevent these under-the-table deals from happening is to train FLA assessors and prepare them for these kinds of situations and what to do when confronted by such managers. The FLA can also set up punishment for accepting these bribes, if anybody is discovered doing so.
Despite the focus on Apple Inc., this solution is applicable to any company that outsources manufacturing to China, and since the extensive media coverage on Foxconn, Apple has been the most cognizant of its workplace environment among its industry rivals like Samsung and HP. Executives promptly took charge of the situation and turned a nightmarish situation into a situation that showed off Apple’s commitment to corporate social responsibility by starting up programs like the Environment, Health, and Safety (“EHS”) Academy, Underage Labor Remediation Program, and the Supplier Employee Education and Development (“SEED”) program. These programs have affected hundreds of thousands of people; SEED itself has, according to Apple’s supplier responsibility website, provided over 280,000 workers with free college-level courses. Apple and its development of corporate responsibility programs for its workers should serve as a role model for its fellow competitors, who could set up programs similar to the ones that Apple has developed. Third parties such as regular citizens can also provide a means of helping the cause by volunteering time or donating money to non-governmental organizations (“NGOs”), the most prominent of which is the China Labor Watch, an organization that spearheads a multifaceted approach towards solving the problem at hand. According to the official website, China Labor Watch engages in multiple solutions like collective bargaining, community training, and improving factories. The organization teaches workers about their rights of collective bargaining as well as “provides training on how workers should engage with their employers to demand a fair wage and acceptable working conditions.” CLW also regularly conducts legal training sessions “to teach Chinese labor activists about labor law and collective bargaining strategies.” This will in turn help the workers develop a better state of mind towards their rights and become better educated about their liberties. If CLW and organizations similar to it receive more funding through donations and more volunteers, it could branch out into untapped Chinese cities, especially ones that have high densities of factory workers.

Bibliography
Gupta, Poornima, and Edwin Chan. "Apple, Foxconn Set New Standard for China Work Conditions." Chicago Tribune. Chicago Tribune, 30 Mar. 2012. Web. 07 May 2014.

Zhang, Lijia. "Chinese Workers Demanding Better Wages, Conditions, Real Union Protections." Alternet. Alternet, 4 Mar. 2012. Web. 07 May 2014.