What are the Social Responsibilities of U.S. Companies Operating in China?

Earlier this year around 150 Chinese workers at Foxconn, the world's largest electronics manufacturer, threatened to commit suicide by leaping from their factory roof in protest of their working conditions. The workers were eventually coaxed down after two days on the top of their three-floor plant in Wuhan province by Foxconn managers and local government officials.

Foxconn, with 1.2 million Chinese employees, is one of China’s largest employers and a major supplier of Apple. It assembles an estimated 40 percent of the smartphones, computers and other electronic gadgets sold around the world. Foxconn’s decisions set standards other manufacturers must compete with.

Evidence gathered from news reports and other sources indicates that 17 Foxconn workers have killed themselves. What had seemed to be a series of isolated incidents has become a worrisome trend. When one jumper left a note explaining that he committed suicide to provide for his family, the program of remuneration for the families of jumpers was canceled.

Reports from inside the factories warned of “sweatshop” conditions and allegations of forced overtime came to life. Foxconn and its partners—notably Apple—found themselves defending factory conditions while struggling to explain the deaths. Some saw the Foxconn suicides as a damning consequence of our global hunger for low-cost electronics.

In a plant in Wuhan, central China's Hubei province, up to 200 workers from the Microsoft Xbox production line of Foxconn, staged a strike. They were not demanding sleek new gadgets, but simply decent pay in return for making them, and proper compensation if being transferred. To drive their point home, they had threatened to kill themselves by jumping off a building.

The Foxconn suicides that started in 2010 are due to oppressive work conditions that include standing for eight hours or more without a break. One worker said that he constantly wanted to drop something on the floor so he could bend down to pick it up while working. Due to the long hours standing, if he had the chance to lie or squat down on the floor, it would be the most enjoyable moment during the work day so he could get the chance to rest.

Plants depend on workers’ being at assembly lines six or seven days a week, often for as long as 14 hours a day. In one instance where Foxconn makes computer cases for Acer, a Taiwanese computer company, workers all had blisters and the skin on their hands was black. The factory was also really choked with dust and no one could bear it. Such facilities have made it possible for devices to be turned out almost as quickly as they are dreamed up.

Foxconn has been criticized for running "blood and sweat" plants in China. It is undergoing an audit by the U.S. Fair Labor Association concerning all aspects of working and living conditions, such as wages, health and safety. The audit was at the request of Apple, which said its suppliers, including Foxconn, will cooperate with the inspectors. Apple launched the initiative not out of a sense of social responsibility but in response to recent concerns over labor practices and reported abuses in the Chinese factories of its suppliers. In other words, Apple was not concerned about the disgraceful working conditions until it created negative publicity for the company.

Last month following a prolonged period of criticism about the working conditions, Foxconn raised wages for its Chinese workers by 16 to 25 percent. The wage hikes took effect retroactively starting Feb. 1, according to a report by Taiwan's Central News Agency (CNA).

In the Shenzhen plant, which has been the initial production location for Foxconn since 1988, the basic wage will be raised to no less than 2,200 Chinese Yuan (about $348) a month from 1,800 ($285) Chinese Yuan. Before the series of wage hikes, the basic salary in the Shenzhen complex stood at 900 ($138) Chinese Yuan three years ago.

Workers welcomed the announced raises as well as overtime limits, though some were skeptical they would cause much real change. “When I was in Foxconn, there were rumors about pay raises every now and then, but I’ve never seen that day happen until I left,” said Gan Lunqun, 23, a former Foxconn worker. “This time it sounds more credible.”

By bowing to such demands, Foxconn has conceded that employees and consumers have gained a sway once possessed only by Chinese bureaucrats and executives at the global electronics firms that hire Foxconn to build their products.

For the system to genuinely change, Foxconn, its competitors and their clients — which include Apple, Hewlett-Packard, Dell and the world’s other large electronics firms — must convince consumers in America and elsewhere that improving factories to benefit workers is worth the higher prices of goods.

“This is the way capitalism is supposed to work,” said David Autor, an economist at the Massachusetts Institute of Technology. “As nations develop, wages rise and life theoretically gets better for everyone.

The Foxconn incident illustrates what happens in an economically expanding economy like China. People become more conscious of their rights as society progresses. It is an inevitable result of moving toward a more western-style form of capitalism. The question is whether the Chinese government and business leaders are ready for the change. My guess is if it occurs at all, it will happen grudgingly at best.

As for the role of US companies like Apple, the question is should they apply the same standards of workplace health and safety as expected in the U.S., or do they rationalize a lower set of standards in the name of cultural differences. Some argue that Apple is providing a service by hiring many Chinese workers that might otherwise be unemployed and/or be forced to live the life of a peasant. Some point to the old adage: “When in Rome, do as the Romans do.” After all, the Chinese worker is not used to more advance working conditions and the government is in no hurry to adopt them.

The bottom line is if China wants to move toward a western model of capitalism it should adopt western-style working conditions as the norm that protects worker rights and not react in a knee-jerk fashion only after well-publicized incidents of attempted suicide. With greater profits come greater social responsibilities to contribute to the betterment of society.

Blog posted by Steven Mintz, aka Ethics Sage, on March 13, 2012