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Wednesday, February 20, 2013

Strategic CSR - Foxconn

The article in the url below is interesting because it challenges a Western-centric view of CSR in developing economies:

“Hon Hai in March said it would change its workplace practices after an audit by a U.S.-based nonprofit worker-safety group found widespread breaches of Chinese law and Apple policies at three plants, including the excessive use of overtime. Hon Hai responded by pledging that it would bring its overtime policies into alignment with Chinese law by next year, allowing workers to work no more than nine hours of overtime a week. The Taiwan-based company, also known as Foxconn, pledged to improve health and safety conditions at its campuses across China as well.”

In particular, the article raises the question of why we seek to impose our values on foreign cultures, especially when it is not clear that the imposition is welcome:

“But more than 15 workers on the Shenzhen campus said in interviews that they work more than the legal limit of nine overtime hours a week. A majority said they work 10 to 15 overtime hours and would prefer more, having left their distant homes to make money in this southern Chinese boomtown on the border of Hong Kong.”

More than not liking the reduced hours, however, these workers are positively angry at the thought:

“‘I think a lot of the more experienced people from the technology production lines will leave’ if the policy to limit overtime goes into effect, said a worker who asked to be identified only by his surname, Ma.”

This all puts Foxconn in a bind—caught between the rock of public opinion in the West (and the pressure it brings from  firms like Apple) and the hard place of pleasing its ambitious employees:

“‘We look at [overtime] very seriously, we look at how we can be in compliance, but at the same time [we are] working with our employees to strike a balance,’ said Hon Hai spokesman Louis Woo. He said the company has ‘heard the grumbles’ from employees about decreased overtime.”

Not only are the impositions increasing unrest among workers, but they have resulted in gradually rising wages across the board. As such, they are cutting into Foxconn’s already tight profit margin:

“The company's labor costs will rise by roughly $1.4 billion when the new labor policies roll out next year, according to a Bernstein Research estimate. Hon Hai's operating profit margin had declined since the second quarter of 2010 because of rising wages.”

And so we close the loop on the consequences of the imposition of our values overseas. If we are going to insist that firms like Foxconn treat their employees as they are treated in the West, then costs will rise and so will the prices of our beloved consumer electronics. Values are not cheap and we will see if Western consumers are willing to put their money where their mouths most often are.

Take care

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Foxconn Workers: Keep Our Overtime
By Paul Mozur
December 18, 2012
The Wall Street Journal
Late Edition – Final