Human Costs Are Built Into an iPad in China
Apple’s Code of Conduct
Mr. Lai’s college degree enabled him to earn a salary of around $22 a day, including overtime — more than many others. When his days ended, he would retreat to a small bedroom just big enough for a mattress, wardrobe and a desk where he obsessively played an online game called Fight the Landlord, said his girlfriend, Luo Xiaohong.
Those accommodations were better than many of the company’s dorms, where 70,000 Foxconn workers lived, at times stuffed 20 people to a three-room apartment, employees said. Last year, a dispute over paychecks set off a riot in one of the dormitories, and workers started throwing bottles, trash cans and flaming paper from their windows, according to witnesses. Two hundred police officers wrestled with workers, arresting eight. Afterward, trash cans were removed, and piles of rubbish — and rodents — became a problem. Mr. Lai felt lucky to have a place of his own.
Foxconn, in a statement, disputed workers’ accounts of continuous shifts, extended overtime, crowded living accommodations and the causes of the riot. The company said that its operations adhered to customers’ codes of conduct, industry standards and national laws. “Conditions at Foxconn are anything but harsh,” the company wrote. Foxconn also said that it had never been cited by a customer or government for under-age or overworked employees or toxic exposures.
“All assembly line employees are given regular breaks, including one-hour lunch breaks,” the company wrote, and only 5 percent of assembly line workers are required to stand to carry out their tasks. Work stations have been designed to ergonomic standards, and employees have opportunities for job rotation and promotion, the statement said.
“Foxconn has a very good safety record,” the company wrote. “Foxconn has come a long way in our efforts to lead our industry in China in areas such as workplace conditions and the care and treatment of our employees.”
Apple’s Code of Conduct
In 2005, some of Apple’s top executives gathered inside their Cupertino, Calif., headquarters for a special meeting. Other companies had created codes of conduct to police their suppliers. It was time, Apple decided, to follow suit. The code Apple published that year demands “that working conditions in Apple’s supply chain are safe, that workers are treated with respect and dignity, and that manufacturing processes are environmentally responsible.”
But the next year, a British newspaper, The Mail on Sunday, secretly visited a Foxconn factory in Shenzhen, China, where iPods were manufactured, and reported on workers’ long hours, push-ups meted out as punishment and crowded dorms. Executives in Cupertino were shocked. “Apple is filled with really good people who had no idea this was going on,” a former employee said. “We wanted it changed, immediately.”
Apple audited that factory, the company’s first such inspection, and ordered improvements. Executives also undertook a series of initiatives that included an annual audit report, first published in 2007. By last year, Apple had inspected 396 facilities — including the company’s direct suppliers, as well as many of those suppliers’ suppliers — one of the largest such programs within the electronics industry.
Those audits have found consistent violations of Apple’s code of conduct, according to summaries published by the company. In 2007, for instance, Apple conducted over three dozen audits, two-thirds of which indicated that employees regularly worked more than 60 hours a week. In addition, there were six “core violations,” the most serious kind, including hiring 15-year-olds as well as falsifying records.
Over the next three years, Apple conducted 312 audits, and every year, about half or more showed evidence of large numbers of employees laboring more than six days a week as well as working extended overtime. Some workers received less than minimum wage or had pay withheld as punishment. Apple found 70 core violations over that period, including cases of involuntary labor, under-age workers, record falsifications, improper disposal of hazardous waste and over a hundred workers injured by toxic chemical exposures.
‘We Could Have Saved Lives’
Last year, the company conducted 229 audits. There were slight improvements in some categories and the detected rate of core violations declined. However, within 93 facilities, at least half of workers exceeded the 60-hours-a-week work limit. At a similar number, employees worked more than six days a week. There were incidents of discrimination, improper safety precautions, failure to pay required overtime rates and other violations. That year, four employees were killed and 77 injured in workplace explosions.
“If you see the same pattern of problems, year after year, that means the company’s ignoring the issue rather than solving it,” said one former Apple executive with firsthand knowledge of the supplier responsibility group. “Noncompliance is tolerated, as long as the suppliers promise to try harder next time. If we meant business, core violations would disappear.”
Apple says that when an audit reveals a violation, the company requires suppliers to address the problem within 90 days and make changes to prevent a recurrence. “If a supplier is unwilling to change, we terminate our relationship,” the company says on its Web site.
The seriousness of that threat, however, is unclear. Apple has found violations in hundreds of audits, but fewer than 15 suppliers have been terminated for transgressions since 2007, according to former Apple executives.
“Once the deal is set and Foxconn becomes an authorized Apple supplier, Apple will no longer give any attention to worker conditions or anything that is irrelevant to its products,” said Mr. Li, the former Foxconn manager. Mr. Li spent seven years with Foxconn in Shenzhen and Chengdu and was forced out in April after he objected to a relocation to Chengdu, he said. Foxconn disputed his comments, and said “both Foxconn and Apple take the welfare of our employees very seriously.”
Apple’s efforts have spurred some changes. Facilities that were reaudited “showed continued performance improvements and better working conditions,” the company wrote in its 2011 supplier responsibility progress report. In addition, the number of audited facilities has grown every year, and some executives say those expanding efforts obscure year-to-year improvements.
Apple also has trained over a million workers about their rights and methods for injury and disease prevention. A few years ago, after auditors insisted on interviewing low-level factory employees, they discovered that some had been forced to pay onerous “recruitment fees” — which Apple classifies as involuntary labor. As of last year, the company had forced suppliers to reimburse more than $6.7 million in such charges.
“Apple is a leader in preventing under-age labor,” said Dionne Harrison of Impactt, a firm paid by Apple to help prevent and respond to child labor among its suppliers. “They’re doing as much as they possibly can.”
Other consultants disagree.
“We’ve spent years telling Apple there are serious problems and recommending changes,” said a consultant at BSR — also known as Business for Social Responsibility — which has been twice retained by Apple to provide advice on labor issues. “They don’t want to pre-empt problems, they just want to avoid embarrassments.”
‘We Could Have Saved Lives’
In 2006, BSR, along with a division of the World Bank and other groups, initiated a project to improve working conditions in factories building cellphones and other devices in China and elsewhere. The groups and companies pledged to test various ideas. Foxconn agreed to participate.
For four months, BSR and another group negotiated with Foxconn regarding a pilot program to create worker “hotlines,” so that employees could report abusive conditions, seek mental counseling and discuss workplace problems. Apple was not a participant in the project, but was briefed on it, according to the BSR consultant, who had detailed knowledge.
As negotiations proceeded, Foxconn’s requirements for participation kept changing. First Foxconn asked to shift from installing new hotlines to evaluating existing hotlines. Then Foxconn insisted that mental health counseling be excluded. Foxconn asked participants to sign agreements saying they would not disclose what they observed, and then rewrote those agreements multiple times. Finally, an agreement was struck, and the project was scheduled to begin in January 2008. A day before the start, Foxconn demanded more changes, until it was clear the project would not proceed, according to the consultant and a 2008 summary by BSR that did not name Foxconn.
A Demanding Client
The next year, a Foxconn employee fell or jumped from an apartment building after losing an iPhone prototype. Over the next two years, at least 18 other Foxconn workers attempted suicide or fell from buildings in manners that suggested suicide attempts. In 2010, two years after the pilot program fell apart and after multiple suicide attempts, Foxconn created a dedicated mental health hotline and began offering free psychological counseling.
“We could have saved lives, and we asked Apple to pressure Foxconn, but they wouldn’t do it,” said the BSR consultant, who asked not to be identified because of confidentiality agreements. “Companies like H.P. and Intel and Nike push their suppliers. But Apple wants to keep an arm’s length, and Foxconn is their most important manufacturer, so they refuse to push.”
BSR, in a written statement, said the views of that consultant were not those of the company.
“My BSR colleagues and I view Apple as a company that is making a highly serious effort to ensure that labor conditions in its supply chain meet the expectations of applicable laws, the company’s standards and the expectations of consumers,” wrote Aron Cramer, BSR’s president. Mr. Cramer added that asking Apple to pressure Foxconn would have been inconsistent with the purpose of the pilot program, and there were multiple reasons the pilot program did not proceed.
Foxconn, in a statement, said it acted quickly and comprehensively to address suicides, and “the record has shown that those measures have been successful.”
A Demanding Client
Every month, officials at companies from around the world trek to Cupertino or invite Apple executives to visit their foreign factories, all in pursuit of a goal: becoming a supplier.
When news arrives that Apple is interested in a particular product or service, small celebrations often erupt. Whiskey is drunk. Karaoke is sung.
Then, Apple’s requests start.
Apple typically asks suppliers to specify how much every part costs, how many workers are needed and the size of their salaries. Executives want to know every financial detail. Afterward, Apple calculates how much it will pay for a part. Most suppliers are allowed only the slimmest of profits.
