Sacom

http://www.bloomberg.com/apps/news?pid=20601103&sid=aUbDxIWdQCKg

By Mark Lee and Tim Culpan

March 1 (Bloomberg) — Apple Inc. should disclose more details about its suppliers, workers’ rights groups said after the maker of iPhones and iPods revealed some of its contractors had hired underage employees.

“The suppliers are breaking the law,” said Debby Chan, project officer at Students and Scholars Against Corporate Misbehavior in Hong Kong. “Apple should disclose its suppliers list to NGOs to allow more effective monitoring of the situation,” said Chan, referring to non-government organizations.

Apple said in its 2010 “Supplier Responsibility” report that 11 workers aged 15 were hired at three partner facilities based in countries where the legal minimum employment age is 16. The Cupertino, California-based company, which visited sites in countries including China, Taiwan and Thailand for its annual survey, said some employees worked excessive hours, while some were paid less than the local minimum wage.

“It seems like Apple is being much more open about this than other companies,” said Frank Parth, chief executive officer of Project Auditors LLC, which advises companies on project management. “I’ve seen nothing on this topic from Dell or H-P.”

Employees at a southern China-based supplier for computer manufacturers including Hewlett-Packard Co. and Dell Inc. earn about 64 cents an hour, and may work more than 87 hours, according to a February 2009 report by National Labor Committee, a Pittsburgh-based worker rights group.

Improve Disclosure

Liana Teo, a Singapore-based spokeswoman at Hewlett- Packard, didn’t immediately reply to voice-mails and an e-mail seeking comment. Sharon Zhang, a Beijing-based spokeswoman at Dell, said she couldn’t comment.

“Apple can be saluted for its transparency, but mainly will be criticized for the fact that they’re doing in the East what they wouldn’t do in the West,” said Hakim Kriout, a portfolio manager at New York-based Grigsby & Associates, which owns Apple shares. “This reminds us that potentially many other companies are doing it.”

Large corporations need to have their factories wherever the labor is the cheapest so competitors don’t get a pricing advantage, Kriout said. Apple is probably more stringent than its competitors in vetting its suppliers, Kriout said.

Apple rose $4.37, or 2.1 percent, to $208.99 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares more than doubled last year.

Worker Shortage

Electronics makers typically trail clothing manufacturers in efforts to enhance workers’ rights, said Apo Leong, China coordinator at Asia Monitor Resource Centre in Hong Kong. He also called for Apple to improve disclosure of worker issues at suppliers to enable external monitoring by rights groups.

Jill Tan, a Hong Kong-based spokeswoman for Apple, said the company doesn’t disclose its suppliers as a matter of policy. The company also visited sites in Malaysia, Singapore, South Korea, Czech Republic, the Philippines and the U.S. as part of its onsite audit of 102 factories, according to the report.

Plants in China’s southern Guangdong province, home to manufacturing facilities owned by Apple suppliers including Hon Hai Precision Industry Co., face a shortfall of about 2 million workers at present, which may exacerbate the issue of underage hiring this year, Asia Monitor’s Leong said.

“I think we are a model supplier within the Apple system,” Edmund Ding, spokesman at Taipei-based Hon Hai said today. The company doesn’t use child labor, he said. Hon Hai has no shortage of labor in China, it said in a Feb. 25 e-mail.

Strictly Follow Rules

Hon Hai, Taoyuan, Taiwan-based Quanta Computer Inc., the world’s second-largest notebook manufacturer by shipments, and Taipei-based Pegatron Technology Corp., the largest maker of computer motherboards, are among Apple’s Taiwan suppliers, Calvin Huang, a Taipei-based analyst at Daiwa Securities Group Inc. said by phone today. Huang said he’s not aware of any suppliers that may have breached Apple’s rules.

“When it comes to labor, it’s more likely for smaller suppliers to break the rules because the larger companies can offer a better package to attract workers,” Huang said. Competition to hire workers may tempt some companies to breach rules, he said.

China prohibits its companies from hiring workers below the age of 16, while the minimum working age is 15 in Malaysia, South Korea, Singapore, Taiwan, Malaysia the Czech Republic and the Philippines, according to data on the U.S. Labor Department’s Web site. In Thailand, children are allowed to work from 13 years.

“We strictly follow the core policies of our customers,” Quanta spokesman Elton Yang said today. The company doesn’t publicly disclose its clients, he said. Denese Yao, spokeswoman for Pegatron, didn’t answer calls to her office and mobile phone.

Other Violations

Apple said it stopped doing business with at least one unnamed supplier after finding repeated violations and “inadequate actions” to address the problems.

The review also found that at eight facilities, including those run by Taiwan-based suppliers, foreign workers paid excessive recruitment fees to hiring agencies to get jobs. The company said employees were reimbursed $2.2 million in fee overcharges over the past two years and that Apple has set a standard limiting such fees to the “equivalent of one month’s net wages.”

“It’s an unhealthy sign, because the factory owners who disregard these minimum age rules may have other violations,” said Asia Monitor’s Leong, who said he was “disappointed” by Apple’s disclosure.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

Last Updated: March 1, 2010 16:15 EST