New war of the flea: CSR and labor activism in China

By John Sexton

October 22, 2009

Copyright ©

Production is at bottom of the food chain in the modern division of labor. Globalization allows multinationals to focus on product development and marketing while outsourcing the messy business of making things to contract manufacturers in the developing world.

Your Hewlett Packard computer may have been manufactured in the same factory as your friend’s Fujitsu. Quite likely the factory is in the southern Chinese province of Guangdong and owned by a Taiwan, Hong Kong or South Korean company. The workers are probably recent migrants from the countryside and the majority will be women living in factory dormitories.

Off-shoring is controversial. Unions in developed countries protest job losses and pressure groups accuse multinationals of exploiting third world workforces. Labor rights controversies have helped create a massive Corporate Social Responsibility (CSR) industry as companies answer critics of their ever more convoluted supply chains.

Critics see CSR programs as window dressing – a subset of public relations and advertising. CSR practitioners on the other hand, are almost by definition masters of spin and presentation. It is difficult to find a balanced view.

But a small but growing group of labor activists operating on China’s mainland, some based in Hong Kong, have moved beyond criticism to action and are using CSR programs as a lever to improve working conditions and, increasingly, to raise workers’ awareness of their rights.

Jenny Chan of SACOM (Students and Scholars against Corporate Misbehavior), a Hong Kong-based pressure group, is celebrating what she sees as a significant victory. Over the past year, two major contract manufacturers in the Guangdong city of Dongguan have invited radical Hong Kong-based NGOs to conduct innovative training courses on workers rights including coaching workers in how to raise grievances with management.

“This is a new worker-centered model of Corporate Social Responsibility, which involves joint monitoring of conditions in the workplace through empowerment of the workers themselves,” says Chan.

At Taiwan-owned Delta Electronics, the Hong Kong-based Labor Education and Service Network (LESN) provided labor rights training to more than 1,500 workers between March and June 2009. Each worker was given a booklet explaining China’s labor laws and the Electronics Industry Code of Conduct – an international standard adhered to by many employers in the industry.

From September 2008 to March 2009, another NGO, the Chinese Working Women Network (CWWN), provided similar training to 2,700 machine operators at another Taiwan-owned manufacturer, Chicony Electronics. CWWN also laid on a special course for 30 members of the factory’s worker committee, and helped establish a hotline service for workers to report problems in confidence.

Jenny Chan sees the courses as a move towards an entirely new model of “worker-based” CSR. Her vision is that multinational brands can be pressured into giving the workers themselves a significant degree of control over CSR programs.

Currently brands exercise control over suppliers by hiring consulting firms to carry out audits. But campaigners say the audits are stacked in favor of the companies. SACOM says they involve “minimum participation of workers if any at all. Only selected workers are questioned during the auditing process.” Neither workers nor consumers receive copies of the reports. SACOM suggests audits are open to manipulation. Others are more straightforward. New York based activist, Li Qiang, says the auditing system is “riddled with corruption.”

Li has obtained documents that show a Walmart supplier, the Huasheng Packaging Factory, prepared “cheat sheets” for its workers to memorize in advance of a visit by Walmart inspectors. The sheets included false information about wages, benefits and hours. The documents also show the company adjusted or concealed company records, especially “documents, forms or rules pertaining to the details of fines or punishments.” The documents even included a plan to conceal the existence of a second Huasheng plant nearby.

Chan calls the training courses in Dongguan “a significant step in the history of CSR programs, a milestone to a large extent. We have gone beyond the brand-supplier partnership framework. NGOs […] have been brought in to the workplace to meet with workers, the key stakeholders.”

The common factor that led to Delta and Chicony’s participation in the training programs is that they are both suppliers to Hewlett Packard, the world’s largest IT company. HP is 9th in the Fortune 1000 list, 26 places above Microsoft. In 2008 it made more than US$8 billion profit on revenues of US$118.4 billion. To put those figures in perspective, the combined GDP of the Baltic States of Estonia, Latvia and Lithuania is US$105 billion.

The computing giant is recognized as having one of the most advanced and progressive CSR programs in the world. After SACOM launched the “Clean up your Computer” campaign in 2006, exposing poor labor practices at electronics factories, HP was the only major brand to respond positively. SACOM began talking to representatives of the company’s Social and Environmental Responsibility (SER) program in January 2007 and in August the same year signed an agreement to coordinate worker training at Delta and Chicony.

Although SACOM organized the training in collaboration with Hewlett Packard SER program, it definitely does not see itself as part of the Corporate Social Responsibility industry. Jenny Chan says “We have never received any money from HP. We will not bend to corporate pressure to write a company-friendly report. SACOM will not become part of the CSR business.”

Rather, activist groups like SACOM and Li Qiang’s China Labor Watch are using what they see as the multinationals’ Achilles heel – their concern over public image – as a weapon in the unequal battle between the international giants and their low-paid workers. Like a guerrilla band harassing a conventional army, they believe their pinprick attacks, a 21st century war of the flea, will eventually force concessions.

Many contract manufacturers are multinationals in their own right. Delta Group employs more than 60,000 people in factories in Taiwan, China’s mainland, Thailand, Mexico, India and Europe. According to its website, it produces power supplies, visual displays, networking products and provides industrial automation and renewable energy solutions. Chairman and founder Bruce Cheng has made large donations to universities in Taiwan, and the company has its own CSR program.

The company says it views the SACOM training course as a routine matter. “Delta has been conducting the training courses by itself years before SACOM/LESN’s training courses this time. Delta itself will continue to conduct its own training courses like before in the future. SACOM/LESN’s training courses are a repeat program of Delta existing training program,” the company told us in an email.

Delta told us that 65 percent of its Donguan workers are female and that the company “follows the minimum wages rule required by local government. Delta uses the minimum wages of RMB 770 (US$113) /person/month as a starting base. Delta workers can easily earn up to RMB 1300 – 1900 (US$190 – 278)/person/month.”

Chicony vice president Chris Huang also indicated that their wages were around the legal minimum. SACOM’s report on the training quoted him as saying “We pay workers in strict accordance with the Dongguan legal minimum wage law.”

The problem is that the local minimum wage is very low. Although Dongguan is a major city with a population of nearly 7 million and all the usual bright lights and skyscrapers associated with modern China, it has built much of its prosperity on contract manufacturing. Less than 2 million of its inhabitants are registered as permanent residents; the rest are migrants from other areas of China. City bosses, whose performance is still judged mainly by GDP figures, have deliberately kept the minimum wage relatively low, well aware that in nearby Vietnam there are millions of workers willing to work for even less, should the multinationals that, after all, call the shots choose to decamp.

The cost savings of off-shoring production are spectacular. Average weekly earnings in US manufacturing industry in August 2009 were 624 dollars according to the US bureau of labor statistics. (Wages in the electronic appliances sector were slightly higher than average). That gives a monthly rate of US$2,704 (18,464 yuan) or nearly 24 times Dongguan’s legal minimum wage or 14 times the lower, and nearly 10 times the higher, estimate of average earnings given by Delta.

For the workers at Delta and Chicony, the training courses provided an opportunity to solve mundane grievances. In the women’s dormitories at Chicony hot water was often unavailable in the evenings. Chicony management lobbied the local authorities to repair the local water supply and also installed a new central heating device, actions that the workers greeted with applause. Some workers also felt the company was making it difficult for them to resign. This turned out to be a misunderstanding, with workers believing verbal notice was sufficient and the company insisting on written notice. Once explained, the matter was resolved.

One lasting legacy of the training course is the telephone hotline at Chicony, now operated by a workers’ committee which is 80 percent elected by the workforce. Vic Lee, one of the more sympathetic managers involved in the program, said “It not only helps workers to understand their labor rights and obligations, but it offers them counseling services and relief from emotional problems. Many factory workers are migrant workers who face challenges being away from home in a new environment.”

From the point of view of SACOM and the other campaigners involved the most important result of the training has been to give the workers the sense that they have the power to influence their working conditions. It is this heightened sense of dignity and empowerment that will, in their view, lead to a long term improvement in their wages and conditions.

“We have confidence in workers that they will carry on their good fight, and after the training, they will gain more power in defending their rights. When workers learn negotiation skills they become brave to bring up previously unspoken issues,” said Jenny Chan.