Foxconn International Company’s Ethics in China

Introduction

Business ethics is a growing field of business studies that is receiving substantial international interests with employees and managers realizing the importance of ethics in business operations. With the increasing importance of business code of ethics and standards influenced by global debates and research studies, several publicly held European companies have integrated ethics in their operations. However, the greatest challenge facing numerous companies in both developing and developed economies is how to apply and utilize the business code of ethics and standards into practice, thus raising controversial public debates (Hanson & Rothlic, 2010). Therefore, this study seeks to examine issues surrounding business ethics at Foxconn International Technology Group.

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Background (Global perspective)

Globally, issues touching on business ethics and code of standards have emerged as one of the most important aspects amongst the many business practices witnessed in contemporary times. Business ethics issues are supremely getting public attention and major economies are increasing their strategic planning to accommodate ethical issues in their program. For instance, a study conducted by Pitta et al. (1999) reveal that the United States started realizing the importance of business ethics three decades ago, with 1980s and 1990s marking the realization of the global economy. The US has ensured that companies strictly operate within their established code of ethics by enhancing the importance of business ethics within their constitutionality. According to Pitta et al. (1999), major ethical issues include sound marketing strategies, excellent product development, motivating promotion, effective pricing, professional marketing research, and appropriate distribution, which are crucial towards ensuring that all companies practice corporate social responsibilities within their operational strategies.

Contrary to the US, several European or rather developed economies have completely been ignorant on issues pertaining to business ethics. Several business corporations and companies have been operating without proper establishment of Planning an Effective Business Ethics Programs. Concerning the issues of business ethics coupled with how companies have integrated them into their management system, the study by Pitta et al. (1999) has considerably highlighted several pitfalls in other emerging and developed economies. In respect of Germany, as one of the most reckoned countries within the context of developed economies, companies have continuously neglected business code of ethics and standards with a majority of them condoning corruption. This scenario has normally been dependent on influential factors including national culture, national governance, and other environmental factors. Other studies have cited lack of proper management and ethics related knowledge including management standards and procedures, and poor system of authority and governance, which lead to the underutilization of business code of ethics.

China is no exception. Being the background and subject to this study, China is among the countries in which companies have failed to recognize the importance of ethics in the business world as an outstanding and a global issue. According to Ling et al. (2011), China, as one of the world’s biggest and fastest growing economies, opened up to international trade and investment in 1978, thus becoming the most significant country for investment. However, the road to development of companies has not been easy with most researchers, human rights activists, and the entire public questioning the commitment of several companies towards ensuring the importance of ethics and code of standards as they contribute towards national development. Hanson and Rothlic (2010) established that famous international companies including Google, Honda, and Rio Tinto among others have continuously formed the basis of case studies pertinent to ethical conflicts arising from businesses operating within China. However, Foxconn Company is the case to this study.

Overview of Foxconn Company

Foxconn is an international renowned Information Technology Company owned by Taiwanese investors, dealing with a wide variety of IT products ranging from hardware to software components. According to Debby and Yi (2012), Foxconn Corporation operating in China has created numerous vacancies including employing over one million workforce. It is renowned for the production of excellent technological products including computer accessories and other electrical accessories including Apple, HP, Nokia, Dell, and Amazon among other famous technologies. It harbors several companies dealing exclusively with Technological products, with iphones being the most popular products. Since the year 2010, the company has received substantial public attention not only from the expanding point of view, but also due to the several inhuman and antisocial cases reported, thus leading to increased debate over its operations in the public domain (Ling, et al., 2011). Consequently, researchers, scholars, and the government have focused on Foxconn Company as the basis of carrying out studies pertinent to business ethics among other companies operating in China.

Foxconn Company and business ethics (problem statement)

As aforementioned, Foxconn Company is increasingly receiving public responsiveness following injustice cases involving the company. The company has been under scrutiny by the Chinese media and Fair Labor Association (FLA) operating in China over allegations on human injustices practiced mainly against employees. The company management has constantly been frustrating workers with cases of suicides and murder becoming a norm. Ling et al. (2011) affirm, “A string of suicide among the workers at Foxconn plant in Shenzhen has raised the question about the condition of million workers in China and the corporate social responsibility practice of the foreign investor in China” (p.1). Moreover, the company mistreats workers and does not respect employee’s freedom of speech, freedom of association, does not allow employees to have access to FLA inspection reports, employees work overtime with meager salaries, employees undergo psychological torture, as well as working in an unsafe environment with other inhumane treatments becoming a norm in the company.

Seemingly, research and investigations conducted by the Fair Labor Association (FLA) and the Chinese media society tend to have very little impact on the company’s welfare. In fact, reports tabled by researchers and letters addressed to Apple and Foxconn Company headquarters calling for immediate action over the suicidal cases have been met with deep silence. Despite having a well-stated and established global code of conduct policy within the context of its management, nothing seems to reflect the presence of business ethics in the company (Foxconn, 2012). Under the code of ethics and conduct policy, the company is a member of the international business community, the Electrical Industry Citizenship Coalition (EICC), and other international corporate bodies governing global business activities; however, nothing seems to change the existing conditions at the company. According to Debby and Yi (2012), inspection by Fair Labor Association reveals that labor unions at Foxconn, which are meant to protect workers, have malfunctioned for long and no longer exist.

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Ethical issues in the company

The main aim of this study is to examine the ethical issues affecting Foxconn Company. Following the above-stated problem, several studies have highlighted some of the ethical problems facing Foxconn Company. According to Debby and Yi (2012), workers have consistently undergone numerous psychological frustrations leading to suicidal cases. Some of the serious cases include excessive overtime for the iPad workers, lack of freedom of speech, unsafe working environment, lack of freedom of association, unpaid overtime, and demanding employees to meet production targets; in addition, lack of access to information has become a normal practice in the company. The company also carries out unnecessary psychological tests for job applicants to examine mental health problems as well as an overall reduction in salaries leading to poor living standards among workers (Debby & Yi, 2012). Use of interns in its operations has become a normal practice with managers overworking employees with an aim of maximizing the company’s profits.

Employee Overwork

Foxconn Company has been in the public limelight by facing criticism over the deteriorating working conditions of employees. Contrary to a statement in their non-operational or rather inactive global code of conduct policy stated under the section 9 of Labor and Human Rights, the management has put very little into practice. Its global code of conduct policy states, “Foxconn is committed to upholding the human rights of workers, and to treat them with dignity and respect as understood by the international community and applicable laws and regulations” (Foxconn, 2012, p.4). However, studies conducted in the company have completely revealed a different picture on the current business ethics on regular practice. Pertinent to employee overwork, research conducted by Debby and Yi (2012) unveils that in spite of the company defending itself with the approval of the code of ethics by the international labor organizations like the Universal Declaration of Human Rights (UDHR), International Labor Organization (ILO), and Ethical Trading Initiative (ETI), employees are encountering labor related challenges.

Foxconn Company is a money-oriented company that does not regard employees’ hard work as an important thing with the level of employee motivation rating lowest. The company continues to misuse human resources and those who attempt to raise their voices face intimidation from top officials who benefit from the prosperity of sweatshops established by Apple and Foxconn Technologies. According to Debby and Yi (2012), the company has been facing suicidal cases of workers since the year 2010 following the increased work pressure accompanied with humiliation from insults by top officials. Instead of solving the suicidal cases amicably and finding the background of the issue, the company has instead been staging anti-suicide rallies, organizing recreational activities, and establishing hotline services as strategies of building confidence and faith to the company. The managers feel that there is no need for structural modification to restore sanity to the company with the management composing of few individual to avoid loses.

Employee health and safety

One of most neglected corporate social responsibilities at Foxconn Company is the issue of employee health. Its global code of conduct policy states clearly that Foxconn Company devotes itself to protecting female workers’ rights and health, employee health regarding issues pertaining to machine safeguarding, industrial hygiene, occupational injury and illness, ergonomics, emergency preparedness and responses, and other health related aspects. However, prior studies have demonstrated completely different image on the company’s employee health-related issues. Debby and Yi (2012) assert, “It is pathetic that Foxconn does not review the harsh management methods in the factory and to what extent these have an adverse impact on the mental health of workers” (p.10). The company advocates for the scrutinizing of the mental condition of workers on or before deployment, which perfectly reveals how the condition of work is critical.

Occupational safety is another critical issue in respect to the issues pertaining to Corporate Social Responsibility at Foxconn. In fact, workers are rarely aware of the chemicals used in the company and the general impact to their health as suppliers collaborate with the top management officials to conceal information concerning the chemicals purchased by the company. Apple Company, which is a constituent company of Foxconn Technology Group, has been on allegations on influencing supplier’s engagement with the company (Debby & Yi, 2012). Apple, which has been in scandals involving overworking employees, has been in the media spotlight for using its policy to influence the corporate culture of several of its suppliers through Supplier Responsibility Progress Reports. Pitta et al. (1999) recognized this misconduct in several Chinese companies, which operated in the nineteen-century. Some of the misconducts include selling defective goods, bribery and corruption, illegal campaign contributions, and hiding of important information, which underscore the common forms of unethical behaviors practiced by Chinese companies.

Hiding vital user safety information pertaining to the chemicals used in Foxconn Company has remained the most challenging issue among workers with employee safety consistently becoming a public concern. The company’s global code of conduct states that the company will responsibly manage chemicals and other materials posing a danger to the environment and human life by ensuring safe handling, storage, movement, use, reusing recycling, and disposal (Foxconn, 2012). However, studies conducted by scholars to examine the professional conduct of the company have contradicted this information. A comprehensive research conducted by Debby and Yi (2012), divulges completely a different story with workers complaining on issues pertaining to occupational health, as most workers especially in the metalworking and parts processing sections use unknown chemicals. With little or no information covering the use and application of these chemicals, most workers worry of their health and safety.

Uncompensated Overtime

One of the terrible misconduct behaviors practiced by Foxconn Company at the expense of the workers’ suffering includes uncompensated overtime. For several decades, Foxconn has consistently practiced overwork to workers including extending working time with an aim of maximizing the company’s profits. The company’s global code of conduct policy states, “Compensation paid to workers shall comply with all applicable wage laws, including those relating to minimum wages, overtime hours and legally mandated profit” (Foxconn, 2012, p.5). However, workers overtime compensation as demonstrated by research revealed that the issue remains amid the most controversial employee-management confrontation. Being among the major causes of frustration and employee suicide contributor, the issue of uncompensated overtime has remained unsettled for a long time. According to Debby and Yi (2012), the company has never attempted to settle the biting issue of workers’ overtime compensation with the management consistently pushing for increased workers’ productivity, failure to which unproductive and incompetent workers face instant sanctions.

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Evidence based on empirical studies reveals that workers are overexploited and human resource attribute is never an issue at Foxconn. Using the most recent research conducted by Debby and Yi (2012), workers have been working for over 70-80 hours overtime work on a monthly basis at one of the most important Foxconn branches at Zhengzhou, with iPad workers being the worst hit by the overtime menace. Due to the increased pressure from researchers, government labor unions, and other corporate social bodies who have continuously criticized overtime as one of the Foxconn’s operation strategies, the management has unwillingly tried to cover the situation. On adjusting the working time, the management slashed workers’ salaries and subjected them to redundant deductions including food deductions, house insurance inferences, and dormitory and social insurance charges, thus reducing employees’ salaries to stressful rates.

Forced internships and Child labor

In a bid to maximize profits and minimize expenditure as one of the strategies used by companies across the globe, this practice at Foxconn is abusing the professional code of business ethics and conduct, thus raising public contests across China. Despite Foxconn clearly stating that child labor and juvenile workers’ protection are critical issues within the company’s business ethics and code of conduct, the public has witnessed forced child and juvenile labor in the company. In China, Pitta et al. (1999) affirm that human rights remain a controversial topic with most of the human rights activists concentrating on child labor, human trafficking, supply chain, political, and civil rights issues. Historically, the problem of child labor in Foxconn Company dates back to 1999, when one of the outlets used children in the Nike supply campaign. This incident has been raising endless conflicts between the company and the public, as child labor remains an unethical business practice.

Apart from child labor, which seems to be a forgotten case that happened a way back in 1990s, Foxconn management has consistently been in the public limelight for ill practices that involve forced internship labor. Globally, interns are just tertiary college student who seek practical experience from companies, as one of the course requirement by their respective institutions. According to empirical evidence based on studies by Debby and Yi (2012), seeking an internship practice at Foxconn is a tough task, since the company seeks such opportunities to exploit interns. On deployment, interns normally find a welcoming atmosphere, but as time go by, the management subjects interns to harsh work conditions that normally frustrate them, thus giving minimal time to achieve their educational purposes during the internship. Despite public criticism, the company has gained courage, as FLA seems less concerned with interns’ plight as interns serve the company with cheap labor, thus frustrating workers’ efforts to fight for their rights.

Freedom of information and Association

One of the compelling forces that have triggered researchers, scholars, and human rights organizations to use Foxconn as a case study to examine the Corporate Social Responsibility issue in China is employee freedom of information and association. Debby and Yi (2012), affirms that in Foxconn Technology Group, there is, “no freedom of speech and no freedom of association” (p.2). This aspect is one of the clearly outlined regulations that the management does not publicly display, but verbally rules on newly oriented employee, warning them against any interaction with journalists and researchers. In the context of employee associations that should protect the welfare of workers in Foxconn Company, the associations are either non-existent or manipulated by the management. Comparing the situation with similar Foxconn Company situated in Brazil where employee associations are much better, Debby and Yi (2012) noticed clear and outstanding differences, thus portraying China’s weaknesses in labor-related issues. See table 1 for differences in working conditions in Brazil and China Foxconn holdings.

Table 1: Comparison working conditions at Foxconn factories in China and Brazil

China Brazil
Basic Salary CNY 1550-1800 (USD244-284) CNY 3352 (USD 528)
Annual leave after 1 year 5 days 30 days
Food allowances no CNY 300 (USD 47)

Source: Debby & Yi, 2012, p. 5.

Low salaries and Remunerations

The most devastating issue that employees at Foxconn Technology Group have been constantly grieving touches on employees’ salaries and remunerations, which forms the backbone of employees’ livelihood. Employees at Foxconn Company have been battling with the management over issues pertaining to salaries, as the situation is continuously deteriorating with wages and salaries reducing almost to nothing compared to the existing social economic situation. Debby and Yi (2012) reveal that the current payment does not accommodate employee needs as desired. Despite several working hardships at Foxconn including overwork and overtime, the current pay of Foxconn workers in Zhengzhou and Shenzhen is sympathetic with majority earning basic salary of “CNY 1550 (CNY 244) and CNY 1800 (CNY 284) per month respectively” (p.5), after several intended deductions. Being the probable contributor of the disputed spate of suicides at Foxconn in 2010, the management has done quite little to address this vice. Normally, deductions normally accompany pay rise at Foxconn thus making no difference to salaries. Table 2 represents current salary scale at Foxconn that accounts to CNY 1000-1500 monthly disposable income.

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Table 2: Current wage and salary scale at Foxconn

Zhengzhou salary (CNY) Shenzhen salary (CNY)
Basic payment 1550 (USD 244) 1800 (USD 284)
Basic payment after increase 1800 (USD 284) 2200 (USD 347)
Dormitory deduction 150 (USD 24) 110 (USD 17)
Social insurance inferences 124 (USD 20) 144 (USD 23)
Mandatory house allowances 77.5 (USD 12) 90 (USD 14)
Food deductions in canteens 300 (USD 47) 300 (USD 47)

(Source: Debby & Yi, 2012, p.6)

Conclusion

Issues pertaining to Corporate Social Responsibility including business code of ethics and conduct have been challenging with several profit-centered organizations practicing injustices against employees. Foxconn is ultimately one of the companies in China that have refused to comply with national rules governing employee issues (Ling, et al., 2011). Based on the findings of this study, which emphasized on empirical evidence provided by prior research, the jumble of suicidal cases did not result from employees’ personal affairs, but due to work-related frustrations. Evidence drawn from different researches reveal that Foxconn has been humiliating workers with low pay, overwork, and extreme non-compensated overtime, thus exposing them to dangerous working environments and denying them basic rights to information and association, regardless of the existing rules set by the Chinese local authorities (Ling, et al. 2011). Therefore, the government should step in to arrest the situation failure to which Chinese workers will continue to suffer with labor unions exempting themselves from multinational corporations.

Recommendations

Management, as an important facet that is responsible for collaboration with the top shareholders, needs an immediate restructuring for the benefit of the current and future company reputation. Hanson and Rothlic (2010) featured poor management practices as one of the causes of business failures in China and recommended that restructuring is important to avert the situation. Secondly, government intervention is imperative to uphold the rights and freedom of Chinese workers employed in foreign companies operating in China. All labor unions located in China must respect the government’s rules and regulations governing employees’ welfare. Thirdly, as highlighted by Hanson and Rothlic (2010), companies must ensure that their practices match their global code of conduct policies immediately after designing them, since implementation of policies in companies is becoming a challenge to most companies in China.

References

Debby, C., & Yi, Y. (2012). Sweatshops are good for Apple and Foxconn, but not for workers. Web.

Foxconn. (2012). Foxconn Global Code of Conduct Policy Social and Environmental Responsibility (SER). Web.

Hanson, K., & Rothlic, S. (2010). Taking your code to China. Journal of international business ethics, 3(1), 69-80.

Ling, K., Kee, H., & Kueng, C. (2011). The Challenges of Corporate Social Responsibility Practice: A Case Study of Taiwanese Investment in China. Journal for the Advancement of Science & Arts, 2(1), 1-21.

Pitta, D., Fung, G., & Isberg, S. (1999). Ethical issues across cultures: managing the differing perspectives of China and the USA. Journal of Consumer Marketing, 16(3), 240-256.

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