Apple Explains: Two letters from Apple’s CEO Tim Cook outlining Apple’s efforts to improve working conditions in its supplier’s factories

by Peter Schnall

I am providing readers with the full content of the letters written this past two weeks by Apple CEO Tim Cook. The first letter accompanied the Apple Annual Report on Supplier Responsibility and the 2^nd is a general response to criticism directed at Apple this past two weeks as more details about working conditions in China and in specific Apple Suppliers in China have emerged in the press. In my next blog I will address some of the inconsistencies and problems with the content of the two letters written by Tim Cook.

Tim Cook’s First Letter: Released to accompany Apple’s 2012 Annual Supplier Responsibility Progress Report.

Team,

We’ve just released our sixth annual update on conditions in Apple’s supply chain, and I want to personally share some of the results with you.

We insist that our manufacturing partners follow Apple’s strict code of conduct, and to make sure they do, the Supplier Responsibility team led more than 200 audits at facilities throughout our supply chain last year. These audits make sure that working conditions are safe and just, and if a manufacturer won’t live up to our standards, we stop working with them.

Thanks to our supplier responsibility program, we’ve seen dramatic improvements in hiring practices by our suppliers. To prevent the use of underage labor, our team interviews workers, checks employment records and audits the age verification systems our suppliers use. These efforts have been very successful and, as a result, cases of underage labor were down sharply from last year. We found no underage workers at our final assembly suppliers, and we will not rest until the number is zero everywhere.

We’ve also used our influence to substantially improve living conditions for the people who make our products. Apple set a new standard for suppliers who offer employee housing, to ensure that dormitories are comfortable and safe. To meet our requirements, many suppliers have renovated their dorms or built new ones altogether.

Finding and correcting problems is not enough. Our team has built an ambitious training program to educate workers about Apple’s code of conduct, workers’ rights, and occupational health and safety. More than one million people know about these rights because they went to work for an Apple supplier. Additionally, Apple offers continuing education programs free of charge at many manufacturing sites in China. More than 60,000 workers have enrolled in classes to learn business, entrepreneurial skills or English.

Finally, we are taking a big step today toward greater transparency and independent oversight of our supply chain by joining the Fair Labor Association. The FLA is a leading nonprofit organization dedicated to improving conditions for workers around the world, and we are the first technology company they’ve approved for membership. The FLA’s auditing team will have direct access to our supply chain and they will report their findings independently on their website.

No one in our industry is driving improvements for workers the way Apple is today. I encourage you to take some time to read more about these efforts, so that you can be as proud of Apple’s contributions in this area as I am. The details are online now at apple.com/supplierresponsibility.

Tim”

Tim Cook’s Second Letter: In response (?) to the recent NY Times article of January 25^th (there were a lot of other critical articles). 

Here is the link to the NY Times article: http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?pagewanted=all

“Team,

As a company and as individuals, we are defined by our values. Unfortunately some people are questioning Apple’s values today, and I’d like to address this with you directly. We care about every worker in our worldwide supply chain. Any accident is deeply troubling, and any issue with working conditions is cause for concern. Any suggestion that we don’t care is patently false and offensive to us. As you know better than anyone, accusations like these are contrary to our values. It’s not who we are.

For the many hundreds of you who are based at our suppliers’ manufacturing sites around the world, or spend long stretches working there away from your families, I know you are as outraged by this as I am. For the people who aren’t as close to the supply chain, you have a right to know the facts.

Every year we inspect more factories, raising the bar for our partners and going deeper into the supply chain. As we reported earlier this month, we’ve made a great deal of progress and improved conditions for hundreds of thousands of workers. We know of no one in our industry doing as much as we are, in as many places, touching as many people.

At the same time, no one has been more up front about the challenges we face. We are attacking problems aggressively with the help of the world’s foremost authorities on safety, the environment, and fair labor. It would be easy to look for problems in fewer places and report prettier results, but those would not be the actions of a leader.

Earlier this month we opened our supply chain for independent evaluations by the Fair Labor Association. Apple was in a unique position to lead the industry by taking this step, and we did it without hesitation. This will lead to more frequent and more transparent reporting on our supply chain, which we welcome. These are the kinds of actions our customers expect from Apple, and we will take more of them in the future.

We are focused on educating workers about their rights, so they are empowered to speak up when they see unsafe conditions or unfair treatment. As you know, more than a million people have been trained by our program.

We will continue to dig deeper, and we will undoubtedly find more issues. What we will not do — and never have done — is stand still or turn a blind eye to problems in our supply chain. On this you have my word. You can follow our progress at apple.com/supplierresponsibility .

To those within Apple who are tackling these issues every day, you have our thanks and admiration. Your work is significant and it is changing people’s lives. We are all proud to work alongside you.

Tim”

Foxconn workers threaten mass suicide in response to terrible working conditions

by Erin Wigger and Peter Schnall

Foxconn (which manufactures iPhones and iPads for Apple) has experienced a number of suicides in the last two years – 14 to date, as well as a number of  unsuccessful attempts. The company responded by raising wages 66% at it’s Shenzen plant, boosting its number of counselors, and making stress management programs available to workers there. It also built safety netting around the factory to prevent further suicide attempts and required that all employees sign a “no suicide” clause in their contract (effectively preventing further payouts to families in the event of a death by suicide). Foxconn also responded with claims that it’s number of suicides, per capita, are not much higher than China’s national average - implying the suicides are not the result of conditions at the manufacturing plant.

However, on January 2^nd approximately 150 workers took to the roof of Foxconn’s factory in Wuhan threatening mass suicide if their demands for better pay were not met. The New York Times reports that workers involved in the protest made accused Foxconn of reneging on the salary initially offered workers agreeing to leave the Wuhan factory - paying only a third of the previously proposed salary - and cited unfair treatment at the plant as the reason for their protest. (Recall the many stories that have appeared in the press of the oppressive working conditions at Foxconn with workers reporting excessive work weeks of 72 hours or more, militaristic supervision, low wages, and company induced indebtedness that have prevented many workers from leaving it's factories.) 

A protest of this nature is shocking. It is hard to condone this type of negotiation or to imagine it is anything but counter-productive in terms of entering into a legitimate dialogue between employers and employees. So what drove it into being? Is this an act of absolute desperation on the part of a collectively abused and exploited labor force, or the extremist tactics of workers trying to coerce the company into bending to their demands?

If this were the first step worker’s had made toward resolving their conflict that would be one thing. But this protest came about only after Foxconn rejected workers attempts at bargaining and issued an ultimatum: resign and receive compensation or stay and continue on the same pay scale as before. In response  to these conditions, approximately 45 employees resigned, but none received any compensation.

This underlines the fact that Chinese employees have no safety net. They do not have the avenues of recourse we, as Americans, enjoy – though these rights in the U.S. are being whittled away daily (e.g. recall the recent Wisconsin Union Bill intended to strip public workers of their collective bargaining rights). In China, Geoffrey Crathall, Director at the China Labor Bulletin, was quoted to have said “employees feel they have no other option. If there were proper channels for the resolution of grievances, they wouldn’t have needed to resort to such actions” and, after weighing the facts, it is hard to disagree. Poor working conditions and pure desperation seem to have driven these workers to the roof.

The protest ended eight hours later after workers were talked down by Foxconn managers and local Chinese Communist Party officials. It remains dubious as to whether or not the dispute over wages has been adequately settled or not.

http://www.upi.com/Business_News/2012/01/11/Mass-suicide-threatened-at-Chinese-Foxconn-factory/UPI-57621326312862/?spt=hs&or=bn 

http://www.nytimes.com/2012/01/13/technology/foxconn-resolves-pay-dispute-with-workers.html?_r=3&pagewanted=all

http://www.businessweek.com/news/2012-01-13/foxconn-workers-at-southern-china-plant-protest-redeployment.html

http://www.digitaltrends.com/international/mass-suicide-threat-at-foxconn-factory/

What a Surprise: Apple Profit Margins Rise at the Expense of Foxconn and Pegatron Corporation

Bloomberg reports in an article today that Apple's margins have widened at the expense of its main supplier as Foxconn Technology Group cuts prices to retain orders for the iPhone and iPad.

The profit spread at Hon Hai Precision Industry, Foxconn's Taipei-listed flagship, has narrowed to 1.5 percent since the debut of the iPhone in June 2007 as Apple's operating margin more than doubled over the past five years, surpassing 30 percent.

Apparently, Foxconn as well as Pegatron are willing to sacrifice profit margins in exchange for volume and scale.  Both companies have seen profit margins decline despite increase sales due to rising salaries and lower sale prices to Apple Corp. on Ipads and Iphones.

This process puts both companies under increasing pressure to get more from workers for less. So if salaries go up it becomes critical to increase worker productivity.

Maybe this has something to do with repetitive motion disorders, stress disorders, suicides and explosions at plants not ready for production but which are pressed into service nonethless (see my previous blog).

See http://www.bloomberg.com/news/2012-01-04/apple-profit-margins-rise-at-foxconn-s-expense.html for more information.