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paperV2N11 Libre PDF
paperV2N11 Libre PDF
1, 2011 1
Abstract
China is one of the world’s biggest and fastest growing economy countries. China is opened
up to foreign trade and investment in 1978 and becomes one of the most important
destinations for cross border direct investment. The challenges for a foreign investor to
address in her quest of going global is the continuing commitment by business to behave
ethically and contribute to the economic development while improving the quality of life of
the workforce and their families as well as the community and society at large. A string of
suicide among the workers at Foxconn’s plant in Shenzhen has raised question about the
condition of million workers in China and the corporate social responsibility practice of the
foreign investor in China. The objective of this paper is to use the corporate social
performance model to identify the weaknesses in corporate social responsibility practice of a
multinational corporation, Foxconn. The case-based research methodology is used to address
the research problem. Scope of investigation covers the management style of the corporation
and employee management of the corporation. This research which is conducted based on the
Corporate Social Performance model will address the strategy that could be adopted by the
multinational corporation in responding to the social responsibility and social issues. Based
on the case study analysis, Foxconn is adopting reactive strategy in management style and
accommodative strategy in managing the workers.
1. INTRODUCTION
China is one of the world’s biggest and fastest growing economy countries. According to the
2010 A.T. Kearney Foreign Direct Investment Confidence Index, China remains the top-
ranked destination by foreign investors, a title it has held since 2002 (Kearney, 2010).
Foreign direct investment (FDI) in China rose 14.3% year-on year in the first five months of
2010. The manufacturing sector is the favourite segment for FDI as it attracts about 47.3% of
the total overseas investment in China for the first 5 months period in 2010 (Agence France-
Presse, 2010). However, the inflow of FDI in China has posed some challenges for the
implementation of CSR practices among multinational corporations (MNCs).
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Corporate Social Responsibility (CSR) has already become a challenge that MNCs have to
face in an emerging market where every business decision may be tagged as exploitation of
local workers. The tragedies at Taiwanese high technology firm, Foxconn has further
illustrated the CSR challenge in terms of foreign corporation industrial relationship with local
workers. Foxconn is the largest manufacturer of electronic and computer components
worldwide and Foxconn is mainly manufacturers on contract for other companies like Apple,
Hewlett-Packard and Sony. The corporation has raised wages by 67% for its hundreds of
thousands of workers in China after 11 suicides, 10 of them in southern Shenzhen city
(Agence France-Presse, 2010). Foxconn’s present situation is inextricably linked to the
‘blood and sweat’ of migrant workers. The treatment to the workers by the Foxconn has
posed challenge to its CSR principles of which emphasize on contribution to society well-
being, valued employees, pay workers a fair and reasonable wage, provide safe and
comfortable living infrastructure for the workers and ultimately to allow migrant workers in
becoming true “citizens of the enterprise” (Sacom, 2010).
What are the underlying problems with the CSR practices in respect of employee relation
issue in Foxconn that lead to the string of workers suicide tragedies in its Shenzhen main
plant? In responding to this question, the objective set for this paper is to identify the
weaknesses in Foxconn's CSR practices in respect of employee relation issue by using
Carroll’s corporate social performance (CSP) model. Furthermore, the authors attempt to
propose appropriate suggestion to overcome the above weaknesses identified. With this
objective, the study contributes in the following points: the study attempts to identify the
challenges faced by MNCs when managing its CSR practices in respect of employee relation
in China. The finding could be meaningful reference on CSR-employee relation issue to
MNCs who wish to invest in China.
The remainder of this article is structured as follows: in the first section, a discussion on
theoretical concepts related to Corporate Social Responsibility, Corporate Social
Responsiveness and Corporate Social Performance Model; in the second section, a
presentation of the methodology; in the third section, the authors analyse the CSR practice in
respect of employee relation at Foxconn’s plant in Shenzhen, China, identifying the
challenges; and finally, in the last section, the authors conclude the findings and suggestion.
2. LITERATURE REVIEW
The FDI in China by MNCs in past several decades have brought big increase in every
imaginable indicator of economic performance (Rawski, 1999, p.139). The dynamic
economic growth stimulated by MNCs also created numerous social issues that resulting a
gap in terms of desire objective between MNCs and China local society especially in terms of
the commitment of the MNCs to its social responsibility to China. Some of the social issues
had eventually leaded to recent labour unrest incidents like string of suicide in Foxconn and
workers strike in Honda (Foroohar, 2010).
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Foxconn is now the Fortune 500 corporations and also the world’s largest contract
manufacturer of Computer, Communication and Consumer-electronics ("3C"). The
corporation manufactures popularly demanded electronic gargets like iPhones, iPads and
other electronic for corporations such as Apple Inc and Hewlett-Packard Co. (China Daily,
2010). The mission of the company in integrating the expertise for mechanical and electrical
parts and an uncommon concept is to provide the lowest "total cost" solution by advancing in
nanotechnology, heat transfer, wireless connectivity, material science and green
manufacturing to increase the affordability of electronics products for all mankind has gain
appreciation from the worldwide customers (Foxconn Group Profile, 2007).
Based on Foxconn inaugural Corporate Social and Environmental Responsibility 2008 Report
(CSER); the report outlines the commitment, plans and aspirations of Foxconn to be the
CSER leader in the 3Cs industry. The corporation also reported the implementation of a wide
range of initiatives to improve on its performance across the spectrum of corporate
responsibility issues. The reports also highlighted the proactive working relationship with its
stakeholders and other interested groups on CSER issues (Corporate Social and
Environmental Responsibility Report- Foxconn Technology Group, 2008). The
understanding on the concept of the CSR, its evolutions as well as the CSP modal are
essential in order to provide a platform to evaluate the effectiveness of the CSR practice in
Foxconn.
Keith Davis (1960, p.70) relates the CSR to “businessmen’s decisions and actions taken for
reasons at least partially beyond the firm’s direct economic or technical interest”. Davis
(1960) also argued that the corporation being an economy unit in the society has a broad
obligation to the community of which it is operates in terms of economic development as
well human value development. Sethi (1975) defined social responsibility as the corporate
behaviour that goes beyond social obligation but rather to commensurate to the social norms,
value and expectation. Sethi (1975) also argued on the necessary to distinguish between
social responsibility and social responsiveness to corporation in relation to corporate social
performance.
In 1963, Joseph McGuire (cited in McGuire, 1963) has proposed a broader view on Corporate
Social Responsibilities where corporation does not only economic but also legal obligation
and certain responsibilities to the society which extend beyond these obligations (McGuire,
1963). Eells and Walton (cited in Ells & Walton, 1961) had highlighted that the CSR should
be taken as the ethical principles that ought to govern the relationship between the
corporation and society. Hay, Gray and Gates (1976) further suggested that the CSR as the
business decision made by corporation should go beyond profit orientation but also aiming at
mobilizing economic resources to address social issue like social problems, poverty and
racial discrimination. In conclusion, the corporate responsibility towards the compliance to
the value, expectation and interest of the society had laid down the fundamental of modern
definition on CSR.
Till the 70s, the CSR concepts mainly focus on the notion of business obligation and
motivation that remains philosophical principles where there is no clear guidance for
corporation to determine what are the social issues that the corporation should become
concerned and involved (Clarkson, 1995). The CSR concepts have overlooked the action and
performance of the corporation in maneuvering the concepts into the proper corporation
strategy and plans (Carroll, 1979). The absence of proper definition on how corporation
should identify and address the relevant social issues to the corporation has lead to the
necessity of a more practical managerial oriented concepts of Corporate Social
Responsiveness that emphasize on how the corporation and its managers should behave in
reacting and responding to the social issues on a timely and effective manner.
The Corporate Social Responsiveness generally emphasized more on actual tangible activities
that contributes to the social responsibility rather than rely upon simplified and philosophical
utterances. The corporate social responsiveness also puts strong emphasis on the needs for
tools, techniques, organizational structures, and behaviour system most appropriate to
identify and measure in an empirical manner towards the business-and-society issues. The
systematic approach in uncovering the social issue as well as identifying both the internal and
external constraints on organizations such as inflexibility or corporate structure, the lack of
social measurements capabilities as well as hefty cost associates with CSR activities will
enable the corporation to device the appropriate actions and programs to overcome the issues
in a more efficient manner (Federick, 1978).
The concept of Corporate Social Performance (CSP) has become the focus of the studies
among researchers on the past few decades which aims in prescribing, identifying, measuring
and anticipating how corporation responses or reacts to the social aspects created by the
management behaviour (Buchholz & Rosenthal, 2004).
There are many researchers provide valuable input in enriching the CSP concepts. Carroll
(1979) introduced the three dimensional CSP model as in Figure 1. The model provides a
valuable framework integrating the social responsibility, social responsiveness, and social
issues for the overall analysis of the responsibility of the corporation to the society (Wartick
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& Cochran, 1985). The underlying interaction nature of the CSP model among the principles
of CSR, the process of social responsiveness and the policies development to resolve social
issues provide a distinctive perspective on corporation strategy towards achieving its
obligations to the society (Wartick & Cochran, 1985). Wartick and Cochran (1985) defined
CSP as a continuous interaction among the social responsibility principles, the responsiveness
process to social issue and the relevant policies and programs developed to resolve the social
issues. Wood (1991, p.693) enriched Wartick and Cochran CSP definition by redefining the
concept of CSP as “a business organization’s configuration of principles of social
responsibility, processes of social responsiveness, and policies, programs, and observable
outcomes as they relate to the firm’s societal relationships”.
The model, in the form of a three dimensional cube integrate Corporate Social Responsibility,
Corporate Social Responsiveness on the social issues and the specification of the philosophy
of response by corporation (Carroll, 1979; Clarkson, 1995). Carroll’s CSP model was
developed based the four parts of CSR pyramid that attempted to reconcile the corporation’s
economic orientation with its social orientation by including the idea of economic and legal
obligations and ethical and philanthropic responsibility. The Carroll’s CSP model is still to be
considered the most widely recognized model to present the CSR (Galbreath, 2009; Matten &
Crane, 2005). Carroll’s CSP model will be used for the discussion in the remaining section.
Carroll’s CSP model is divided into three dimensions namely social responsibility category,
social issues involved as well as philosophy of social responsiveness.
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The first dimension of the CSP model defined the CSR responsibility of a corporation. The
CSR responsibility must embody the economic, legal, ethical and discretionary obligations of
the corporation to the stakeholders and the society. The four categories demonstrate a
continuum with economic concerns on one end and social concerns on the other. All the four
categories are inter-related and not mutually exclusive (Carroll, 1991). The Carroll’s four
categories of CSR are popularly used by scholars who conduct research on social issues
(Wood & Jones, 1996).
The economic responsibility is the first and most important responsibility of corporation in
view of the legitimate obligation in providing financial return to its shareholders. The
corporation institution is the basic economic unit in society of which has the responsibility to
produce goods and services that demended by the society and sells them at a profit
(Friedman, 1970). Generally, the characteristic of the economic responsibilities will be the
corporation operating in a manner consistent with the objective of maximizing earning per
share. The main objective of the corporation is to ensure profitability and strong
competitiveness. The corporation needs to maintain a high level of operating efficiency in
order to ensure costing is low in return for higher margin. In short, the corporation will be
considered as a successful corporation if it is consistently profitable (Carroll, 1991).
As corporation exists at the pleasure of the society; its behaviour and methods of operation
must fall within the guidelines set by society. Similar to government, corporation has a social
contract – an implied set of rights and obligations. The contract is general remains as the
source of business legitimacy despite it may change as societal conditions change
(Donaldson, 1983). Hence, the legal responsibility highlighted the requirement of the
corporation entity in compliance to the ‘social contract’ between the society and the
organization of which the entity is expected to fulfill its economic mission within the
parameter of the government and law requirements. The corporation is required to comply
with various federal, state and local regulations as well as law of overseas country where it is
has footprint (Carroll, 1991).
Although the first two categories embody ethical norms, there are additional behaviours that
are not necessarily codified into written law but nevertheless are the value and expectation
demanded by the society. There is in accordance to the underlying principle of corporation
acts as a moral agent within society (Ozar, 1979; Rawls, 1971). Business corporation to
certain extend is similar religious institutions where they owe responsibility to society to
reflect and reinforce values. Donaldson (1982) has commented that corporations have the
capacity to use moral rules in decision making and control not only overt corporate acts but
also the structure of politics and rules. Scholar like Preston and Post (1975) had argued that
there is a genuine responsibility of the corporation in contributing to the host society in term
of social well being. Therefore, corporations must meet the conditions of moral agency of the
society and must behave ethically in a manner consistent with society’s standards, values,
norms and expectations. There is a generally accepted rules that the corporation is considered
fulfilling the ethical responsibility as long as the corporation exceed and over the legal
requirements, to do what is right, just and fair and avoid create harm to the society (Carroll,
1991).
Discretionary (or volitional) responsibilities demonstrate that the company should exercise
judgement and choice accurately and voluntary in doing business that assume social roles
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over and above the society expectation, not required by law, and not even generally expected
of business in an ethical sense. This includes activities or programs that promote human
welfare or goodwill, be a good corporate citizen that contributes resources to the society that
aims to improve qualify of life (Carroll, 1991). In summary, a CSR corporation should strive
to make a profit, obey the law, be ethical, and be a good corporate citizen (Carroll, 1991;
1999).
The second dimension of CSP model is to relate the corporate social responsibilities to the
corresponding social issues or topical areas. It is important for corporation to identify
constantly the social issues that business needs to address as the issues changed over a period
of time following changed of society mentality, education level and society structure.
Besides, the evolution and cross border expansion of the business involving different cultures
and norms and laws also poses a necessity requirement on corporation to constantly identify
the social issue encounters. A timely identification of social issues concerns the corporation
based on the considerations of corporation resource ability to match the corporation needs
with the social needs, the seriousness of the social needs, the commitment and the interest of
the top executives, public relations value of social action as well as the governmental
pressure will directly determine the successfulness of the corporation in resolving social
issues (Holmes, 1976).
There are many influencing factors in determining the success of a corporation namely
economic, political and legislative factors of which are beyond the corporation means.
However, there is another important factor that within the control of the corporation could
affect the corporation survival and success. The factor is the approach of the corporation
manager in managing the stakeholder expectations. The stakeholder approach is about the
managerial behaviour taken by the corporation in response to the groups and individuals that
have, or claim, ownership, rights, or interests in a corporation that could affect the entity
(Clarkson, 1995; Freeman, 1984). The Stakeholders can be primary or secondary. Primary
stakeholder groups comprise of shareholders (owners/investors), employees, customers,
investors, suppliers, government, and community with whom the corporation may have a
formal, official, or contractual relationship (Clarkson, 1995). The primary could be further
breakdown by internal and external stakeholder groups. While internal stakeholders comprise
of employees and investors, external stakeholders include customers, communities, suppliers,
government, and natural environment (Galbreath, 2006). Secondary stakeholders are media
and special interest groups towards whom a corporation does not have any engagement or
contractual obligation (Clarkson, 1995).
A corporation’s survival and success depends on the ability of its managers to create wealth,
satisfaction or opportunity for its. If any of the primary stakeholder groups become
dissatisfied and withdraw its support from the corporation whether totally or partially will
seriously and adversely affect the corporation operation (Clarkson, 1995). This requires
corporation to identify and integrate crucial social issues, specific to each primary
stakeholder, with organizational policies and practices. An effective stakeholder management
has become more important for corporation that involving in cross border investment in view
of the diversity stakeholder issues in local as well as global platforms.
Corporation policies and practices toward the well being of the employees are an important
CSR indicators for corporation especially those with cross nation operation. The complexity
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arising from differences of societal standards and expectations regarding working conditions,
benefits and compensation structure are to be considered the challenges to the MNC. An
employee-oriented company will commit resources to promote employee welfare (Hooley et
al., 2000). At a minimum, employers are expected to respect employees’ rights (Donaldson,
1989). In a survey of 3,500 Americans, 85 percent of the respondents opined that better
treatment of employees is a high indicator of corporate citizenship (O’Brien, 2005).
However, workplace issues such as poor working conditions, lack of equal opportunity, and
‘sweat factory’ have frequently caught the attention of media, regulators, and the public.
Catering to such issues enhances CSR towards employees
The third dimension of the CSP model addresses the philosophy, mode or strategy that could
be adopted by the corporation in responding to the social responsibility and social issues that
being identified in the second dimension. The degree of responsiveness of the manager could
be ranged on a continuum from no response (do nothing) to a proactive response (do much).
The degree indeed depends on how manager of the corporation appreciation of the moral
obligation towards the social issues (Carroll, 1979). Response strategies to manage the issues
include reactive, defensive, accommodative, and pro-active (RDAP) strategies. A proactive
strategy involves doing more than required to address social issues. In an accommodative
strategy, a firm will be less active compared to the proactive state in addressing social issues.
In a defensive strategy, a firm does only the legally minimum things to address social issues.
In a reactive strategy, the firm either fights against addressing social issues or ignores them
(Carroll, 1979; Clarkson, 1991, 1995; Wartick & Cochran, 1985). Generally, the proactive
strategy towards social issue will foreseen managerial attention and resource allocation
become high for such activities as compared to reactive strategy. Other researchers like Terry
McAdam has described four managerial responsiveness towards social issues namely (1)
fight all the way, (2) do only what is required, (3) be progressive and (4) lead the industry
that mesh well with RDAP strategies (Carroll, 1979; McAdam, 1973).
Generally, the managers of the corporation are the ‘moral actors’ within a business
corporation. They are the key person in deciding and executing discretionary business
strategy, action or program that either strictly profit oriented or social oriented. Generally, the
corporation Ethical and Discretionary (or volitional) responsibilities are those about which
society has no clear-cut message and not well defined for managers of the corporation as
compare with economic and legal responsibilities which well defined in corporation’s key
performance indicators and written legal laws. The ethical and discretionary responsibilities
are left to individual judgment and choice (Carroll, 1979).
In the absence of the rules, law or guidance, the every business decision made by corporation
managers will inadvertently influencing and shaping the role of the corporation in area of
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CSR (Wood, 1990). Indeed, the management behavior of the corporation executive will bring
impacts and consequences to corporation as every business decision made by them will affect
the compliance to its societal role in CSR and hence influence the corporation reputation
(Berthoin, 1990).
Carroll (1987) has highlighted that there are generally three types of management behavior
that governs the CSR level of an organization, namely immoral management (management
actively opposed to ethical principles), moral management (management actively conformed
to ethical principles) as well as amoral management (a hybrid style between immoral and
moral management). The senior management has a leadership responsibility in embracing the
concept of moral management in order to initiate a transformation of the corporation
behaviour into any of the above three type of management behaviour. Ackerman (1975)
suggested three characteristics behaviours of a responsive corporation: (a) it monitors and
assesses environmental conditions (b) it attends to the many stakeholder demands placed on
it, and (c) it designs plans and policies to respond to changing conditions. These behaviours
are the important processes for handling information, people and group, and social issues and
events.
Caroll’s CSP model is useful to both academicians and corporate manager (Carroll, 1979).
‘For academics, the model is primarily an aid to perceiving the distinction among definitions
of social responsibility that have appeared in the literature’ (Carroll, 1979, p. 502). For
corporate manager, the CSP model could provide a conceptual insight to corporate manager
to the inter-relating relationship between economic performance and social responsibility and
hence to guide them systematically to think critically in addressing the social issues faced
(Carroll, 1979).
From January 2010 to May 2010, there were thirteen production line workers have committed
suicide by jumping from the factory building at Foxconn’s plant in Shenzhen. The tragedy
marks the death of eleven workers and two workers seriously injured (Sacom, 2010). The
death of the workers in Foxconn attracts huge criticisms on the unethical business practice in
the corporation (Chang, 2010). Compare to China’s overall suicide rate, the suicide rate at
Foxconn is not statistically aberrant but the rapid rate of the suicides is unusual (Dean, 2010).
It is important to find out the message sent by the suicide workers in this tragedy.
According to Foxconn, the similarities of these suicide incidents are, the deceased are aged
between 18 and 23, and they are all newly recruits of Foxconn. Further, they are all migrant
workers (China Hush, 2010). This new generation migrant workers are born after 80s and
90s; their resilience and ability to endure hardship is weaker than the previous generation.
Also this generation’s self esteem is more fragile, they feel more pressured and they have
‘big’ dreams for their future. They are struggling in between earn to take care of their family
in hometown as well as save more in order to pursue their ‘dreams’. They are often easily
pressured in this tin-can like factory district. The migrant workers’ dream will disappear
when they are unable to make enough money to return to hometown; they easily become
depress and commit suicide soon become the only ‘way out’ between continue live as ‘ants’
(Liu and Vlaskamp, 2010) in the city or shamelessly back to hometown (China Hush, 2010).
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There are two study questions that attempt to be addressed by this research paper from the
perspective of CSR:-
i. Why there is high incident rate of a string of suicide among the new generations of
China’s migrant workers at Foxconn’s plant in Shenzhen?
ii. How to reduce the frequency of a string of suicide among the new generations of China’s
migrant workers at Foxconn plant in Shenzhen ?
The research paper was carried out with the following justifications:
Porter and Kramer (2006) suggested that the socially accepted and recognised CSR practice
by the corporation will enhance the corporation image, strengthen its product branding and
marketing successfulness. String of workers suicide in Foxconn plant not only seriously
affects its corporate image among the local community; but it also tarnishes its business
image before its global business partners who are mostly western based Fortune 500
corporations who uphold the important of CSR practice at its chain of suppliers. The
irresponsible practices in Foxconn will put its global customers under pressure as they are
legitimately be held responsible for the irresponsible CSR practice among their worldwide
supply network (Amaeshi, Osuji & Nnodim, 2008). This will seriously affect Foxconn’s
image as the global contract manufacturer.
Generally, there is a direct linkage between Corporate Social Performance with the
corporation financial performance. There are research shown that both the corporations with
an usually high and low CSR practice will result in higher financial performance against
other corporation; however, the unusually good CSP practice corporation will survive in
relative longer time horizons as compare to unusually poor CSP practice corporation
(Brammer & Millington, 2008; Walter, 1977). The string of suicide incidents has forced the
Foxconn to adopt various utmost urgent measures in curbing the tragedy like employees’
salary increment, set up employee hotline, arrangement of qualified psychologist to handle
workers issue, setting of safety netting around dormitory as well as high compensation has
eroded into the corporation profitability.
The failure of the company in advocating a socially accepted CSR practice will render the
company to be the target of the government as well as other non governmental interest group
(Wartick & Cochran, 1985). The rejection or the retaliation by the government and local
society will force the corporation to withdraw the operating presence from such territorial
area to prevent further aggravation of the anti company sentiments among the locals. This
will inadvertently posit multiple concerns to the corporation such as increased of investment
cost, high retrenchment for existing employees, high retraining cost for new employee and
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The string of worker suicide incidents has also lead to the various protest and demonstration
organized by interest group. The industrial dispute and the pressure from both government
agency and NGOs have lead to Foxconn to review the workers working condition and this
cause an impact to Foxconn’s production schedule.
The paper attempts to review Foxconn case in respect of perspective of Corporate Social
Performance model, do management style, employment management and working conditions
contribute to the incident of a string of suicide among the new generation of China’s migrant
workers at Foxconn’s plant in Shenzhen?
3. METHODOLOGY
The researchers have chosen the case study method as research design strategy. The
researchers have carried out a single case study (Yin, 1994) with a MNC (Foxconn) from the
manufacturing sector. Foxconn was chosen in consideration of the important social and
environmental impacts of the problem for the new generations of Chinese migrant worker in
the local communities. Foxconn is a Taiwan-based company, which employs some 820,000
workers throughout China, is the world's largest electronics contract manufacturer by revenue
(Dean & Ting, 2010, p. 2). Moreover, this MNC has strong activities in China, in which
social and environmental demands are very important and specific. Foxconn has depended on
huge numbers of cheap labourers, mainly from rural areas, who has forged an export-oriented
style “world factory” and fueled the rapid growth of the country’s economy.
The case based research can be used to address research problems within the interpretivist
paradigms (Perry, Reige & Brown, 1999). The researchers use interpretivist approach to
identify the reason behind the string of suicide among the new generations of Chinese
migrant workers at Foxconn’s plant in Shenzhen and to explore the possible solution to
reduce the frequency of a string suicide among the new generations of Chinese migrant
workers at Foxconn’s plant in Shenzhen. The researchers noted that Yin’s five components of
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research design that are important for case studies. The five components of research design
comprise of (1) a study's questions; (2) its propositions; (3) its unit(s) of analysis; (4) the
logic linking the data to the propositions, and (5) the criteria for interpreting the findings
(Yin, 1994).
The researchers follow the five components suggested by the Yin’s case study framework as
shown in Table I.
Logic linking the Data collection will be focused in exploring the impact of
data to the management style and employee management in Foxconn on the
proposition string of suicide. Documentary review and corporate social
performance model will be adopted in the study.
The criteria for The criteria for interpreting the findings included:
interpreting the 1. “Militaristic” management approach is a society acceptable
findings approach.
2. The workers’ right in respect of their social needs.
3. Number of working hours as stipulated in China Labour
Contract Law.
The document research was conducted within the period from May 2010 to July 2010. A total
of twenty (20) documents were analyzed (among them are journals, articles, magazine,
webpage and newspapers). The researchers have identified the following from these
documents:
(a) Foxconn’s management style
(b) Employee management in Foxconn
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The data analysis process is defined by the final two steps: analyzing data; and shaping
challenges and enfolding literature.
Analyzing data: 20 documents were analyzed. From these analyses, the truth of the string
suicide at Foxconn case emerged. This will help to identify the weaknesses in the CSR
practice in the corporation using the CSP model.
Caroll’s CSP model that stresses on 3 dimensions, namely CSR, philosophy of social
responsiveness and social issue involved, will be adopted by the researchers in the process of
evaluating and analyzing the Foxconn’s documentaries to discover the causes of a string of
suicide among the new generations of China’s migrant workers at Foxconn’s plant in
Shenzhen.
4.1.1 Analysis
Taiwanese managers are particularly known for their disciplinarian approach in their offshore
factories. The ‘militaristic’ corporate culture in Taiwanese corporation often invoked ‘hard-
working’ spirit as its symbol Corporations include Foxconn in Shenzhen have benefited from
such culture; its economic boom has put its GDP per capital far ahead of most cities in China
(Chan & Wang, 2004; Chou, 2010, p. 6). Foxconn's ‘militaristic’ management style,
including workers have to follow strict orders all day long. They have to do countless
repetitions of the same movements on the production lines. Verbal abuse rains down on them
if they make a mistake. Some have even been beaten up and harassed by security guards for
performing below expected target. Foxconn’s harsh management style creates excessive
stress on workers and led to some of workers to commit suicide (Pang, 2010, p. 1; Dean &
Ting, 2010, p. 3).
Foxconn employs 400,000 workers in Shenzhen. Workers work in various shifts who also
live and eat in the massive factory complex (English News, 2010). Beside providing living
and dining facilities, Foxconn also provides school, hospital, television station, banks, post
office, swimming and shopping mall for its employees. Foxconn provides better facilities and
better benefit to her workers as compare to the majority of corporation worldwide. The
corporation provides free laundry services, free Internet access, sports centers, Olympic-size
swimming pools. The corporation also provides better medical and insurance coverage than
required by law. Workers are also given opportunities to continue their education "to earn
qualifications from high school, college, masters and even PhDs (Chung, 2010, p. 2;
Eskildson, 2010).
According to Foxconn’s Vice President Terry Cheng, providing employees with basic
necessities including a safe and convenient place to live at the work-site might have been
sufficient in the past, but this arrangement no longer satisfies the needs of the young migrant
workers of today. He said this latest effort to stop his employees leaping off buildings is part
of a move towards a “more open” style of management. Finally, Foxconn realized that she
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cannot manage half a million workers she has and decided hand over dormitory management
to property management companies (Wilson, 2010, p. 1). In this tragedy, it highlighted that
Foxconn’s management is not sensitive to the changing in the nature of the China’s work
force.
4.1.2 Findings
The authors need to analysis Foxconn management style based on Carroll’s three dimensional
CSP model. Firstly, the authors need to ascertain the breaching of Foxconn’s management
style in relation to the four parts of CSR categories in CSP model. Then, the authors need to
ascertain the social issue created by the Foxconn’s management style. Lastly, the writers will
base on the CSP model to identify the philosophy of social responsiveness applied by
Foxconn in addressing the above social issues.
Foxconn’s decision in providing living and dining facilities, as well as providing better
medical and insurance coverage together with opportunity for higher education to its workers
is exceeding the economic responsibility and legal responsibility categories in the first
dimension. Although the providence of the above amenities and facilities are far beyond any
codified labour law requirements and economic considerations; but it is largely in accordance
to local society expectation. Traditionally, China culture is emphasizing that the employer
should acts to take care of the well being of its workers in order to ensure an intrapersonal
and interpersonal ‘harmony’ to ensure the workers productivity performance.
The social issue involved from the above management style is occupational safety and health
where the providence of the living and dining facilities is to ensure the workers basis living
needs are taken care to exchange for a better work concentration. The philosophy of social
responsiveness applied by Foxconn is accommodative strategy as the corporation provides
workers with better living and dining facilities as well as personal growth opportunity as
compare to the minimum law and legal requirements.
The ‘harsh management’ style in managing the workers such as using violence approach on
workers through the in-house security guards indeed violating the legal responsibility in
accordance to Carroll’s CSP first dimension. The ‘open reprimand’ to workers also violating
the ethical responsibility categories as ‘face saving’ is a general accepted social rules in local
community. The social issues involved under this area will be the discrimination. The
migrant workers are felt being discriminated and exploited by the corporation. Their right and
dignity are not being preserved but rather invaded by the company of which leads to adverse
psychological pressure. The philosophy of social responsiveness applied by Foxconn in these
issues are reactive strategy as it has considered violating the law and legal requirement in
protecting the rights and interests of its workers.
ethical responsibility in Carroll’s four parts of CSR category as its management practice has
against the society value and expectation.
The manager should acts morally towards the workers (Ozar, 1979; Rawls, 1971). The
manager should not treat the workers as ‘machine’. The workers should be treated with
dignity and respect. In accordance to Carroll’s management behaviour, Foxconn is unable to
consider as a moral manager as every business decision made is still business oriented
although the company provides better living style to the employees. The concern and focus of
the management are outside or beyond the moral order where concentration still lying on
issues such as productivity and profitability. The focus of the corporation in precise cost
management has make the corporation neglect every business decision impacts to its workers
(such as employees right to socialize, needs to be respected and opportunity to growth) which
make Foxconn fall under the category of “Amoral Manager” (Carroll, 1987).
Although the company provides better living and accommodation to its workers but its
ultimate intention is not for workers well being but rather serve as tool for Foxconn to
monitor and control the movement of workers. Besides, the company desire in getting extra
work hours out of workers also easier when they live in dormitories inside the factory
compound. The living, dining and short traveling distance between factory and dormitory
also enable Foxconn to enforce long stretches of overtime (Chan & Wang, 2004). In view of
the above, in general, Foxconn cannot be classified as a corporate social responsible
organization in view of its ‘unethical’ management approach to its workers, the amoral
management behaviour has failed the corporation in responding to the changing social issues
(worker’s expectation) and managing the needs of its interest and expectations of its
stakeholders in a timely manner (only after the string of suicide tragedy).
4.2.1 Analysis
There are 450,000 workers (migrant workers or second generation of migrant workers with
more than 85% at aged below thirties whom born in the late 1980s and 1990s) house in the
Foxconn Long Hua plant. Foxconn is using different colour uniform to differentiate the
workers from various departments. The workers in Foxconn do not have their own identity
(Kong & Wang, 2010; Chung, 2010, p. 4). Production line workers do not have interaction
JOURNAL FOR THE ADVANCEMENT OF SCIENCE & ARTS, VOL. 2, NO. 1, 2011 16
among themselves. The workers with the same uniforms and work in the uniform gesture and
manner indeed make them see their colleagues are the shadows of themselves. The workers
do not have a chance to gather together due to long workings hours and different working
schedule (Chang 2010, p. 3). The workers do not have a chance to share their feelings with
their colleagues.
Foxconn schedules the front line production workers in such a way that they are not able to
meet their roommate and friends from the same province. The workers hardly have a chance
to meet their roommate. They do not know their roommate and the roommate is a stranger to
them. The dormitory merely a place to rest and sleep to the workers. Peer support does not
exist as interaction among workers is virtually zero in Foxconn (Kong & Wang, 2010). If the
worker has difficulties or working pressure, he cannot share his feelings or seek someone for
help to solve his problems. This led to some workers that not able to undertake excessive
work pressure to a tragic end.
The workers earn a wage about 900 yuan a month (Chung, 2010, p. 4; Chang, 2010, p. 2).
This is in tandem with the minimum wage level set by the Shenzhen local government
(CNFOL, 2010). The wage earned unable them to make a decent living as such work
overtime to sustain their basic living is a common behaviour among workers in Shenzhen
(Chung, 2010). However, most of the time, overtime is offered to the reliable workers and to
those have a good relation with the production supervisor and factory manager (Chung, 2010,
p. 4).
4.2.2 Findings
The authors need to analyse Foxconn employee management practice based on Carroll’s
three dimensional of CSP model. Firstly, the authors need to ascertain the employee
management in Foxconn fall under which CSR categories in CSP model. Then, the authors
need to ascertain the social issue created by the Foxconn’s employee management practice.
Furthermore, the writers will base on the CSP model to identify the philosophy of social
responsiveness applied by Foxconn in addressing the above social issues.
The restriction of workers’ right to socialize and communicate has seriously violating the
basic human tolerance level. The arrangement to structurally separate the living and resting
schedule for one worker to others has seriously violating the workers freedom to associate
with peers and friends. Although there is no codified law to address such issue but it is
generally an unacceptable practice in a society that traditionally encourage interpersonal
interaction among peers and friends. This has shown Foxconn do not fulfilling its ethical
responsibility to the society.
The issue involved here will be the discrimination where workers have being discriminated
from its right to socialize and freedom to communicate with others. The restriction of
communication rights has forced some of the workers to take the ‘terminal way’ to resolve
their psychological grievances. Generally, Foxconn is not being sensitive enough to
understand the evolving attitude and social needs of its new generation of migrant workers.
There is no effort by Foxconn to ascertain the impact of its employee management practice to
the state of mind among its workers. The philosophy of social responsiveness applied by
Foxconn in the issue is Reactive strategy where it is trying all the possible means to manage
its workers in order to make them produce to their fullest capacity.
JOURNAL FOR THE ADVANCEMENT OF SCIENCE & ARTS, VOL. 2, NO. 1, 2011 17
As for the minimum wages; the issues is on general working environment. Foxconn has
adopted a Defensive Strategy as it is paying in accordance to what the law is expected. The
wages that keep low is in line with the Corporation objective to maximize its financial return
to its shareholder.
Most of Foxconn workers are migrant workers from countryside. Their intention to work in
city like Shenzhen is to make fortune in order to return home gracefully. However, the
compensation scale of which just leveling with the minimum wages set by local governments
is unable to satisfy the present needs and future needs of the employees. The high living cost
in the city as well as family commitment at hometown had further saddened their plan in
return home with sizeable accumulated wealth.
Besides, the migrant workers also find hard to adjust themselves comfortably to the city life
as their ‘simple’ thinking and perception is unable to accommodate them to the complex and
yet challenging living style. Desperation and hopeless in earning enough for future (low pay);
further with the absence of opportunity to be associated and supported by friends and
coworkers has deepen the psychological disturbance among migrant workers. This coupled
with lacking of proper channel for them to seek ‘redress’ has inadvertently leads to the strings
of commit suicide tragedy among the workers.
The employees generally pose the right to social, right to communicate and provide
opportunity to determine their cause of action. However, Foxconn has neglected such rights
and indirectly imposed pressure among the workers particularly in compliance to the
production needs and priority. Foxconn fails to identify and respond on an appropriate scale
and timely manner to the workers’ social needs and expectation (Ackermen, 1975). Although
the corporation set up the appropriate platform for workers to seek redress for their
psychological depression after the string of commit suicide incidents like counseling phone
line and availability of professional trained counselors in handling worker’s problem; but this
is rather too late as the tragedy is irreversible. By large, Foxconn perhaps fulfilling its
economic and legal responsibility to the shareholders and society but the failure of the
corporation to identify, recognize and response to the social problem created by them will
make Foxconn not a CSR corporation (Preston & Post, 1975).
JOURNAL FOR THE ADVANCEMENT OF SCIENCE & ARTS, VOL. 2, NO. 1, 2011 18
5.1 Conclusion
In relation to the providence of living and dining facilities as well as opportunity to personal
growth; Foxconn should maintain the accommodative strategy. The strategy is considered as
an effective tool to gain support from the local society as well as the recognition by the
government on the corporation contribution to the social improvement beside employment.
The acceptance and support from the local society and government will reduce the risk of
expose Foxconn in becoming the ‘target’ of the government and other interest group in terms
of the CSR issues. Furthermore, the writer do not see the ground for further increment of
investment in this area as it will reduce the possible return to its shareholder of which will
affect its economic responsibility.
On the other hand, Foxconn should seriously consider revising its managerial behaviour in
managing the workforce in its Shenzhen plant. The emerging and changing mind set of the
new generation of migrant workers that emphasize on the self and personal improvement and
their desire to build their fortune in the city should be studied thoroughly by the corporation.
The need and expectation of the employees should be taken into consideration for the
employment related policies in Foxconn.
Besides, Foxconn should ensure its in house security guards do not breach their code of
conduct in handling the underperforming workers in a violent manner as this could be
considered a serious breach of human rights. Lastly, the rights and dignity of the workers
should be respected by the management; the workers should be allowed to voice their view
and comment in relation to work related issues.
In consideration of the above, the writer would suggest that Foxconn should adopt the
Accommodative Strategy where proper system and procedure (more than what is required by
the law) should be derived in handling workers’ needs and expectation. The writers are in
opinion that there is a risk for Foxconn adopting a Proactive Strategy although it is ideal in
term of theoretical approach. The Proactive Strategy adopt by Foxconn may lead to more
unreasonable demand from its stakeholders of which may deteriorate its profitability.
Foxconn should review its current Reactive Strategy of which aiming at ‘divide and rule’
method. The corporation should recognize the importance of appreciate the basic human
needs for socialization and self actualization. It is rather inhumane practice for isolating the
workers life from peers and friends. Perhaps, Foxconn should adopt an Accommodative
Strategy where workers rights and interest are preserved in accordance not only to the law or
statue but rather in accordance to the society expectation and demand.
Although there is no codified law on how the wages should be derived; but Foxconn should
embark a thorough studies on its wage structure in relations to the living cost in a city like
Shenzhen. Consideration of wage revision should be considered if there is a vast disparity
between the wages and the corresponding cost of living. By doing this, Foxconn will be
JOURNAL FOR THE ADVANCEMENT OF SCIENCE & ARTS, VOL. 2, NO. 1, 2011 19
considered fulfilling its ethical responsibility and hence make the company a socially
responsible corporation. As such, Accommodative Strategy is desirable for Foxconn.
The scope of this research is limited to the Foxconn’s management style and the employee
management. The researchers do not explore others relevant aspect in this tragedy. This
research is based on commentary and criticism found in various documentary sources. The
researchers have not done any on-site in-dept study to ascertain the detail of the tragedy in
Foxconn. Furthermore, there are limited direct inputs from Foxconn’s management over the
tragedy; the researchers unable to present a holistic perspective on the tragedy as the one
sided input from the society could be biased. The study on the Foxconn’s case may not be
representative for the general working climate, particularly in Shenzhen and generally in
China.
5.3 Recommendation
In short the CSR is no longer being treated ‘lightly’ as some thing ‘supplements’ to the
business operation but rather critical in determining the sustainability and long terms
existence of the business. The CSR expectation is even more important for foreign investors
who venture their businesses in foreign soil which constantly involving in different social
structure, value and expectation following the surge of globalization move in the past few
decades.
Table 2 shows the strategy that adopted by the corporation in responding to the social
responsibility and social issues and recommendation to improve the weaknesses in the current
practice of Foxconn.
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Dr. Kwek Choon Ling received his B.Mgt (Marketing), M.B.A. (International Business) and
D.B.A. from the University of South Australia (Australia), the Charles Sturt University
(Australia) and University of New Castle (Australia) respectively. Currently, he is Senior
Lecturer in the Faculty of Management and Information Technology at UCSI University,
Kuala Lumpur. His areas of interest are consumer behaviour, services marketing, internet
marketing and strategic brand management.