Instructions: Answer each question in not less than SEVEN (7) sentences per

question.

Case: Worker Exploitation at Foxconn/Hon Hai

Foxconn/Hon Hai Precision Ind. Co. Ltd. is a key China-based supplier to several U.S. high-tech
companies like Apple, Dell, and HP. Manufacturers have a vested interest in the quality of products from
their suppliers and their labor practices. Low-cost labor and a nearly endless supply of employees lead
many U.S. companies to deal with suppliers in China. As more U.S. corporations strive for social
responsibility, it was only a matter of time before production overseas saw the ripple effect of those
decisions. Labor laws in China provide limited protection for workers and therefore the U.S. companies
faced an ethical dilemma. Should they monitor labor practices at Foxconn/Hon Hai to ensure that
workers were treated respectfully, or should they accept that if Foxconn followed Chinese labor laws it
was not their concern?

Hon Hai, the world’s largest electronics contract manufacturer, employs over 800,000 workers, who
produce parts for iPads, iPhones, and other devices. Workers are housed in a campus with dormitories,
a hospital, a bookstore, swimming pools, free bus transportation, and other services. Many of the
workers migrated from farm communities to the industrial hubs where Hon Hai’s operations are located.
Their jobs at Hon Hai’s factories are often the first assembly-line jobs they have ever held and they are
frequently living far from home and family. Working conditions at Hon Hai’s factories complied with
Chinese labor laws but frequently led to what is considered in the U.S. as worker abuse. Workers
routinely worked in excess of 40 hours, with most workers averaging 120 hours of overtime per month.
That calculates to an average workweek of 70 hours. Many machines were not properly equipped with
safety devices leading to injuries. Underage workers were employed. At least 10 employees at the
company committed suicide in 2010, which brought labor conditions under great public scrutiny. The
company’s response was to install safety nets around the dormitories to prevent additional casualties.
The uproar from customers and the independent worker-advocacy agency, the Fair Labor Association,
led to serious review of working conditions. Apple had previously questioned labor conditions at Hon
Hai. The company sent a team to investigate reports of excessive overtime and other “sweatshop”
conditions. After the rash of suicides Apple sent a team of executives to China to inspect the factories
and meet with Foxconn’s CEO. Apple continues to monitor conditions at the supplier that were so bad
that the U.S. company could no longer ignore the abhorrent labor practices. Because of the sheer size of
Hon Hai and its importance in the supply chain to electronics manufacturers, discontinuing the
relationship would be a very difficult and costly alternative for Apple and others. Hon Hai has
implemented a number of improvements for workers that should satisfy its customers and keep its
employees safe and healthy. Employees at Hon Hai’s factories will now work fewer hours and receive
higher pay. For example, there is now a maximum 40- hour work week for each employee, with the
option of working up to a maximum of 36 hours of overtime each week. The probation period for entry-
level workers was cut in half from six months to three months. The company instituted an Employee
Assistance Plan to assist employees with mental health concerns.

®
© 2017 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Labor laws around the world reflect the priorities of each nation’s government and this can lead to great
differences between countries. When a U.S.-based company does business with suppliers in other
nations, one factor to consider is how workers are treated and what is required by law to insure humane
working conditions.

Questions for the Group:

1. What obligation does a company like Apple or HP have to insure that suppliers follow the local labor
laws? What should Apple do if it discovers that the supplier is not in compliance with those laws?

2. As someone who might purchase devices made by Apple, Dell, or HP, how does this treatment of
workers at a supplier influence your opinion of Apple and other U.S. companies that deal with such
suppliers? Does Apple bear any responsibility for these labor problems because of its quest for ever
lower costs? Explain thoroughly your answer.

®
© 2017 Cengage Learning . May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.