Apple and the Foxconn suicides: employing guanxi to protect human rights in the supply chain

To illustrate the usefulness of guanxi for addressing human rights issues in the supply chain, we diagnose what was done right and what could have been done better by Apple during and following a disturbing string of suicides at its main Chinese supplier, the Taiwanese-owned Foxconn. Beginning in January 2010, and continuing with frightening regularity throughout the year, there was a series of at least 14 suicides, all of younger workers, at the so-called “Foxconn City” industrial park in Shenzhen, where the bulk of Apple’s iPhones are manufactured, as well as products for Hewlett-Packard, Motorola, Nokia, IBM, and Cisco (Rothlin & McCann, 2015, pp. 1S8-161).

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Pressures that led to the suicides in 2010-2011 have recently been ratcheted up in the era of COVID-19 when workers are expected to increase productivity and maintain social distancing. In March 2020, China Labor Watch (CLW) reported that a Foxconn worker, rumored to have contracted COVID-19, committed suicide by jumping from the 11th floor of a Foxconn dormitory (Bennet, 2020).

At first, Foxconn took a no-comment approach to these suicides by not admitting that there was a problem, and (at least publicly) treating the initial four suicides as isolated incidents. This was a face-saving move insofar as it avoided admitting failure while suggesting causes that did not point back to Foxconn. However, after the fourth suicide, Foxconn acted. One step was to admit to poor management of new staff. Like most workers in large coastal cities in China, the overwhelming majority of Foxconn workers are from poor rural backgrounds, and are, in many cases, earning money to support not just themselves but family who may be quite distant (Rothlin & McCann, 201S, p. 160). As a result, this population presents distinctive ethical and management challenges, including pressure to work long hours combined with a profound fear of failure. This, together with spectacular global demand from clients such as Apple, led to workers working far beyond local overtime regulations, often without overtime pay (Rothlin & McCann, 2015, pp. 162-163). This scandal, coming as it did just a few years after an ongoing controversy about alleged sweatshop conditions at Foxconn, led to significant notoriety, as well as attention from the Chinese government. Presumably in part to save face in light of international scrutiny and criticism, the Chinese government turned its eye on Foxconn and began an official inquiry of working conditions there (Wang & Zhan, 2010).

Apple has an unusually close commercial relationship with Foxconn. iPhones account for over 50 percent of Foxconn’s revenue, and around 60 percent of Apple’s sales (Kanematsu, 2017). Reports suggest that several of Foxconn’s global clients, Apple among them, approached Foxconn to work collaboratively to address the problems that were leading to the suicides (Kanematsu, 2017, The Economist, 2010). It is in precisely such situations that an accurate and nuanced understanding of gudnxi, together with the skill to apply it—Ethical Agility—is needed, to manage risk and save lives. Evidence that Apple, especially under Tim Cook, possesses significant Ethical Agility comes from several of Apple’s outward behaviors toward Foxconn, both in challenging times and more ordinary times. One behavior is the personal touch of sending Mr. Cook to China several times over a period of many years, first as COO and then as CEO, to meet with executives and workers alike, as well as government officials (BBC, 2012, Vincent, 2016). To Chinese perspectives, sending a very high-ranking person indicates how seriously Apple takes the relationship between the firms. In challenging times, such as following the 2010-2011 suicides, it also indicates to Chinese counterparts and government officials how seriously Apple regards the problem to be. This serves to put the spotlight on any Foxconn response, which means they will be more likely to be more compliant, not only to preserve face on the global stage, but to be seen in a posture of problem-solving and cooperation with the world’s most valuable brand. All of these practices serve to promote face for Foxconn workers, executives, and even its CEO, Terry Gou. This is because they present Gou as a key collaborator working with one of the world’s most powerful companies and famous CEOs to help solve problems, rather than as a (mere) contracted manufacturer and “gadget assembler” (Gurman, 2019).

Here is yet another place where face and gudnxi interact: the promotion of face serves as a cornerstone and powerful motivator for maintaining the relationship with Apple and its cooperative tenor. The Apple-Foxconn experience thus offers validation for our proposition that cultivating and maintaining gudnxi is a highly useful resource to get Chinese counterparts and partner firms to improve transparency, raise their accountability, and act quickly when human rights problems and other problems arise that need to be addressed. The point is not to dismiss the importance of vigilant (and, better yet, independent external) monitoring of labor conditions that has become the gold standard for assuring human rights compliance. What we are saying is that if a company wants to prevent human rights problems from emerging in the supply chain in the first place, and deal effectively with problems when they arise, then it is critical that it fully embrace the importance cultivating gudnxi and, more generally, appreciate of the underlying dynamics of traditional Chinese culture (Santoro, 2003).

To be sure, human rights concerns and allegations continue to plague Foxconn and Apple, but the blueprint for prevention and cure has been established. In 2019, China Labor Watch (CLW) alleged that despite previous investigations and promises to rectify the situation, Foxconn had temporary staff known as dispatch workers comprising around half of the workforce, whereas Chinese labor law stipulates a maximum of 10 percent (Gurman, 2019). Temporary staff are often hired in large numbers to meet seasonal demand. They receive fewer protections than regular workers. In addition, CLW alleged, resignations were not approved during peak production periods, some temporary staff did not receive promised bonuses, student workers were doing overtime during peak season despite regulations that prohibit this, and some workers were putting in over 100 overtime hours each month, where Chinese labor law limits that to 36 hours (Choudhury, 2019). Adding to the complexity of the situation is the fact that many workers want to work overtime to make more money. Thus, there is significant demand from workers for Foxconn to break Chinese labor laws and to tread into territory that violates human rights (Gurman, 2019).

To address these new allegations, Apple continues to rely on longstanding guanxi in the way it interacts with Foxconn, maintaining an attitude and posture of respect and collaboration while avoiding any finger-pointing or blame. As an example, consider Apple’s official public response to the allegations:

Apple said that, after conducting an investigation, it found the “percentage of [temporary] workers exceeded our standards” and that it is “working closely with Foxconn to resolve this issue.” It added that when it finds issues, it works with suppliers to “take immediate corrective action.” Foxconn Technology Group also confirmed the dispatch worker violation following an operational review.

(Gurman, 2019)

This approach has been consistent in Apple’s public commentary regarding its relationship with Foxconn and Gou, from 2010 to the present day. The effectiveness of this approach is reflected in Foxconn’s rhetoric following the CLW allegations. Instead of evasion and denial, the company said its

work to address the issues identified in our Zhengzhou facility continues and we will closely monitor the situation. We will not hesitate to take any additional steps that might be required to meet the high standards we set for our operations.

(Gurman, 2019)

In sum, addressing the 2010 crises at Foxconn in the way Apple did, it helped to develop their most important global supplier into a company that effectively responds and communicates with Western audiences on human rights challenges. This is no small achievement in protecting human rights.

It should be noted that, while Apple has been successful in addressing human rights concerns in its manufacturing supply chain at Foxconn— reflecting that, unlike Google and Facebook, it is primarily a hardware company—it has been less adept at addressing more human rights issues emanating from the software side of its business. For example, the company has come under criticism from activist shareholders and human rights advocates for removing virtual networking (VPN) apps—which enable users to avoid China’s internet censorship and access foreign news outlets—from its App store. Responding to this criticism in September 2020, Apple published a human rights policy, “Our Commitment to Human Rights,” in which it claimed, without much explanation or apparent justification, to be “based on” the UNGPs (Apple, Inc. 2020). While the policy, which fails to mention China, acknowledged “the critical importance of an open society in which information flows freely,” this affirmation was undercut by the company’s dubious claim in the next breath that “we’re convinced the best way we can continue to promote openness is to remain engaged, even where we may disagree with a country’s laws.” Apple’s “UNGP-wrashing” human rights policy was, to say the least, a disappointing pronouncement for a company that, under CEO Tim Cook’s leadership, has claimed to be a defender of the freedom of speech and privacy of its customers. Because of its decades of experience and plethora of strong relationships with Chinese government officials, Apple is certainly capable of taking a stronger stand on internet freedom and it most certainly has a moral duty to do so.

 
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