Some American companies now concede that the cheating is far more pervasive than they had imagined. "We've come to realize that, while monitoring is crucial to measuring the performance of our suppliers, it doesn't per se lead to sustainable improvements," says Hannah Jones, Nike Inc.'s vice-president for corporate responsibility. "We still have the same core problems."

This raises disturbing questions. Guarantees by multi-nationals that offshore suppliers are meeting widely accepted codes of conduct have been important to maintaining political support in the U.S. for growing trade ties with China, especially in the wake of protests by unions and antiglobalization activists. "For many retailers, audits are a way of covering themselves," says Auret van Heerden, chief executive of the Fair Labor Assn., a coalition of 20 apparel and sporting goods makers and retailers, including Nike, Adidas Group, Eddie Bauer, and Nordstrom. But can corporations successfully impose Western labor standards on a nation that lacks real unions and a meaningful rule of law?

Historically associated with sweatshop abuses but now trying to reform its suppliers, Nike says that one factory it caught falsifying records several years ago is the Zhi Qiao Garments Co. The dingy concrete-walled facility set near mango groves and rice paddies in the steamy southern city of Panyu employs 600 workers, most in their early 20s. They wear blue smocks and lean over stitching machines and large steam-blasting irons. Today the factory complies with labor-law requirements, Nike says, but Zhi Qiao's general manager, Peter Wang, says it's not easy. "Before, we all played the cat-and-mouse game," but that has ended, he claims. "Any improvement you make costs more money." Providing for overtime wages is his biggest challenge, he says. By law, he is supposed to provide time-and-a-half pay after eight hours on weekdays and between double and triple pay for Saturdays, Sundays, and holidays. "The price [Nike pays] never increases one penny," Wang complains, "but compliance with labor codes definitely raises costs."

Story continues below ↓

advertisement | your ad here

A Nike spokesman says in a written statement that the company, based in Beaverton, Ore., "believes wages are best set by the local marketplace in which a contract factory competes for its workforce." One way Nike and several other companies are seeking to improve labor conditions is teaching their suppliers more efficient production methods that reduce the need for overtime.

MORE FROM BUSINESSWEEK
How to make factories play fair
Global comparison of sweatshops
The future of outsourcing
Five offshore practices that pay off
Major players in outsourcing
The problems in China aren't limited to garment factories, where labor activists have documented sweatshop conditions since the early 1990s. Widespread violations of Chinese labor laws are also surfacing in factories supplying everything from furniture and household appliances to electronics and computers. Hewlett-Packard, Dell, and other companies that rely heavily on contractors in China to supply notebook PCs, digital cameras, and handheld devices have formed an industry alliance to combat the abuses.

A compliance manager for a major multinational company who has overseen many factory audits says that the percentage of Chinese suppliers caught submitting false payroll records has risen from 46 percent to 75 percent in the past four years. This manager, who requested anonymity, estimates that only 20 percent of Chinese suppliers comply with wage rules, while just 5 percent obey hour limitations.

CONTINUED : Crude methods of concealing

< Prev | 1 | 2 | 3 | 4 | 5 | Next >

Discuss Story On Newsvine
Rate Story:
View popularLowHigh
Email
Instant Message
Print