When Foxconn Technology Group announced on March 30, 2012 that we were committed to the implementation of a remediation program based on the findings of the Fair Labor Association (FLA) audit of our operations, the largest and most comprehensive assessment of an electronics manufacturing operation ever undertaken by any independent audit organization in China, we said that we participated fully and openly in this review and this process as part of our long-standing commitment to working together with our customers to ensure that our employees are treated fairly and their rights are fully protected. We also said that we are committed to carry out the remediation program that was presented with the FLA audit findings.
In making the commitment to carry out that remediation program, we embarked on a long journey that will change our company and the lives of our more than one million employees in China. Equally important, our considerable investment in this process will change our industry through the positive example we are setting for other companies who, while they may receive short-term benefits from their competitive cost structure, must eventually invest in reforms of their own companies if they are to meet the changing requirements of their customers and their employees.
The implementation of the FLA remediation program is on target and it is generating the required results. That process will not be deterred by a SACOM exercise that seeks to contrast alleged conversations with 170 employees against a review process carried out by an internationally respected independent audit organization that formally interviewed more than 35,000 employees. The fact that SACOM’s conversations occurred just as the remediation program was being launched further undermines the credibility of their exercise.
SACOM’s May 31 report lists nine “key findings” and, in an effort to set the record straight, we have no hesitation in addressing those points:
1. SACOM: “No freedom of speech.” Foxconn: All responsible companies have policies clearly outlining employee engagement with the media, we are no different. If this is a restriction of freedom of speech, then most of the Fortune 500 companies would be equally culpable.
2. SACOM: “No freedom of association.” Foxconn: In China, it is the government that organizes employee trade unions and not individual enterprises. Foxconn Technology Group does have an employee trade union, the Foxconn Technology Group Federation of Labor Unions, and over 90 percent of our employees are part of this union. All employees are welcome to join but it is not mandatory and we would certainly never force any of our employees to join any organization. The labor union plays an important role in ensuring clear lines of communication and a positive working relationship between our employees and our company and it has been effective in representing the needs of our employees. Moreover, the function of the labor union is introduced during an orientation session in which all of our employees participate when they first join the company. A representative of the labor union participates in that session to introduce employees to the organization and to provide a point of contact. As part of the FLA remediation program, Foxconn has committed to developing an action plan that will further enhance worker participation in committees and other union structures so that employees will have even greater representation and voice in the decision-making processes of the labor unions. To ensure that our programs are aligned with employees’ needs and expectations, the labor union has been carrying out employee surveys on a monthly basis to solicit their feedback.
3. SACOM: “No transparency in the FLA’s inspections.” Foxconn: The report and the summary of the remedial actions have long been posted by the FLA on their website and are available to anyone. There is no restriction of any access.
4. SACOM: “Overall salary decreases.” Foxconn: Yes, we have continued to increase total compensation to one of the highest levels in our industry. For example, more than 75 percent of our employees in Shenzhen have a basic salary that ranges from 2,200 to 2,500 yuan per month which is far more than the incorrect range included in the SACOM report, far more than government-mandated minimum levels, and far more than most in our industry. Yes, we have also begun to implement our agreement to bring overtime hours down to the government-mandated ceiling and we have committed to bring the overtime levels of all employees down to this level by July 1, 2013. At the same time, we are ensuring that we continue to pay one of the highest total compensation levels in our industry. If we did not do this, we would not be able to maintain our industry-leading employment recruitment and retention levels.
5. SACOM: “Unpaid overtime and demanding production targets.” Foxconn: We are committed to paying employees everything they earn and to doing so on time in compliance with our own code of conduct and relevant government regulations. While the FLA audit found that Foxconn pays wages on time, it also found that there is a need for improvements to the system used to track overtime. As outlined in the FLA remediation program, Foxconn has already begun to implement the measures needed to enhance our management system to address this requirement.
6. SACOM: “Excessive overtime.” Foxconn: Our employee records show that, during the period stated in the report, less than 2% of our employees in the specific production facility referred to in the report reached the working-hour limit reflected in the Electronic Industry Citizenship Coalition (EICC) Code that we have long used as a guideline for working hours. While all overtime is voluntary, as a part of our commitment to providing employees with a positive working environment, we are working with our customers and the FLA towards our July 1, 2013 objective of reducing overtime to no more than 36 hours per month. As for holidays, the majority of our employees did, in fact, take home leave during Chinese New Year and only 1.2% worked voluntary overtime during that period and they were paid, on an hourly basis, three times their normal salary.
7. SACOM: “Inhumane treatment.” Foxconn: Our management policies and practices seek to ensure that our workers are treated with respect and we do not tolerate any infractions of these policies. If a violation is found, there are formal grievance procedures that workers can and do follow to bring them to the attention of our senior management team who are required to investigate each and every grievance filing.
8. SACOM: “Psychological tests for job applicants.” Foxconn: Yes, like many companies operating in China and internationally, we do have a section in the written test for job applicants designed to assess the psychological state of applicants. This was one of the measures recommended by many of the mental health experts who we retained in 2010 to help us develop policies designed to better meet the counseling and other health needs of our more than one million employees. We believe this is a responsible action on the part of our company.
9. SACOM: “Unsafe working environment.” Foxconn: We are mandated by our own strict policies, Chinese government law, and our commitments to our customers to ensure that the highest level of health and safety standards are applied to our operations in all locations. This includes providing our workers with the training and, when required, the protective equipment needed to safely carry out their responsibilities. Our policies and practices in this area are regularly audited by our internal teams, government regulators, and our customers and if any areas for improvement are noted, they are immediately addressed. While we have strict programs in place to mitigate against industrial accidents, we follow all government regulations regarding notification of any industrial injuries when they do occur.
We would also like to address the misrepresentation of the remarks of our Chief Executive Officer at an event on April 28 in Taipei that are included in the SACOM report. A full review of his statements at that event shows that he said the company is working hard to promote positive workplace conditions and all employees should be proud of the contributions they are making for our customers. He also said that he takes exception to any characterization of Foxconn as a sweatshop because the scrutiny that the company receives from the world’s media and others, including voluntary FLA audits, clearly shows that is not the case.
Our success in implementing the FLA audit remediation program is meeting our goal of setting an example for others in our industry in China and we will be judged by future FLA audits and the monitoring of the implementation program, by reviews carried out by our customers, and by future employee surveys. Our employees are our greatest asset and we are fully committed to ensuring that they have a safe, satisfactory, and healthy working environment.