SOCIAL TOPICS (Archive): HUMAN RIGHTS

Published, July 1998

       by Rev. David M. Schilling

       Having recently returned from a fact-finding mission looking into factory conditions in Southeast Asia, Reverend David Schilling offers perspective on how companies can become part of the solution to sweatshop injustices.

       The outsourcing of work to independent contractors and subcontractors in the global economy presents unique challenges to those who believe companies must take responsibility for workplace conditions wherever their products are made. Too often labor abuses are far removed from the company decision-makers, who may not even know of all the factories making their products. In addition to obvious abuses such as low pay and poor working conditions, workers can be subject to arbitrary disciplinary measures that dehumanize them. The most egregious offense of sweatshops is what they do to the human spirit.

       Many companies are purportedly working to curtail sweatshop conditions. These efforts help protect company reputations and may enhance their bottom line over the long term. Those that are truly embracing a sweatshop-free strategy should incorporate the following elements in their business plans.

       A productive workplace must be measured not only by standards of economic efficiency, but also by how it supports and enhances the dignity of each person. A March 1998 fact-finding delegation organized by Interfaith Center on Corporate Responsibility (ICCR) visited footwear supplier plants that produce for Nike and Reebok in Indonesia, Vietnam, and China. The delegation visited a plant in Zhu Hai, China (a 90-minute hour ferry ride from Hong Kong), owned by Pou Chen, a Taiwanese company. Over 12,000 workers, most of whom are in their early 20s, make sport shoes for Reebok. The average tenure is two to three years. Pou Chen’s management described factory initiatives to encourage more collaborative relationships between management and workers.

       As the ICCR delegation toured the plant, we observed a sign posted at an entrance to one building indicating employees were not to enter. If they did, they would be fined fifty (Hong Kong) dollars, or about three day’s wages. We learned that a system of fining workers for specific “infractions” was enforced in this factory, a practice we saw as antithetical to the goal of creating a more humane, collaborative relationship with workers. Reebok responded positively to the delegation’s recommendation by issuing a new policy in April 1998 that requires the elimination of fines in all its supplier factories in China.

       The right of workers to organize their own unions is a crucial element in ameliorating workplace abuses. A number of U.S. companies, with freedom of association provisions in their code of conduct, operate in free enterprise zones in countries such as China and Indonesia, where independent labor organizing is a criminal offense.

       For example, ICCR’s delegation talked with independent labor leader Muchtar Pakpahan in Jakarta while he was on trial for subversive activity. In 1992 Pakpahan successfully organized an independent trade union, the Indonesian Prosperity Trade Union (SBSI) that became a threat to the government-sponsored union, the All-Indonesian Trade Union (SPSI). Pakpahan told us, “Two hundred and ninety-two SBSI leaders were arrested and ninety-two were jailed. Ten thousand workers were dismissed from their jobs because of SBSI membership.”

       The situation in Indonesia is changing. One of the first acts of newly appointed President Habibie was to release Pakpahan from prison — a hopeful sign. At this critical moment it is time for U.S. companies operating in Indonesia to press the new government to respect the right of workers to organize without fear of dismissal or jail.

       A company must be measured not only by how much it increases shareholder value, but by how well it distributes the wealth it creates. Fiduciary responsibility should be broadened to include the responsibility of equitably sharing with employees and communities the wealth the company produces.

       The ICCR fact-finding delegation found that factories producing for Reebok and Nike had made some improvements in ventilation, air quality, payment of legal minimum wages, and communication systems. Despite this progress the key issue for workers is still not being addressed. Workers need a sustainable living wage to meet their basic needs and have some discretionary income. In Indonesia the minimum wage is 5,750 rupiah per day ($.60 at March exchange rates). The recent financial instability in Indonesia has caused the purchasing power of wages to drop an estimated sixty percent as rice has tripled in price, cooking oil has quadrupled, and powdered milk has been priced out of the range of workers entirely. One footwear worker told our delegation, “The high price of goods has made it very difficult. Wages have not increased. We are trying to figure out how to make it.”

       In April Reebok did raise the minimum wage by twenty percent in its supplier plants and Nike raised their minimum wage by fifteen percent. Although important, these increases do not address the severe economic crisis of working people. Low wages that keep people on the edge of survival, fearing the next medical crisis, the next family emergency, are contrary to responsible business practice and the protection of human dignity.

       Companies must be measured by their level of participation in the independent monitoring of their plants and the plants of their contractors and sub-contractors. This year religious shareholders filed resolutions with twelve apparel, footwear, and toy companies focusing on the issue of independent monitoring.

       To be effective, independent monitoring must rely heavily on reputable, local, non-governmental organizations (NGOs) who know the culture, language, and working conditions within their communities and are likely to have the trust of workers. ICCR’s experience working with the Independent Monitoring Group in El Salvador at Mandarin, a Gap supplier, has shown that local NGOs are equipped to play a key role in eliminating sweatshop conditions by effectively monitoring company codes of conduct and national laws.

       Partly because of religious shareholders’ pressure, Nike’s CEO Philip Knight recently announced the company’s commitment to independent monitoring. Knight said, “Independent monitoring is a critical element of an overall system of improving labor practices. Nike’s goal is to reach a point where labor practices can be tested and verified in much the same manner that financial audits determine a company’s compliance with generally accepted accounting principles.”

       This announcement is an important step forward that challenges other companies to make the same commitment. Nike has yet to decide how it will implement its independent monitoring pledge. Religious investors believe that for the system to be effective it must involve respected local NGOs in a major role, not simply as a tag-on to monitoring done by large auditing firms.

       If independent monitoring systems utilize the skills of local NGOs, if progress is made toward every worker receiving a sustainable living wage, if workers’ rights to organize is upheld, and if companies take concrete steps to affirm the human dignity of every worker, we have a fighting chance to make sweatshops a thing of the past.

Rev. David M. Schilling is Director, Global Corporate Accountability Programs for the Interfaith Center on Corporate Responsibility in New York City. He is a member of the White House Apparel Industry.