Earlier this week, I came across an article alleging that Microsoft has been doing business with Chinese suppliers who have been breaking labor laws. Specifically, those suppliers were accused of failing to register workers under 18 years of age and had allegedly forced them to work excessive overtime: 280 hours in a month against a limit of 60 hours per week.

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How did these violations come into the news?

It was publicized in a report written by the National Labor Committee (NLC).

The NLC is an organization whose mission is “to help defend the human rights of workers in the global economy.” In fact, I think you can get a good feel for what they do by reading these excerpts from their Web site…

“Transnational corporations now roam the world to find the cheapest and most vulnerable workers. The people who stitch together our jeans and assemble our CD-players are mostly young women in Central America, Mexico, Bangladesh, China and other poor nations, many working 12 to 14-hour days for pennies an hour. The lack of accountability on the part of our U.S. corporations–now operating all over the world, and the resulting dehumanization of this new global workforce is emerging as the overwhelming moral crisis of the 21st century. The struggle for rule of law in the global economy–to ensure respect for the fundamental rights of the millions of workers producing goods for the U.S. market–has become the great new civil rights movement of our time.”

The Web site goes on to brag that the NLC “successfully pressured dozens of companies – including the Gap, Kathie Lee Gifford/Wal-Mart, and the Walt Disney Company – to improve conditions in supplier plants and to respect human and worker rights.”

Are your low cost country suppliers behaving in a way that would draw the attention of the NLC?

Your answer may be “No, we audit our suppliers.”

What may surprise you is that Microsoft may have said the same thing.

An NLC report on the Microsoft situation assails supplier auditing practices.

In a section of the NLC report entitled “State and Corporate Factory Audits are a Complete Failure Leaving China’s Workers in a Trap with no Exit,” the report says:

“Consider for example, a rare local government audit of the KYE factory which happened in 2008. Though the audit was supposed to be unannounced, someone in KYE management was alerted with sufficient time to round up the hundreds of workers who were under 18 years old…The young workers were instructed to gather in the factory courtyard so they could be bused to another location, where they would wait out the state audit and then return to work.

“Corporate audits of the KYE factory by Microsoft and other high tech companies have also failed miserably over the last several years. At the KYE factory the process of preparing for monitoring visits is somewhat subtle. Management instructs the workers to ‘answer the clients’ questions very carefully.’ They should say they never work more than 12 hours a day and overtime is less than 36 hours a month. Workers are told to respond they are ‘very satisfied’ when asked about working conditions, their dorms and meals. To make this sound even more ‘authentic,’ workers are told to ‘spontaneously’ mention other factories where they had worked in the past, where conditions were ‘awful.’ They are more ‘hopeful’ now that that they are working at KYE.

“We asked if factory management has to openly threaten workers to lie. The answer was no. As the workers put it: ‘They don’t have to as workers get it and know what is going on. Those who break ranks are fired. Workers have heard of others being fired for speaking truthfully. Among themselves, workers talk about this. They know not to tell the truth.’”

“The workers did tell us that Microsoft representatives have visited and walked through the KYE factory, always being accompanied by mid and high-level managers. On these walk-throughs, U.S. company representatives hardly ever speak to the workers.”

In a sidebar, the report quotes the United Nations’ top expert on corporate social responsibility as saying “We keep hearing now, from just about everywhere… Monitoring doesn’t work. Just about everyone, at least off the record, will tell you that monitoring doesn’t work because people cheat.”

So what’s the key to staying above the ethical line when sourcing globally?

Perhaps it is to set your investigation standards higher than the NLC. If you don’t audit better than they do – both before and after the contract is signed – your company is at risk of a public relations nightmare. By virtually defining global sourcing as “roaming the world to find the cheapest and most vulnerable workers,” it should be clear that the NLC does not exist to be your friend.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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