(10-2000) This article was cut from a piece called ""Codes Update and Resources" memo" from the Maquila Solidarity Network

Two recent reports, which received major coverage in the North American media, raise serious concerns about the integrity and reliability of social audits of company codes of conduct by PricewaterhouseCoopers (PWC) and other private sector auditing firms.

PWC is the world's largest private sector monitor of labour and environmental practices. In 1999, it carried out audits of over 6,000 factories for major shoe, garment and toy companies, including Nike, Disney, Wal-Mart, the Gap, and Jones Apparel. It is also likely to be accredited as a social auditor under the Fair Labor Association (FLA) initiative, as well as the Worldwide Responsible Apparel Production monitoring program (WRAP).

1. The Chun Si Case:

In an October 2 article in the US magazine Business Week, the US retail giant Wal-Mart admitted that its Kathie Lee label handbags had been made in Chun Si Enterprise Handbag Factory in southern China. For several months, Wal-Mart and Kathie Lee had denied that they had ever had a relationship with any company or factory with that name anywhere in the world. The factory was notorious for labour and human right abuses. According to the article, workers were locked in the factory for all but 60 minutes a day, forced to work up to 90 hours a week, fined for taking too long in the washroom, punched and hit for talking back to managers, charged a large portion of their salaries for food and lodging, required to hand over their personal identification cards, and given expired temporary-resident permits exposing them to possible arrest if they left the factory grounds.

According to Wal-Mart, the factory had been inspected five times in 1999, four times by Cal Safety Compliance Corporation and once by PWC. While the auditors had reported that Chun Si was not paying legal overtime rates and was requiring excessive overtime, they apparently failed to uncover many of the most serious abuses. Meanwhile, the local government labour office was receiving several complaints a month about the company's violations of Chinese labour laws.

Because of their confidentiality agreements with Wal-Mart, both PWC and Cal Safety Compliance Corporation remained silent throughout the months Wal-Mart officials were denying they had ever done business with Chun Si. According to the article, "Wal-Mart declined to allow Business Week to talk in detail to Cal Safety or PWC, citing confidentiality agreements."

The Chun Si case not only raises questions about the reliability of private sector audits, but also about the total lack of transparency in this social auditing model.

2. Monitoring the Monitors:

On September 28, Dara O'Rourke, Assistant Professor at the Massachusetts Institute of Technology (MIT) and health and safety expert, released an extremely critical inside report on the labour monitoring methods of PricewaterhouseCoopers. While doing research for the Independent University Initiative of five major US universities, O'Rourke accompanied PWC auditors on inspections of factories in China and Korea, and also was able to evaluate PWC's findings in a factory in Indonesia.

His report documents major labour rights violations that PWC auditors failed to note, including use of hazardous chemicals and other health and safety problems, barriers to freedom of association and collective bargaining, violations of overtime laws, and timecards that appeared to be falsified.

O'Rourke claims that in the Chinese factory he visited, the PWC auditors failed to note that the union was run by management, and that in the Korean factory the auditors skipped over all interview questions about freedom of association during the worker interviews, stating, "There is no union in this factory, so I don't need to ask these questions." Both factories were reported to be in full compliance with freedom of association provisions. As part of the project O'Rourke was working on, PWC audited 13 factories in seven countries, including countries known for restrictions on freedom of association, yet not one factory was reported to be in violation of freedom of association provisions.

On wages and hours of work, the PWC report claims that workers in the Chinese factory were required to work overtime at a rate that was less than the minimum wage, and that workers worked overtime to complete their quotas. According to O'Rourke, the PWC auditors made verbal suggestions to the factory managers on how to bypass national overtime laws. O'Rourke also claims that in the Korean factory overtime was neither recorded nor paid, and that the PWC auditors actually recommended that the factory circumvent overtime pay laws by paying a "bonus" rather than legally required overtime premiums.

The report blames PWC's monitoring methods rather than individual auditors. It notes that auditors gather most information from managers rather than workers, and depend largely on data provided by management. According to O'Rourke, all interviews with workers were carried out inside the factories, and managers were allowed to help select workers to be interviewed and to bring them to the offices where they were interviewed. The managers therefore knew who was being interviewed, for how long, and on what issues.

If you want copies of either of these documents in English, please let us know.

RESOURCES

Labour Practices in the Footwear, Leather, Textiles and Clothing Industries.
Report for discussion at the Tripartite Meeting on Labour Practices in the Footwear, Leather, Textiles and Clothing Industries. International Labour Office, Geneva, September 16 20, 2000. www.ilo.org/public/english/dialogue/sector/techmeet/tmlfi00/tmlfir.htm The report includes detailed information on the changing structure of the industry worldwide, as well as updates on labour practices and wages. It assesses recent developments related to ILO "fundamental principles" such as child labour, freedom of association, discrimination, and forced labour and also includes reference to codes of conduct and other private sector initiatives.

And from Central America Have you seen? Códigos de Conducta y Monitoreo en la Industria de Confección. Experiences Internationales y Regionales con Ronald Koepke, Norma Molina y Carolina Quinteros (copiladores), Ediciones: Heinrich Boll, Marzo 2000, 223pps. Contact -- GMIES@amnetsal.com. [Spanish only]

COVERCO Second Public Report, Independent Monitoring Report with Liz Claiborne, Inc., June 2000. Contact: coverco@infovia.com.gt. [English and Spanish]

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Maquila Solidarity Network (MSN) / Ethical Trading Action Group (ETAG) 606 Shaw Street, Toronto Ontario M6G 3L6 CANADA

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