CSR Meets PR Again

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Apple has had a PR battle on it hands since news of factory conditions at its China contractor were recently reported in the British newspaper (see here), but now McDonalds is also facing problems. This time an actual battle is involved.

According to a report in Forbes, over a thousand workers at a toy-making contractor (owned by Merton in Hong Kong) that supplies McDonald’s (as well as Disney, Mattel and others) have rioted over low pay and working and living conditions. The report suggests that the contractor in Dongguan (Guangdong province) has been flaunting laws on overtime, minimum wages and holiday pay. The report refers to information from China Labor Watch investigation which says:

    “Workers at the Merton Company typically work for 11 hours a day and 6 days a week. The total overtime hours go up to 70 hours a month. However, under the Chinese Labor Law, workers shall not work for more than 40 hours a week and overtime shall not exceed 36 hours a month. Workers will be subject to salary deduction if they refuse to work overtime. At Merton, workers do not enjoy paid national holidays, vacation or sick leave.

    The base salary for workers who are paid at hourly rate at Merton is 574 RMB ($71.75) a month, the exact minimum wage standard in Dongguan. The factory does not calculate workers’ overtime compensation separately and overtime is not paid 1.5 times of regular rate as required by the law. There is not base salary for workers who are paid at piece rate. Workers’ salaries are normally withheld for a month. Furthermore, the factory has stopped providing workers with salary slips since February 2006, which is also mandatory under the law.

McDonald’s has disputed the claims, and responded that the riot was not over working conditions, but over the firing of an employee. Either way, it seems there was a lot of resentment, and that the situation got out of control.

An early PR statement from McDonald’s that they were “looking into this matter” is not very inspired, but is a reminder that “looking into” suppliers is a good idea…but not just when they are pitching for business. It is essential that suppliers and partners are monitored and audited over time to ensure compliance. Not just for the sake of corporate PR, but if that is a driver for change, then it is not a bad place to start.

Please contact us to discuss any risk, due diligence, audit (or PR) issues you would like to address.

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Updated 28/07/06

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