LABOR | Developments in China

Mike Lee, Lead Trainer for China, and
Eliza Wright, Development Manager, SAI.

In June 2010, a nonviolent eight-day strike of 1,700 workers at the Honda factory in Zhongshan attracted international attention. Within three weeks, it was the third Honda auto parts factory in Guangdong province to suffer a work stoppage, along with plants in Shenzhen and Foshan.

In addition to the issue of inadequate wages, the workers at the Honda plants were pressing to have their own union, because they felt that the All-China Federation of Trade Unions (ACFTU) was not representing them adequately.

On August 4, I was privileged to talk about these questions with Mike Lee, Lead Trainer for Social Accountability International in China, who was in the United States for the same SAI planning sessions that Rishi Singh participated in. (See my report on workplace developments in India immediately before this one; also note my disclosure that I have been married for 41 years to the president of SAI.)

Lee has his M.Sc. degree in Chemical Engineering from Northeast China Institute of Electric Power Engineering and a B.Sc. degree in Electrical Engineering from Wuhan University. He has conducted more than 50 SA8000 audits. He is based in Shenzhen, near the site of one of the three Honda plants that had work stoppages in 2010.

Q&A

Q1. Mike, I thought the ACFTU was supposed to be the only union in China. It’s the one that Wal-Mart’s workers belong to. Why do you think the Chinese government has allowed the Honda union – and similar ad hoc worker groups in other factories - to continue?

LEE: It was a puzzle at first. The theory now is that the government is using the existence of the bottom-up worker representation to put pressure on the national union to be more responsive to worker concerns. The government knows that Honda and other big brands can establish factories anywhere they want. Another reason is that although Wal-Mart had established many ACFTU branch unions inside their companies, actually it does not work as expected. The union seems to be not functioning where there was a mass layoff in Wal-Mart last year.

Q2. A striking Honda worker who was afraid to identify himself is reported as saying: “The ACFTU is not representing our views; we want our own union that will represent us.” What might the do-it-yourself unions have that the official union does not?

LEE: Actually workers in the Honda strike asked their local government to re-organize the ACFTU local union in Honda’s factory. After a series of negotiations, finally, the members of the Honda union were elected by workers directly, but the previous union leader is still there. The new re-organized union in Honda’s factory cannot be viewed as a completely independent labor union but worker representation was enforced.  Perhaps  the Chinese government is trying to find out what works. It wants to make the national union better. Probably the most important task is to improve communication between plant managers and workers and to increase the representation of workers in ACFTU local unions.

Q3. How can a union improve representation of workers?

LEE: SAI has been thinking about this for a long time and has ideas on how to create systematic channels of effective communication between the factory manager and the workforce, and how to encourage workers and unions to become more involved.

Q4. Can you give me an example?

LEE: An example is to establish a mechanism inside factories to handle disputes. SAI’s approach in its Social Fingerprint^® Program is to establish “Internal Social Performance Teams”.

Q5. Doesn’t every factory have something like this?

LEE: Apparently not. The Chinese government may be seeking to ensure that the ACFTU is bringing workers’ representatives and  management to the table together when necessary.

Q6. It sounds like President Kennedy’s idea of a three-way negotiation, with the government bringing management and labor together. Of course, he was interested in the national unions and the major steel companies, whereas these issues are strictly local initiatives. What is the outlook for pop-up unions in China?

LEE: Yes, this is quite similar to President Kennedy’s idea of a three-way negotiation. No one knows the outlook of pop-up unions in China, but the government’s letting them continue informally at Honda and elsewhere is a good sign. Think of them as pilot projects under observation, and perhaps showing the way for the AFCTU, encouraging them to have a closer relationship with workers in every factory. The latest interesting news in China is that in May 2012, a pilot project of electing union leaders by workers directly at factory level in Shenzhen was successfully implemented. And the ACFTU branch in Shenzhen has announced they will involve more factories this year. This program of pilot elections may be considered a response by the local government and the ACFTU branches to the Honda strikes. This is a first step toward greater independence of the labor unions.

Q7. How does the Honda union operate?

LEE: Once a year, in February or March, or both, the union engages in collective bargaining with management for a wage increment and some assurances on other matters, such as  that excessive overtime will be reduced.

Q8. Is the leadership among workers at the Honda plants, and the governments allowing them to continue, having any effect nationally?

LEE: I think so, if workers’ requests are  mainly focused on increasing their wage level, reducing excessive overtime working hours, and health and safety issues. It is seen as a signal that having workers’ representation in the factories is considered healthy by the government. It is good for the worker committees and the workers because it creates confidence that management will be responsive. 

Q9. There were strikes in other cities outside Guangdong and the targets are often Japanese-owned and Taiwanese-owned factories. And in India the factory where there was violence was owned by Suzuki, a Japanese firm. Is there any significance to the fact that these factories are foreign-owned?

LEE: People are perhaps more willing to believe that there is a lack of communication when the factory is foreign-owned. Also, perhaps the British and American-owned brands became aware of the problems earlier, because of consumer sentiment. Some U.S. brands have been early users of SAI’s Social Fingerprint^® Program and the SA8000 certification program.

LABOR | Defusing India's Time Bomb

Joleen Ong (L), Communications Manager,
and Rishi Singh, India Project Director, SAI.

Last month auto workers at the Maruti Suzuki plant near New Delhi were angry. They killed the plant manager, injured a dozen or more Japanese managers, and set fire to the factory.

What was going on here??

I have quizzed Rishi Sher Singh (see photo at left taken yesterday) about the incident. This is the kind of problem he specializes in. He directs two workplace initiatives in India for the New York-based non-profit organization Social Accountability International (SAI). He was here in the USA for planning meetings with SAI (disclosure: I have been married to SAI’s president, Alice Tepper Marlin, for 41 years).

Singh grew up in a Sikh family in New Delhi and is now based in Bangalore. In 2011, he ran 22 workshops to train managers in the implementation of workplace standards and management systems for human resources. Prior to joining SAI's staff, he worked in the industrial area where Maruti Suzuki is located, for a supplier to this company. Here are his answers:

Q1. I was shocked at the violence of the workers on July 18 and by the lack of communication that it indicates between management and workers. Are these reactions merited?

SINGH: Yes to both. 

Q2. An automotive analyst in Bangkok believes that the core problem is the “perceived inequality” of India’s contract workers, which he calls a “ticking time bomb.” Is he right?

SINGH: Yes, that is definitely a key issue, unfairness to contract workers. More broadly, factory managers are  not taking enough time to listen to the problems of workers. Stakeholder engagement is very important and there must be a pressure-relief valve for dissent, to prevent it becoming an explosion. Otherwise the pressure builds up.

Q3. What do you think were the major issues that led to the violent worker reaction on July 18?

SINGH: I think there were two major issues: (1) One was harassment. A supervisor called an Indian worker low-caste. The insulted worker responded by slapping the supervisor. The worker was fired.  The incident seems to indicate that the plant might have a weak system for handling complaints, especially for filing a report on discrimination and caste-related issues. The insulted worker did not think he had any recourse. What is clearly needed at the plant is a complaint resolution system for harassment and other concerns. (2) The other was wage concerns. Yes, the plant did have a mechanism for addressing wage questions. A big problem is that contract workers are paid as little as one-third what permanent workers get and the company pays them no medical benefits. This is a countrywide problem, because the law is ambiguous. Contract workers are supposed to be used only for peripheral jobs but they are used for core jobs – they are in fact often doing the same work as permanent workers. Manufacturers are exploiting a loophole in the law. The use of contract workers has doubled since 2000 to 1.5 million workers, and some states under-report the number of contract workers. The central government should be monitoring the state reports, their completeness and the clarity of reporting on the scope and engagement of contract workers. 

Q4. How has the company reacted to the violence?

SINGH:  Maruti's Chairman quickly declared a lockout. The police have been keeping workers or outsiders from entering the factory and they are exercising arrest warrants for union leaders - including the union president, Ram Meher, who has said that the violence was started by company-hired anti-union thugs who attacked workers with weapons.The company and Indian police have denied this. So the facts are still being established. 

Q5. Maruti Suzuki says they pay more than 70 percent above minimum wage. Any comment?

SINGH: Yes, in the automotive region where they are located, all wages are relatively high. 

Q6. Management says they plan to reduce the share of workers who are contractual to 20 percent. Comment?

SINGH: Yes, that would help. 

Q7.Published reports show that management had warning of worker discontent, with three production stoppages in the past year. The lockout means Maruti is producing 1,600 fewer cars per day. Maruti stock fell 8.5 percent in two weeks and Suzuki Motor Corp. stock fell 6.6 percent. What does this mean in the bigger picture?  

SINGH: It might be good for Hyundai and Tata Motors, which sell competing cars. But of course it may have a negative impact on foreign investment in India. 

Q8. Is this factory unique, or have other factories seen incidents like this? 

SINGH: I wish I could say it was a one-off. But in recent years three other factories in the automotive area had strikes for higher pay and improved status for contract workers. Four years ago  the managing director of an Italian-owned plant in the area, Graziano Trasmissioni India, was beaten to death by a group of dismissed employees. 

Q9. What is the solution?

SINGH: The factories need to reduce tension and manage conflict on an ongoing basis. They need a means of regular communication between workers and management to get to the root causes of their major issues.  Any systematic approach to ensuring this is better than none, but of course I am inclined to encourage the use of the SA8000 approach.

Q10. Why is SA8000 special?

SINGH: The key is SA8000’s “management systems” approach to human resources, which seeks to ensure routine adherence to the other eight performance criteria of the SA8000 standard. The systematic approach is much admired by managers who have been trained in use of SA8000, specifically because it helps to sustain compliance. The system also incorporates routine stakeholder engagement, which is crucial for understanding the many points of view of those involved in a supply chain.