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Apple's audit report |
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August 17, 2006
Like many of you, we were concerned by reports in the press a few
weeks ago alleging poor working and living conditions at a manufacturing facility
in China where iPods are assembled. Our Supplier Code of Conduct mandates that suppliers
of Apple products follow specific rules designed to safeguard human rights, worker
health and safety, and the environment. We take any deviation from these rules very seriously.
In response to the allegations, we immediately dispatched an audit team
comprised of members from our human resources, legal and operations groups to carry
out a thorough investigation of the conditions at the manufacturing site. The audit
covered the areas of labor standards, working and living environment, compensation,
overtime and worker treatment. The team interviewed over 100 randomly selected employees
representing a cross-section of line workers (83%), supervisors (9%), executives
(5%), and other support personnel (3%) including security guards and custodians.
They visited and inspected factory floors, dormitories, dining halls, and recreation
areas. The team also reviewed thousands of documents including personnel files,
payroll data, time cards, and security logs. In total, the audit spanned over 1200
person-hours and covered over one million square feet of facilities.
To ensure the accuracy of the investigation, the team cross-referenced multiple sources
of information from employees, management and personnel records. For example, working hours and
overtime reported in the interviews were corroborated with line-shift reports, badge
reader logs, and payroll records of those specific individuals to confirm that they
were paid appropriately.
We found the supplier to be in compliance in the majority
of the areas audited. However, we did find violations to our Code of Conduct, as
well as other areas for improvement that we are working with the supplier to address.
What follows is a summary of what we've learned, what's already being done in response,
and our commitment to future diligence and action.
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Labor Standards
The team reviewed personnel files and hiring practices and found no evidence whatsoever
of the use of child labor or any form of forced labor. This review included examining security
records targeted at discovering false identification papers — an important check for companies
serious about preventing illegal employment of any kind
Working and Living Environment
The manufacturing facility supports
over 200,000 employees (Apple uses less than 15% of that capacity) and has the services
you'd expect in a medium city. The campus includes factories, employee housing,
banks, a post office, a hospital, supermarkets, and a variety of recreational facilities
including soccer fields, a swimming pool, TV lounges and Internet cafes. Ten cafeterias
are also located throughout the campus offering a variety of menu choices such as
fresh vegetables, beef, seafood, rice, poultry, and stir-fry noodles. In addition,
employees have access to 13 different restaurants on campus. Employees were pleased
with the variety and quality of food offerings.
The supplier owns and leases dormitories
that are offered at no charge to employees, provided they help in cleaning common
areas to maintain the facility. Workers are not required to live in these dormitories,
although the majority do. Our team randomly selected and inspected a wide range
of dormitories (both supplier-owned on-campus and off-site leased facilities) that
collectively house over 32,000 people. Buildings are separated by gender, with female
dorms containing a private bathroom/shower for each room and male dorm rooms typically
sharing bathroom/shower facilities. The dorms have TV rooms, potable water, private
lockers, free laundry service, and public telephones. Many also have ping-pong and
snooker tables, and sitting/reading areas. All of the on-campus dorms have air conditioning.
Visitors are permitted in the dorms, although a sign-in process is used for security
purposes.
Our audit of on-site dormitories found no violations of our Code of Conduct.
We were not satisfied, however, with the living conditions of three of the off-site
leased dorms that we visited. These buildings were converted by the supplier during
a period of rapid growth and have served as interim housing. Two of the dormitories,
originally built as factories, now contain a large number of beds and lockers in
an open space, and from our perspective, felt too impersonal. The third contained
triple-bunks, which in our opinion didn't provide reasonable personal space.
To address this interim housing situation, the supplier acquired additional land and
is currently building new dormitories. These plans were in place prior to our audit,
and will increase the total living space by 46% during the next four months.
Compensation
Our investigation confirmed that all workers earn at least the local minimum wage,
and our sample audit of payroll records showed that more than half were earning
above minimum wage. Employees also have the opportunity to earn bonuses. In addition,
the supplier provides a comprehensive medical plan including free annual checkups.
We did find, however, that the pay structure was unnecessarily complex. An employee's
wage was comprised of several elements (base pay, skill bonus, attendance bonus,
housing allowance, meal allowance, overtime), making it difficult to understand
and communicate to employees. This structure effectively failed to meet our Code
of Conduct requirement that how workers are paid must be clearly conveyed. The supplier
has since implemented a simplified pay structure that meets the Code of Conduct.
We also discovered that the process for reporting overtime was manual and monthly,
and while not a violation of the Code of Conduct, it was subject to human error
and relied too much on memory for dispute resolution. To address this issue, the
supplier will link the payroll system and electronic badge system, which will automate
the recording of hours worked and pay calculations. This update will be completed
by October 1.
Overtime
We found no instances of forced overtime and employees confirmed
in interviews that they could decline overtime requests without penalty. We did,
however, find that employees worked longer hours than permitted by our Code of Conduct,
which limits normal workweeks to 60 hours and requires at least one day off each
week. We reviewed seven months of records from multiple shifts of different productions
lines and found that the weekly limit was exceeded 35% of the time and employees
worked more than six consecutive days 25% of the time. Although our Code of Conduct
allows overtime limit exceptions in unusual circumstances, we believe in the importance
of a healthy work-life balance and found these percentages to be excessive.
The supplier has enacted a policy change to enforce the weekly overtime limits set by
our Code of Conduct. The policy change has been communicated to supervisors and
employees and a management system has been implemented to track compliance with
the Code of Conduct. Supervisors must receive approval from upper level management
for any deviation.
Worker Treatment
Employees work in factories that are generally
bright, clean and modern with air-conditioned assembly line areas, and are provided
with protective gear. There's an employee grievance process in place, including
a telephone hotline, a CEO mailbox for complaints and employee suggestion boxes.
Our interviews with employees revealed areas of both satisfaction and dissatisfaction.
A majority of employees interviewed were pleased with the work environment and specifically
noted the opportunity for advancement, widespread year-end bonuses, and the reputation
of the supplier in the industry. Additionally, employees consistently mentioned
that they felt safe and secure in both the workplace and the dormitories.
Employees expressed dissatisfaction with some aspects of the workplace. The single largest
complaint (approximately 20% of interviewed workers) was the lack of overtime during
non-peak periods. The second largest complaint (less than 10%) was the transportation
schedule for employees living in off-campus dorms, which they felt was inadequate
outside of working hours. Results of the interviews have been shared with management,
and will be addressed where appropriate. For example, the transportation schedule
is being reviewed for adjustment.
During our interviews with employees, we explicitly
asked every line worker whether they had ever been subjected to or witnessed objectionable
disciplinary punishment. Two employees reported that they had been disciplined by
being made to stand at attention. While we did not find this practice to be widespread,
Apple has a zero tolerance policy for any instance, isolated or not, of any treatment
of workers that could be interpreted as harsh. The supplier has launched an aggressive
manager and employee training program to ensure such behavior does not occur in
the future.
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The Future
Recognizing that some aspects of workplace auditing (such as health and
safety) lie beyond our current expertise, we've engaged the services of Verité,
an internationally recognized leader in workplace standards dedicated to ensuring
that people around the world work under safe, fair and legal conditions. We are
committed to ensuring compliance with our Code of Conduct and will complete audits
of all final assembly suppliers of Mac and iPod products in 2006.
We recognize that
monitoring compliance is an ongoing process requiring continual progress reviews.
When violations are discovered in any supplier, we will require corrective action
plans, with a focus on prevention and systemic solutions. We will also ensure that
action plans are implemented and in cases where a supplier's efforts in this area
do not meet our expectations, their contracts will be terminated.
We are encouraged
with the actions to date in response to our audit. However, we realize that auditing
compliance is only one step in the journey toward driving change. We have also joined
the Electronic Industry Code of Conduct (EICC) Implementation Group, which has established
industry-wide standards and offers valuable resources for evaluating suppliers.
The EICC was a key benchmark when our own Code of Conduct was created and as an
industry leader, Apple will make important contributions to this group.
Apple is
committed to the highest standard of social responsibility in everything we do and
will always take necessary action accordingly. We are dedicated to ensuring that
working conditions are safe and employees are treated with respect and dignity wherever
Apple products are made.
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