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Wal-Mart’s Chinese Suppliers
Wall-Mart, the world’s largest retailer, built its rise to dominance on the mantra of “everyday low prices. ” Getting those low prices has required Wall-Mart to source many of the goods it sells from factories that pop- rate at low cost around the world. Increasingly, those factories are in less-developed nations, opening Wall- Mart to the charge that It uses “sweatshop labor” to make the goods it sells to American consumers at low prices.
Long cognizant of the fact that working council- tools In many parts of the world fall short of Western arms, Like many other corporations Wall-Mart has an ethical supplier code of conduct In place. This man- dates. Among other things, that suppliers do not employ underage labor, pay at least the legal minimum wage for that nation, do not make employees work excessive overtime, and adhere to basic safety standards. To put teeth in this code, Wall-Mart regularly audits the facto- rises of its suppliers.
In 2006, for example, 16,700 audits were conducted in 8,873 factories around the world. The audits were undertaken by Wall-Mart’s own ethical standards auditors and selected third-party firms. About 6 percent of those audits were unannounced surprise audits. The audits found that 40. 3 percent of factories had “high-risk” violations. These factories were rear- edited after 120 days to make sure they had corrected any violations. If a factory is found to have four high- risk violations in a two-year period, it is banned from producing goods for Wall-Mart for one year.
In 2006 2. 1 percent of all factories audited fell into this category. Another 0. 2 percent of factories were permanently barred from producing goods for Wall-Mart, presumably because they had failed to correct past violations that De them to being banned for a year. Wall-Mart’s auditing scheme seems comprehensive, but critics charge that the audits are not always as such- successful In detecting workplace violations as the com- panty would like to believe.
Consider the case of Tang Holding, the manager of a Chinese factory that sup- plies pens, mechanical pencils, and highlighters to Wall-Mart. In 2005, Tang learned that Wall-Mart was had three high-risk violations. Auditors had found that the factory paid its 3,000 employees less than the legal minimum wage in the province and violated overtime rules. A fourth would mean that the relationship with Wall-Mart would end.
So Tang hired a Shanghai con- silting company, which for $5,000 promised that the factory would get past the audit. The company pro- vided Tang with advice on how to create fake but AU- ethnic looking records, and suggested that Tang hustle any workers with grievances out of the factory on the day of the audit. The consulting company also coached Tang on what questions to expect from the auditors and how to answer. Tang followed this advice, and the factory passed the audit, even though it changed none of its practices.