Published in CommPro.biz 2013.04.30

A Better People

 

OK! We get it. We understand that manufacturing economics too often makes outsourcing the creation of goods a necessity, especially when a major hand assembly component is involved. And when horrific calamities strike in faraway places, such as the building collapse last week (2013.04.24) in Savar, a suburb of Dhaka, the capital of Bangladesh, the American companies whose goods come from these factories wring their hands and say they are doing everything they can. That is simply untrue.  There is an alternative.

A low wage outsourcing model that works indefinitely better. It’s better for the workers and still allows the production of goods at competitive price levels. Born in the mid-1960s – 30 years before NAFTA – the Maquiladoro concept continues to be a cost-effective outsourcing alternative for American manufacturers. This concept flourishes along the US border with Mexico. American companies build factories in Mexican free trade zones. The workers and most managers are Mexican nationals, but the working conditions and standards are firmly in the hands of the American owners.

That’s very different from the 5,000 +/- factories in Bangladesh. Their owners, Bangladesh nationals, are driven by nothing but cost. The disaster that saw an eight-story building collapse in a pile of rubble came one day after cracks in the building made it apparent that it was unsafe. The owners were told to close it, an order they simply ignored. This calamity that took hundreds of lives cannot be ignored by the brands that used this facility and others like it.

It’s not enough for these brands to promise to put pressure on the factory owners. It’s time for them to build their own factories in countries where labor costs are favorable. It’s time for the major global clothing companies, Walmart, Gap, Sears, Tommy Hilfiger and all the rest, to act. They owe it to the more than three million workers in Bangladesh that sew their goods for minimum wage, under $40.00 a month. It’s not enough for Apple to say that FoxConn, a manufacturer in China, is making improvements. Apple could buy out FoxConn and make things right for the workers in those factories. Americans can afford the tiny bump up in prices that these ethical moves would bring.

The Maquiladoro concept works. For half a century most Maquiladoro workers have had clean, safe working conditions. Many have access to free healthcare on site, to nutritious meals at reasonable cost, to simple things like showers that we take for granted. While their wages are low by American standards, they make what is a living wage in their society, and we benefit from the cost of the goods they produce. Ethically, how can we accept anything less in the creation of what we wear on our backs and carry in our pockets? We have been blessed with much. How can we see those who make these goods suffer, even die to save us pennies? We are a better people than that.

My 2012 Top Ten 

Business Ethics Milestones

This year as every year almost everyone and almost every business strives and succeeds to maintain the highest ethical standards. It’s our nature and we know that our most precious asset is our reputation. After all, who wants to do business with a crook? It is, however, a struggle; and it’s too easy to take that first little step over the line onto the slippery slope. Of course there are those who seem ethically challenged. They spend a lot of time and treasure scheming and even more trying to cover their tracks. Ultimately they end up at the bottom of the slope, way past ethics into criminal territory. Most of this year’s milestones fall into the latter category, but there are some outstanding rays of sunshine.

#10 Let’s start out with some good news. A nationwide research study by Satmetrix, a West Coast provider of customer experience software, measured the attitudes of 30,000 consumers. Their findings reinforce the ethical business model’s value. It’s no surprise that companies boasting a long history of ethical standards top the list. Wegmans, Costco, Apple, Jet Blue, American Express, Virgin America, Amazon, Lowes, Google, all the usual suspects lead when it comes to doing the right thing. And guess what? They are leaders when you check their bottom line.

#9 There’s no such glow when you look at a few of our wealthiest Americans and biggest financial institutions; you get more of a Greasy Sleazy Feeling. They think nothing of turning our commodity markets into gambling halls, manipulating the price of food and fuel. Markets designed to support commodity producers have become a playpen for those with more money than morals. There’s a cure: limit commodity purchases to end users. Good for producers, good for end users, good for consumers, good for America.

#8 The ethical cesspool at the center of the media colossus Rupert Murdoch spawned on London’s Fleet Street, is beginning to suck him into its vortex. Unfortunately, it’s spread beyond his native Australia and Great Britain; it has spilled onto our shores. Murdoch became an American citizen so he could legally own broadcast properties here. He bought a couple smarmy newspapers like his British rags. He has also taken over and is twisting the once the once well-regarded Wall Street Journal. His big bucks come from broadcast holdings; satellite operations in Asia and Great Britain, cable outlets here. And then there’s his production arm producing television programs and motion pictures. Murdoch lunged over a line that most media tend to avoid, plunging into politics, even attempting to pick out his own presidential candidate. That kind of activity is common in Great Britain, not so much on this side of the pond. It’s especially disturbing when practiced by Scum-Lord Rupert Murdoch.

#7 Big Pharma's Big Con. The real cost of bringing a new drug to market averages $90 million a pop; a lot of money but a fraction of the$1.3 billion dollars they claim. Unless of course you include marketing, that’s where the big bucks go: flooding doctors’ offices with materials and samples, even hiring them to pitch other docs on the newest, latest, slightly updated drug. Add in the avalanche of print and television advertising urging patients to pressure their doc. It all adds up to sky high drug prices. Prices protected by a law prohibiting the government from negotiating lower prices– all courtesy of Big Pharma’s friends in the Congress. It’s enough to make you sick.

# 6 When the lobbyists pushed through “The Commodity Futures Modernization Act” opening up Wall Street to gambling, they unleashed a chain of events that resulted in the collapse of the world economy eight years later. Wall Street began leaping one ethical barrier after another and today everyone but the bankers is suffering. Dodd-Frank is designed to rein in some of the worst of this. The bankers are fighting these sensible controls. Our economic future depends on how it works out.

#5 Foxconn, a Taiwanese company with operations in China and around the world, makes many of the electronic toys that fill our lives. A British newspaper report described the life of a 21-year-old woman working ninety hours a week for less than fifty dollars a month. They calculated that allowing for inflation that fifty bucks comes to, “about half the wage weavers earned in Liverpool and Manchester in 1805.” Ponder that ethical issue the next time you finger the electronic toys in your pocket.

#4 Little did we know that the HSBC slogan, “Bank as easily around the world as you do at home” was to be taken literally. That this British “too-big-to-fail” bank was laundering cash for Mexican Drug Lords, hiding funds from the IRS in far off India for wealthy Americans, providing US currency to a Middle Eastern bank said to be a source of terrorist funding, and generally thumbing their nose at American laws and regulators. The bank has been hit with a record $1.9 billion fine in the US. The $27.5 million Mexico hit them with last summer along with the legal fees they have run up brings the total over $2 billion. That sounds like a lot of cash until you compare it to their 2011 profit, nearly $17 billion, or to a bonus pool of more than $4 billion that the HSBC executives split up. And surprise, it looks like none of those big-wigs are facing jail. The $2 billion amounts to pocket change for HSBC, just another minor cost of doing business.

#3 “Income Inequality” is a really big deal in the minds of Americans. A Pew study found it to be our greatest source of tension. Two thirds of the respondents see the divide between the super rich and those on down the food chain as our major concern. Reinforcing that view, in a Bloomberg Global Poll more than 1,200 investors, analysts and traders say it harms the economy and harms growth. Why is nobody willing to do anything about it?

#2 How can we turn our backs on sexual abuse? The Church, College Athletics, The Boy Scouts, who knows where it will be found next? The abuse of our children by institutions we trust is horrific, to cover it up is unforgivable.

#1 The Gift of Life - 4,800 people died last year waiting for a kidney. There were nearly 100,000 waiting for one a few months ago. The numbers are similar across organ donation programs. How could that happen? Consider that the latest available annual highway death toll (2010) totaled 32,885 individuals, a tragic number. But most with healthy organs, it’s disgraceful that so few remember that should something fatal befall us, our organs could help others live. Every business, everywhere we gather, organ donation should be a primary focus. We can think of no higher moral and ethical goal than assuring that if we give up our lives, we give life to others.

The Worm In That Apple

A thorny aspect of business ethics emerges when we examine the outsourcing of work by American companies. Earlier this month (01.21.12) an in-depth piece in The New York Times examined the subject especially as it applies to electronics manufacturing. Apple was the centerpiece of the well-researched and balanced story. 

Reaching back a year into early 2011 they reported on a dinner the Silicone Valley élite hosted for President Obama. Each of the top tier executives was asked to bring one question for the President to answer. However, he had a question for Apple icon Steve Jobs: “What would it take to make iPhones in the United States? Why can’t that work come home?” President Obama asked. Jobs’ response was short and to the point: “Those jobs aren’t coming back.”

Surprisingly, the answer has less to do with the cost of labor in China where the iPhone is made and more to do with the availability of workers from those on the assembly lines to engineers who are trained and ready to go to work. China has huge industrial complexes with the technology and personnel available on short notice and that usually makes the difference. 

One company dominates this field. Foxconn Technology has dozens of facilities in Asia, Europe, even North and South America. Close to half of the electronics that fill our lives pour out of their factories. You name it, from Amazon to Apple, from Nintendo to Nokia, from Samsung to Sony and almost any other brand name in that game, Foxconn makes it.

One of their complexes in southern China, Foxconn City, is a picture of efficiency and productivity. Nearly a quarter million workers are at its command. Many live in Spartan barracks next to the factories, on call at a few moments’ notice. That’s where the picture becomes a lot less attractive. The workers, most of them young women, often feel trapped in an endless chain of 12-to 15-hour days.

A 2006 story in The London Daily Mail and other more recent sources detail the despair that leads to a high rate of suicide among these workers. A problem that Foxconn deals with by stretching nets between their housing units to prevent the workers from leaping to their death off the roofs of their barracks. The Daily Mail cites a 21-year-old from central China, a worker on an Apple assembly line whose 90-hour weeks paid her less than fifty bucks a month. The Daily Mail points out that allowing for inflation that comes to, “about half the wage weavers earned in Liverpool and Manchester in 1805.”

Ethically where does that leave Apple and all the rest of the big guys who turn to Foxconn and the host of suppliers surrounding its facilities, most with appalling working conditions by our standards? Should we blame Apple? Maybe we should look at those who demand nifty gadgets at unrealistically low prices. Maybe we should look in the mirror. Ponder that ethical enigma the next time you finger the toys in your pockets.