On July 16, 2009, a 25-year-old Foxconn employee named Sun Danyong committed suicide by jumping from the twelfth floor of his apartment building. Mr. Sun, who worked at an electronics factory in Shenzen, had been put in charge of a prototype of a new Apple iPhone that went missing. Mr. Sun’s death has sparked outrage about labor conditions at China’s factories and at the Western companies that source from them.
Foxconn manufactures electronics for some of the world’s largest companies, including Sony, Hewlett-Packard, and Apple. When the prototype iPhone went missing, Foxconn allegedly accused Mr. Sun of theft and initiated an investigation. On the day before his death, Mr. Sun told friends he had been beaten and humiliated by factory security guards. Mr. Sun’s suicide has brought about an outpouring of further complaints against Foxconn, including unpaid overtime and a militant management regime.
However, it is not only Foxconn that has taken the blame for the suicide and the conditions that led to it. The Western giants that source from Foxconn—Apple, in particular—have received criticism for their “cultures of secrecy,” which many believe encourage militant management at their factories. These companies’ intense efforts to protect their trade secrets at sourcing factories in China point to another difficulty with sourcing from China: intellectual property rights violations. Popular brands like Apple are counterfeited heavily in China, and prototype theft is a real and widespread problem.
Foreign companies that source from China must therefore walk a very fine line between protecting their intellectual property and ensuring reasonable working conditions that comply with international and local standards. Management that is too lenient subjects a company to theft and counterfeit, but an overly militant managerial regime may lead to inhumane working conditions and potentially even to tragedies like the suicide of Mr. Sun.
1. Was Mr. Sun’s reaction to the accusation of theft something that only might be expected in China? (10%) 2. Is theft of intellectual property a problem everywhere? Why or why not? Does every culture view the importance of intellectual property in the same way? (20%) 3. Why is theft of intellectual property such a concern in foreign sub-contractors? What can be done to control it? (20%)
II. Works Councils and “Inform and Consult” In the EU: HP Acquires Compaq (EU/US, 2002)
The merger of Hewlett-Packard and Compaq in May 2002 triggered extensive consultation with workers in Europe. Under EU requirements, such corporate mergers require companies with 1,000 or more employees in the EU, with at least 150 of those in each of two or more member states, to consult with their employee representatives (through their works councils) on any business decisions contemplated as a result of the merger, such as redundancies, restructuring, and changed work arrangements (all of which were triggered by this merger).
Because of that experience, HP took the initiative under the new EU Inform and Consult Directive (and the pending—at that time—UK enabling legislation) to become the first US firm to announce an “Inform and Consult” framework which was approved by its workforce. At quarterly meetings, HP’s management consulted with and informed their employee representatives on matters such as HP UK business strategies, financial and operational performance, investment plans, organizational changes, and critical employment decisions, such as layoffs, outsourcing, workforce agreements, and health and safety.
Key UK HP managers plus HP employee representatives elected to the HP consultative forum from each of the four UK business units met on a quarterly basis. Wally Russell, who was HP’s European employee relations director at that time, said, “My own preference is that we be the master of our own destiny. So let’s work together now to [develop] a model that suits HP’s culture.”
1. What do the EU directives on works councils and “Inform and Consult” require in a situation like this? To whom do these directives apply? (25%) 2. What is it about European culture that has led to the development and implementation of these sorts of practices and policies? Why haven’t they developed in countries like the US? (25%)
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