The National Labor Committee released a report called "China's Youth Meet Microsoft [MSFT]: KYE factory in China produces for Microsoft and other U.S. Companies" on Apr. 13. It accuses KYE (photo, right), a major supplier to the world's largest software company, of child-labor law violations in its factory in Dongguan, China.
The report says: "KYE recruits hundreds (up to 1,000) 'work-study' students 16 and 17 years of age, who work 15-hour shifts, six and seven days a week making webcams, mice and other computer peripherals. Some of the workers appear to be just 14 or 15 years old. A typical shift is from 7:45 a.m. to 10:55 p.m. Most of the students work for three months, but some stay longer." The investigation was conducted over a three-year period.
Codes of Conduct: "Zero Impact"
Charles Kernaghan, executive director of the organization and author of the report, says of his group's findings: "It sounded like torture. The frantic pace on the assembly line, same motion over and over for the 12 hours or more of work they did."
The report adds: "As usual, the codes of conduct for Microsoft, HP [HPQ] and the Electronics Industry Council have zero impact." The report makes a number of other allegations about work conditions in the facility.
According to The Seattle Times, Microsoft responded to the report in a statement: "We take these claims seriously, and we will take appropriate remedial measures in regard to any findings of vendor misconduct."
Claims of employee abuse at suppliers are not new for American companies. Nike (NKE) has confessed that it "blew it", using child labor in Pakistan. More recently, in February, Apple (AAPL) admitted that it discovered child laborers were employed in factories used to build its iPods and Macs.
No matter what standards U.S. companies put in place to prevent suppliers using child labor in developing countries, the problem will persist. It's impossible for companies, even those as large as Microsoft and Apple, to consistently monitor labor practices across thousand of factories over which they ultimately have no direct control.
American companies' only real option is to cut off ties to suppliers that violate codes of conduct. Controlling the problem beyond that has proved to be an insurmountable task.
Why do investors make the decisions that they do?View Course »