Transcript: 'Nightline's' Bill Weir's Interview with FLA Head Auret van Heerden on Foxconn Audit

March 29, 2012— -- The following is a transcript of "Nightline" anchor Bill Weir's network exclusive interview with Auret van Heerden, the president and CEO of the Fair Labor Association, regarding the FLA's audit of Foxconn, one of Apple's largest suppliers.

"Nightline" anchor Bill Weir: Good to see you again, several weeks later, 4,000 miles away. So how would you characterize what you found at Foxconn?

Fair Labor Association President and CEO Auret van Heerden: We found over 50 findings. Findings are either a violation of the law or the code, or just a gap in the management system, which could-- which represents a risk, which could lead to a non-compliance in future. Pretty much par for the course, I would say, for factories in China. The hours of work issues that we found, for example, working more than 60 hours a week and working more than the Chinese legal limit on overtime. It's a common finding we have in Chinese factories.

Weir: As Americans understand the term, would you define Foxconn as "a sweatshop"?

Van Heerden: No. I think we have to be absolutely clear about that. It's a-- it's a very modern facility. And the issue is not... by stereotyping it we do ourselves absolutely no service at all. In fact we mislead ourselves. So the important thing for us was to look at it as it is, put aside all those stereotypes that we had, and start to peel the onion, actually really find-- look at what we have in front of us and hold it up to the cold light of day, and as I said.

Weir: So what are the most egregious violations being made there?

Van Heerden: Overtime. Overtime. And in some instances, overtime for interns. That's the key issue to address. Secondly the exclusion of workers from-- or the failure to integrate workers into all of the committee processes. So the health and safety committees, the union committees, workers are not participating in the elections, they're not represented on the committees, and so their voice isn't coming through and one of our most important recommendation is include workers.

Weir: Did you find any evidence of child labor?

Van Heerden: We did not.

Weir: None.

Van Heerden: No child labor. No forced labor.

Weir: A considerable number of the workers you found were concerned about their health and safety. Speak to that. What was the main concern? How frightened are these people about their own health and safety?

Van Heerden: It's very interesting perception that and we probed it quite carefully. Foxconn has got all the systems in place to take care of safety and health at work. They got the policies, the procedures, the staff are trained. We checked whether they're taking the right measurements. We checked whether the instruments are calibrated correctly. So that the hardware, if you like, of their health and safety system is in place. And they've strengthened it, they've improved it since the accidents that they had last year. It's the software that's missing. That message is not getting through to workers. They don't appreciate it. They're not aware of it. They're not involved the in decision making, not involved in the monitoring of those health and safety conditions. So there's a perception gap there. And it's very important to close that.

Weir: Right, but you do say more than 43 percent of the workers reported they have experienced or witnessed an accident. What does that say about their safety?

Van Heerden: That's true, but it's a very wide range of accidents and injuries which they witnessed. It ranged from a box falling on someone's foot through to traffic accidents, which they saw outside of the-- the building. It was a wide spectrum. And we don't-- we haven't calculated that as a rate. We're not presenting that as an accident statistic, as such. We just wanted to get a feeling from them about how they're feeling and if they're feeling insecure, why. So this is really more of an attempt to identify areas of discontent or concern which need to be addressed.

Weir: Did you see evidence-- I mean we've heard horror stories about mangled limbs and people's hands shaking from chemical poisoning and so forth, did you see any of that?

Van Heerden: We did not. We found some work stations where chemicals needed to be labeled more accurately, where the material safety data sheets needed to be more complete, and we've made a number of recommendations for ways in which the handling of health and safety can be strengthen, but no, we did not find those cases that we feared we might find.

Weir: Pay. Everybody we talked to said they wished they wished they made more money. That's a universal sentiment, I imagine, but what about there. Is it fair, what these folks are making?

Van Heerden: Very interesting question. They're paid about 20 percent above the minimum wage, the legal minimum wage. We asked them if they feel it is fair and the majority of them said yes, they thought it was fair. But they also felt it wasn't enough to meet their basic needs. So they have aspirations, they have concerns in the their lives, which they feel they need more money. We asked them more about that. One of the issues was education. They said they felt they needed more for education. And we thought about that. These are young workers, mostly single, they haven't had children yet, so they're probably talking about the education of a sibling. And this is where one of those cultural factors come into play, where these young workers are often coming to work to help their entire family, their parents, their grandparents, their brothers and sisters, and so they're looking at their wage and their basic needs in that extended family sense.

Weir: Right, right, I think a lot of people will hear you said, "this is not a sweatshop," they still want to know how we should feel about how these beloved products are being made.

Van Heerden: Yeah.

Weir: Can you put it in terms relative to the United States? How do these factory conditions compare to those in the U.S.?

Van Heerden: I would say they're very, very similar to any capital-intensive production process. And the production lines resemble those of any electronics factories in Malaysia, in Philippines, in Singapore, all over the world. And it's-- they're all the same. This is comparable. The production process itself places certain demands on the way you organize work. You saw it's a high-tech facility. Many of the rooms are clean rooms. And there's-- there's a level of sophistication which comes with the product. And that would be the same in the U.S. in Brazil, in Malaysia, in China.

Weir: So you think-- so are you saying essentially Foxconn workers face the same sort of daily grind that American workers would? They make a lot less money, but it's the same sorts of sets of problems?

Van Heerden: That production work on an iPhone, or any telephone, would be comparable to anywhere in the world. The difference there, of course, is the local labor market context. The Chinese rules on trade union organization, for example, are different. You don't have plurality of trade unions. Very big difference between them and the West.

Weir: Yeah, they can't organize the way you would here.

Van Heerden: Exactly. They-- you've got a very high percentage of migrant workers. Their social security benefits are not that transportable, so they have some issues with, will they be able to claim pension and any prominent insurance when they go back home, so there are particularities in that labor market, which you wouldn't have obstacles, which you wouldn't face in the U.S., but the work, as such, I would say, electronics factories, all maintain pretty much the same standards.

Weir: Regardless of what country they're in.

Van Heerden: Exactly. Because of the nature of the product.

Weir: Right, so overtime. If overtime is your main concern, how is that-- how are these folks being taken advantage of when it comes to overtime?

Van Heerden:To extend your question about how it compares, you can work overtime in the U.S., there's no cap on overtime in the United States, so in fact the laws on overtime are more generous in the U.S. then they are in China. Considerably more generous. The question is, are people doing it voluntarily. Do they have a say. If they refuse overtime, are they going to face any kind of incrimination. If they did, can they complain. How effective is the grievance mechanism. So those are the aspects, which we are looking at, and where we really want them to really improve, to raise the game.

Weir: So, how does that happen for forced overtime? You think your shift is ending, the boss says, 'hold on, you're going to spend the night here,' how does that go?

Van Heerden: Right. Overtime needs to be scheduled. And we're helping them to tighten up the rules on that. But let's say two hours into the shift you're told you have to spend another two hours, and you've got some commitments that evening, you want to go home, you've got to feel free to make that call. And that's what-- those are the kinds of issues we probed.

Weir: And most people you talked to don't have that, don't feel that sense of freedom.

Van Heerden: Right. They didn't. So, we've said, OK, we've got to clarify this. We've got to make sure people can opt out and if they do feel that they've suffered any kind of incriminations as a result, that they can complain, and that complaint will be handled fairly.

Weir: What sort of promises did Foxconn make to address all of this?

Van Heerden: So the most important two, I would say, are that they have agreed to go to Chinese legal limits on overtime. That's a very strict limit of 49 hours a week. Nobody else has made that commitment perfectly. So that's really a precedent-setting commitment.

Weir: And right now they're working how many hours?

Van Heerden: Foxconn is working 60, I would say most of the industries beyond that, so they would cut working hours by 20 percent. And they-- of course if you worked less, you earn less, and workers are not going to put up with cutting pay. So they've got to come up with a package, where they ratchet down the hours but they don't ratchet down the pay. So that's a real challenge for them. But that's the commitment that they've made. And we've-- they're spitting it out in a detailed action plan and we'll monitor the implementation of that plan.

The second commitment, again is very, very important, is that they've acknowledged that workers' voice is not coming through. Workers are not participating in various structures, the committees, the union structures, which are open to them. And right now those structures are predominantly, made up, comprised of people drawn from the ranks of management. And that's not right. And so they'll need hard work of participation in those elections and in those committees so that their voice comes through and that they participate. Foxconn is committed to including them in decision-making.

If they can do this, I think it raises the bar quite dramatically for the whole sector, because if you think about it, if Foxconn's improved its offer, work less for the same money, that becomes an attraction to workers from, what is right now, a very tight labor market. It's a shortage, in Shenzhen. So they will attract workers away from other factories, who will then have to match these terms. And so we've sort of set off a race to the top, rather than the race to the bottom we've had today.

Weir: But they also made a commitment, in order to keep up with the demand, they're going to have to build entire new lines.

Van Heerden: Yeah.

Weir: And dormitories and canteens.

Van Heerden: Yeah.

Weir: That's a huge cost. How do you know they're going to do this?

Van Heerden: They-- so we've discussed all of that. That's built into the plan. And there's two reasons I know they'll do this. One is that we will monitor it and verify it, and report it publicly, and secondly, they've made this commitment publicly now. And you guys, and the consumers, they external stakeholders are all going to watch to see if they actually deliver. And I think its such a high profile, and major, commitment, that there's no way they won't deliver on it.

Weir: OK, and I think everybody who owns an iPad wants to believe that this was made humanely

Van Heerden: Exactly.

Weir: And now we seem to have a promise that it will be, but who pays that price? Is Apple going to eat that cost? Is it going on to the customer?

Van Heerden: It's a very important point. Social responsibility has a cost. We're asking factories to make significant investments to produce a more ethical product. We've all got to be ready to share that cost.

Weir: So you think it will ultimately go down to the customer.

Van Heerden: I can't predict how it will be spread, you know, obviously Foxconn will absorb some, the buyers, because it's not just Apple, it's all the other electronics companies as well who have to absorb some of this and I think we need to be ready to put our money where our mouths are.

Weir: Is-- when there is such incredible, sensational demand, when there's a new iPad that hits the market, do you believe that until they ramp up, until they build new lines, under these guidelines, that they could still fill that demand at the current rate or basically are we going to see a-- the supply stream compressed while they make these adjustments?

Van Heerden: I've no doubt that they've made those calculations. They know exactly how, at what rate, they need to ramp up the capacity in order to insure that the reduction of hours doesn't lead to any bottlenecks.

Weir: What about all of Foxconn's other partners? Apple is just one. Every major electronic brand in the world does business with them, will they be held to the same standards? Or is this an Apple-specific idea?

Van Heerden: No, Foxconn will-- certainly its an Apple/Foxconn commitment right now, but Foxconn will implement this across all of their lines. They have to, otherwise the workers in the other buildings next door, as soon as they heard about the deal the Apple workers have, all would want to come across, or would start protesting to get the same, so they will definitely do this company-wide.

But you raise a very important point then because the Nokia factory down the road, which was written about recently in the Bloomberg piece, is going to have to-- to now align itself to these terms and conditions or they will lose half their workers.

Weir: I just have one more question, please. There are critics of your methodology who say you didn't talk to enough people off campus.

Van Heerden: Right.

Weir: That you have partners on your board, corporate partners, Apple, Nike-- what do you say to them?

Van Heerden: Two things. One is that if you look at what the workers told us in the survey, they reported noncompliance, they reported legal violations, they told us they worked 11 days straight on occasion, so they weren't holding back in the testimony that they gave. And they knew they could give us that because it was anonymous. And they trusted to that process so I'm confident that they were candid in their responses to the questionnaire.

But the second thing I would say to the critics, is just wait for the report. Go to the report. Have a look at it. And have a look at the 50-odd findings that we have, and ask yourself, does this look like some company was able to suppress information. I think the facts will speak for themselves.

Weir: Ok, thanks.