In January 2002, China Labor Watch2 published a report on working conditions in six factories in China These factories manufactured footwear products for the US-based Reebok International Limited (Reebok), one of the leading footwear and apparel companies in the world. The report highlighted the poor working conditions in these factories. A similar report had been published in 1997 by two Hong Kong based non-profit organizations, which had accused Reebok’s sub-contractors3 of violating some of the provisions of Chinese labor laws in footwear factories in China.
With over a hundred years of operations in the footwear industry, a large workforce (estimated to be over 75,000 in 2002), and operations in over 170 countries across the world, Reebok’s dominance in the global footwear industry was unquestionable However, with the focus of the international community drifting to human rights issues in Chinese footwear and apparel factories, Reebok joined the ranks of those companies that were accused of not paying sufficient attention to human rights issues.
Reebok had taken several measures to prevent human rights violations in its Asian footwear manufacturing operations (Refer Exhibit I). It had established an exclusive human rights department (HRD) in 1998 to address human rights issues in its operations across the globe, and it had also instituted a Code of Conduct, also known as Reebok’s Human Rights Production standards (Refer Exhibit II), to regulate working conditions in the factories of its sub-contractors.
However, in spite of the measures taken by the company, it had to face several allegations regarding the violation of labor laws in its Chinese operations. Analysts felt that the efforts made by the company were not adequate, and that the company needed to be more committed to the protection of human rights to enhance its image as a socially responsible company Background Note In 1885, Joseph William Foster (Foster), a famous athlete in the English Running Club (Bolton, UK) made spiked running shoes in his garden shed. In the early 1890s, he set up a company called “JW Foster & Sons, Inc. ” to make hand made spike shoes.
Foster believed that due to their superior quality, such shoes could help athletes improve their performance in long distance track events. By 1900, the company developed a clientele of internationally reputed athletes. In 1933, Foster expired and the company was renamed “The Olympic Works. ” In the 1950s, Foster’s grandsons – Jeff and Joe – started a new company called Reebok Sports Limited. 4 In the 1960s and 1970s, as Reebok’s business expanded, the company established its distribution outlets in several countries all over the world.
In the 1970s, the company was renamed Reebok International Limited. By 1981, the company’s sales touched $1. 5 million. In 1982, Reebok launched ‘Freestyle,’ an athletic shoe for women, pioneering the concept of sports gear for aerobics In the same year, the company also launched its first tennis and fitness shoe for men. In 1984, Reebok got its shares listed on the New York Stock Exchange. Reebok’s name was first heard in connection with human rights issues when, in 1986, it withdrew its operations from the Republic of South Africa (RSA) to protest against apartheid. In 1988, Reebok’s HRD was established to address human rights issues in the company’s operations across the world.
The company also instituted an annual Reebok Human Rights Awards to recognize and reward the contributions of young people (below the age of 30) across the world who made efforts to prevent human rights violations in their countries. In the same year, Reebok also asked its sub-contractors in China to certify that they did not employ child labor in their factories… Excerpts Reebok’s Problems in China
Multinational shoe companies (MNSCs) entered the Peoples’ Republic of China (PRC) in the mid-1980s, following the liberalization of the Chinese economy in 1984. Due to large scale unemployment in China, the workers were ready to work for low wages, thus resulting in low wage-related expenditures for MNSCs. Moreover, labor laws were not strictly implemented by local governments within the PRC, which competed with each other to attract foreign investment, especially in labor-intensive industries such as shoe manufacturing.
Like most of its competitors, Reebok entered the Chinese market through the contract manufacturing route, i. e. , through sub-contractors. By doing so, the company could absolve itself of responsibilities relating to footwear production, while at the same time take advantage of low production costs to earn higher margins. The company could also bargain with sub-contractors to fix production deadlines and manufacturing price. By the end of 1996, China accounted for nearly 35% of Reebok’s worldwide footwear production…
Reebok’s Response In response to the increasing allegations of human rights violations in China, Reebok took few steps to assess and improve the working conditions in its manufacturing facilities In May 1999, Reebok, along with Mattel and Levi Strauss (which had large operational interests in China), teamed up with 21 human rights, fair trade and social investment groups to endorse a set of principles (Refer Exhibit V) for corporations doing business in China.
Through these measures, Reebok attempted to address issues such as the use of forced labor, child labor, inadequate wages, long working hours, and physical or other kinds of abuse of employees. This was one of the first major initiatives taken by leading US business corporations in China to address human rights issues… The Ineffective Measures Though Reebok improved working conditions in its Chinese and other Asian factories, analysts felt that a lot still remained to be done.
Reports continued to be published regularly about poor working conditions in Reebok’s footwear operations in China. In January 2002, the China Labor Watch published a report after investigating working conditions (between June 2001 and January 2002) in six Reebok shoe factories in China. The report concluded that the steps taken by Reebok to improve working conditions and prevent human rights abuse were not sufficient… | The Efforts
Even though doubts were raised about the efficacy of Reebok’s measures for preventing the violation of human rights, the company continued with its efforts to improve working conditions at the Chinese factories. In August 2002, Reebok took measures to reduce overtime working hours in these factories to 36 hours per month. In November 2002, elections were conducted in one Reebok’s Taiwanese owned Fuh Luh footwear factory in the Fujian province of China. Reebok had to negotiate with the factory management and the ACFTU for several months to develop a framework for the conduct of the elections. |