For Apple to Make a More Ethical iPhone, Garment Industry Offers a Fitting Example

In the world of global manufacturing, it seems that multinational corporations are destined to take their turn in the sweatshop spotlight. Apple’s turn, merely the latest, has taken an unusual twist.

Chief executive Tim Cook, on a trip to China last week, visited a Foxconn factory and released photos of grinning workers on the iPhone production line. Cook’s trip came after months of investigations, centered on Foxconn, of Apple’s alleged sweatshop conditions. As the story gained momentum — in part because of a theatrical performance by a man named Mike Daisey, who has since apologized for fabricating much of his narrative — Apple hired a third-party monitoring group, the Fair Labor Association, to audit working conditions at its factories. The FLA issued a report last Thursday citing widespread overtime abuses and subsistence pay at Foxconn, and the manufacturer and Apple pledged to do better.

Apple and Foxconn appear to be on the right track. But independent monitoring and critical reports on factory standards have failed to make real change before. It is a promise to do better by an organization that isn’t really beholden to anyone. Monitoring, which may offer wary consumers a balm, used to be the best that international manufacturers had. That is no longer the case, and Apple — long a leader in the tech world — now has both an opportunity and a responsibility to prove itself a leader in the world of ethical working conditions. The company need only look as far as the garment industry for an example.

Global manufacturing — from computers and electronic devices to cars and garments — has been a target of anti-sweatshop activists for years. In 1996, Kathie Lee Gifford’s teary apology after activists discovered Honduran sweatshops making her line of clothing for Wal-Mart helped spearhead the anti-sweatshop movement. Lawsuits against Gap, Levi Strauss, Target, J.C. Penney and other retailers also helped raise awareness. In the mid- to late 1990s, protests erupted on college campuses, and groups such as No Sweat Apparel and Behind the Label were born.

The industry’s response was for the brands to begin monitoring their own factories. Beyond the obvious conflict of interest that arises when a corporation polices itself, there are other issues at play. Factories often have contracts with many companies, all of which now have their own codes of conduct — some more enforced than others. Take overtime, for example. If Gap allows up to 20 hours a week of overtime, but the local government allows only 10 — as was the case several years ago in Shenzhen, China — whose mandate should be followed? If the local minimum age for workers is 15, but one brand requires workers to be 16 and another brand 18, whose law prevails?

And companies soon realized that they could not effectively monitor their factories alone. Enter the third-party auditors, including Apple’s new partner, the FLA. I’ve seen many auditors, including Social Accountability International and Verite, do very good work, even in China. But, hypothetically speaking, if a factory makes garments for Gap and Gap contracts with Verite, and that same factory also makes garments for Eileen Fisher and Eileen Fisher contracts with Social Accountability International, the factory will be ensnared in a constant tug of war among these various international players.

What we have is an industry where factories are monitored incessantly; where the quality and efficacy of monitoring varies wildly; where local laws, if they exist, are often ignored in favor of international buyers; and where factories pay enormous sums to a variety of monitoring groups just to be in the international game.

Monitoring, when done effectively, takes a lot of time, from two days to a week. It’s not simply a matter of walking around a factory checking ventilation systems, light bulbs and fire exits; it’s painstakingly comparing export records with buyers’ contracts and calendars (to make sure that work is not happening on a Sunday, say).

On top of that, third-party monitoring is very expensive. The International Labor Organization puts the cost at $1,500 to $3,000 per audit, and many factories are audited five or six times in one month, though the frequency varies greatly.

Underage employees are often weeded out by auditors simply walking around attempting to spot young-looking workers — most often girls — or thumbing through employee records. I interviewed dozens of workers in the course of writing a book about the global manufacturing industry, and every one told me that she would help hide underage co-workers if need be, because the families of these girls must be in dire straits to send their daughters to work.

There is, though, a better way. Cambodia has proved it. In the late 1990s, the country negotiated a deal with the Clinton administration that linked good factory conditions to increased access to the US market. Cambodia brought in the ILO to oversee factory monitoring and create unions, among other things, and in less than a decade, garments became the country’s primary export — more than 95 percent of all goods exported, in fact. Eventually, the ILO turned over administration of the program to local authorities. And while there were factories that fell out of compliance, and mistakes were made, by and large it was a successful experiment.

Today, federal law guarantees the garment workers of Cambodia breast-feeding breaks, 43 paid vacation days annually, medical clinics on site and 90-day paid maternity leave, among other things. The program, called Better Factories Cambodia, has become a model for many other countries.

That program, now called Better Work, is used in Haiti, Lesotho, Jordan, Nicaragua, Indonesia and Vietnam. It is a partnership among the ILO, the World Bank’s International Finance Corporation, international brands, local factories, local governments and nongovernmental organizations. It costs $7 million to $10 million over the course of five years to establish the program — though in a country the size of China, it would be much more. Half the money so far has come from development grants, and the other half from fees shared by factories, international buyers, unions and local governments.

While this might sound like a lot of money, it is far more economical than the ad hoc system of third-party monitoring. The ILO estimates that Better Work will ultimately cost just $2,000 per factory annually.

The program also streamlines many of the economic, cultural and political issues surrounding international brands and third-party auditors working in foreign arenas. “Factories don’t live in isolation,” one ILO official told me several years ago. “They live in the context of laws and the country. Say your factory is great, but outside the factory there’s no rule of law. It creates fear in the community. All of us are realizing we have to have a way to move forward at the enterprise level, but it’s got to be broader than that. You’ve got to build the nations’ ability to run good labor standards and industrial relations.”

Apple, admittedly, is in a tight spot. China does not allow formal labor unions (apart from the government’s own union), and labor laws are generally set by prefecture rather than at the federal level. Allowable overtime, for example, might differ from one area to another. To get around this, one factory I visited in China had created its own worker-led union to advocate for workers with management.

The reality is that Apple has the influence, economically and otherwise, to flex a little muscle. The company has long been visionary when it comes to technology that enhances the lives of privileged Westerners. Now let’s see if it can take on the moral and ethical challenge of improving the lives of its overseas workers.

The Washington Post
Rachel Louise Snyder is the author of “Fugitive Denim: A Moving Story of People and Pants in the Borderless World of Global Trade” and an assistant professor of creative writing at American University.

Rachel Louise Snyder | April 03, 2012

SUMBER thejakartaglobe.com

identifikasi  modals :

• Apple and Foxconn appear to be on the right track. = uses : strong expectation
• Monitoring, which may offer wary consumers a balm, used to be the best that international manufacturers had.  =  uses : repeated action in the past  
• And companies soon realized that they could not effectively monitor their factories alone.  =  uses : impossibility (negative only)   
•  I interviewed dozens of workers in the course of writing a book about the global manufacturing industry, and every one told me that she would help hide underage co-workers if need be, because the families of these girls must be in dire straits to send their daughters to work.  =  uses : 95% certainty
• All of us are realizing we have to have a way to move forward at the enterprise level, but it’s got to be broader than that.  =  uses : necessity
• You’ve got to build the nations’ ability to run good labor standards and industrial relations.  =  uses : necessity

Shale Gas Revolution

The United States is a country that has received many blessings, and once upon a time you could assume that Americans would come together to take advantage of them. But you can no longer make that assumption. The country is more divided and more clogged by special interests. Now we groan to absorb even the most wondrous gifts.
New and efficient technologies for extracting oil and natural gas are increasing the supply of both fuels from North America. A few years ago, a business genius named George P. Mitchell helped offer such a gift. As Daniel Yergin writes in “The Quest,” his gripping history of energy innovation, Mitchell fought through waves of skepticism and opposition to extract natural gas from shale. The method he and his team used to release the trapped gas, called fracking, has paid off in the most immense way. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is 30 percent and rising.
John Rowe, the chief executive of the utility Exelon, which derives almost all its power from nuclear plants, says that shale gas is one of the most important energy revolutions of his lifetime. It’s a cliché word, Yergin told me, but the fracking innovation is game-changing. It transforms the energy marketplace.
The U.S. now seems to possess a 100-year supply of natural gas, which is the cleanest of the fossil fuels. This cleaner, cheaper energy source is already replacing dirtier coal-fired plants. It could serve as the ideal bridge, Amy Jaffe of Rice University says, until renewable sources like wind and solar mature.
Already shale gas has produced more than half a million new jobs, not only in traditional areas like Texas but also in economically wounded places like western Pennsylvania and, soon, Ohio. If current trends continue, there are hundreds of thousands of new jobs to come.
Chemical companies rely heavily on natural gas, and the abundance of this new source has induced companies like Dow Chemical to invest in the U.S. rather than abroad. The French company Vallourec is building a $650 million plant in Youngstown, Ohio, to make steel tubes for the wells. States like Pennsylvania, Ohio and New York will reap billions in additional revenue. Consumers also benefit. Today, natural gas prices are less than half of what they were three years ago, lowering electricity prices. Meanwhile, America is less reliant on foreign suppliers.
All of this is tremendously good news, but, of course, nothing is that simple. The U.S. is polarized between “drill, baby, drill” conservatives, who seem suspicious of most regulation, and some environmentalists, who seem to regard fossil fuels as morally corrupt and imagine we can switch to wind and solar overnight.

The shale gas revolution challenges the coal industry, renders new nuclear plants uneconomic and changes the economics for the renewable energy companies, which are now much further from viability. So forces have gathered against shale gas, with predictable results.
The clashes between the industry and the environmentalists are now becoming brutal and totalistic, dehumanizing each side. Not-in-my-backyard activists are organizing to prevent exploration. Environmentalists and their publicists wax apocalyptic.
Like every energy source, fracking has its dangers. The process involves injecting large amounts of water and chemicals deep underground. If done right, this should not contaminate freshwater supplies, but rogue companies have screwed up and there have been instances of contamination.
The wells, which are sometimes beneath residential areas, are serviced by big trucks that damage the roads and alter the atmosphere in neighborhoods. A few sloppy companies could discredit the whole sector.
These problems are real, but not insurmountable. An exhaustive study from the Massachusetts Institute of Technology concluded, “With 20,000 shale wells drilled in the last 10 years, the environmental record of shale-gas development is for the most part a good one.” In other words, the inherent risks can be managed if there is a reasonable regulatory regime, and if the general public has a balanced and realistic sense of the costs and benefits.
This kind of balance is exactly what our political system doesn’t deliver. So far, the Obama administration has done a good job of trying to promote fracking while investigating the downsides. But the general public seems to be largely uninterested in the breakthrough (even though it could have a major impact on the 21st-century economy). The discussion is dominated by vested interests and the extremes. It’s becoming another weapon in the political wars, with Republicans swinging behind fracking and Democrats being pressured to come out against. Especially in the Northeast, the gas companies are demonized as Satan in corporate form.
A few weeks ago, I sat around with John Rowe, one of the most trusted people in the energy business, and listened to him talk enthusiastically about this windfall. He has no vested interest in this; indeed, his company might be hurt. But he knows how much shale gas could mean to America. It would be a crime if we squandered this blessing.
Sumber: ( http://www.nytimes.com )
NB : New and efficient technologies for extracting oil and natural gas are increasing the supply of both fuels from North America (Teknologi baru dan efisien untuk mengekstraksi minyak dan gas alam meningkat pasokan dari kedua bahan bakar dari Amerika Utara)
Already shale gas has produced more than half a million new jobs, not only in traditional areas like Texas but also in economically wounded places like western Pennsylvania and, soon, Ohio. (Gas serpih telah menghasilkan lebih dari setengah juta pekerjaan baru, tidak hanya di daerah-daerah tradisional seperti Texas tetapi juga di tempat-tempat ekonomis terpuruk seperti Pennsylvania barat dan, segera, Ohio.)

Stocks are Perpetual

It is also true that in the real world investors in stocks don't usually get to buy at book value. Sometimes they have been able to buy in below book; usually, however, they've had to pay more than book, and when that happens there is further pressure on that 12%. I'll talk more about these relationships later. Meanwhile, let's focus on the main point: as inflation has increased, the return on equity capital has not. Essentially, those who buy equities receive securities with an underlying fixed return just like those who buy bonds.
Of course, there are some important differences between the bond and stock forms. For openers, bonds eventually come due. It may require a long wait, but eventually the bond investor gets to renegotiate the terms of his contract. If current and prospective rates of inflation make his old coupon look inadequate, he can refuse to play further unless coupons currently being offered rekindle his interest. Something of this sort has been going on in recent years.
Stocks, on the other hand, are perpetual. They have a maturity date of infinity. Investors in stocks are stuck with whatever return corporate America happens to earn. If corporate America is destined to earn 12%, then that is the level investors must learn to live with. As a group, stock investors can neither opt out nor renegotiate. In the aggregate, their commitment is actually increasing. Individual companies can be sold or liquidated and corporations can repurchase their own shares; on balance, however, new equity flotations and retained earnings guarantee that the equity capital locked up in the corporate system will increase.
So, score one for the bond form. Bond coupons eventually will be renegotiated; equity "coupons" won't. It is true, of course, that for a long time a 12% coupon did not appear in need of a whole lot of correction.
Must we really view that 12% equity coupon as immutable? Is there any law that says the corporate return on equity capital cannot adjust itself upward in response to a permanently higher average rate of inflation? There is no such law, of course. On the other hand, corporate America cannot increase earnings by desire or decree. To raise that return on equity, corporations would need at least one of the following: (1) an increase in turnover, i.e., in the ratio between sales and total assets employed in the business; (2) cheaper leverage; (3) more leverage; (4) lower income taxes; (5) wider operating margins on sales.
And that's it. There simply are no other ways to increase returns on common equity. Let's see what can be done with these. We'll begin with turnover. The three major categories of assets we have to think about for this exercise are accounts receivable, inventories, and fixed assets such as plants and machinery. Accounts receivable go up proportionally as sales go up, whether the increase in dollar sales is produced by more physical volume or by inflation. No room for improvement here.
With inventories, the situation is not quite so simple. Over the long term, the trend in unit inventories may be expected to follow the trend in unit sales. Over the short term, however, the physical turnover rate may bob around because of special influences -- e.g., cost expectations, or bottlenecks.
The use of last-in, first-out (LIFO) inventory-valuation methods serves to increase the reported turnover rate during inflationary times. When dollar sales are rising because of inflation, inventory valuations of a LIFO company either will remain level (if unit sales are not rising) or will trail the rise in dollar sales (if unit sales are rising). In either case, dollar turnover will increase.
During the early 1970s, there was a pronounced swing by corporations toward LIFO accounting (which has the effect of lowering a company's reported earnings and tax bills). The trend now seems to have slowed. Still, the existence of a lot of LIFO companies, plus the likelihood that some others will join the crowd, ensures some further increase in the reported turnover of inventory.
Sumber : ( http://edition.cnn.com/ )
NB : As a group, stock investors can neither opt out nor renegotiate. (Sebagai kelompok, investor saham tidak dapat memilih keluar atau negosiasi ulang.)
When dollar sales are rising because of inflation, inventory valuations of a LIFO company either will remain level (if unit sales are not rising) or will trail the rise in dollar sales (if unit sales are rising). (Ketika penjualan dolar meningkat karena inflasi, persediaan penilaian dari sebuah perusahaan LIFO akan tetap baik (jika penjualan unit tidak naik) atau jejak penjualan dolar meningkat  (jika penjualan unit meningkat).