CLW Research Casts Doubt on the Validity of Samsung’s Corporate Social Responsibility Report

Tuesday, May 17, 2016
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In 2012, 2014 and 2015, China Labor Watch (CLW) undertook four investigations on Samsung and its suppliers in China, revealing that Samsung had violated rights by using child labor, student labor, and excessive overtime. This investigation is a continuation of this series, with the aim of ensuring that Samsung had acted on their promise to improve labor conditions. We also sought to examine the validity of their corporate social responsibility report. Through investigation we seek to compel Samsung and other transnational corporations to continue protecting labor rights in China.

In July and August 2015, CLW investigators collected 217 paystubs from two factories in Tianjin. 109 of were collected from Tianjin Samsung Telecom Technology Co. Ltd., and 108 were collected from Tianjin Zhonghuan Tongxun Technology Co. Ltd. Tianjin Zhonghuan is one of the 227 suppliers that Samsung has in China, producing Samsung’s semi-finished and finished mobile phones, currently employing 900 workers. Tianjin Samsung Telecom Technology Co. Ltd. was established in China by Samsung Electronics as a base to manufacture phones, employing 8000 people.

Both factories are located in Tianjin, and both of them produce mobile phones for Samsung Electrics, making it an ideal setting comparative study. Through these paystubs, we underwent a descriptive analysis of the work hours and pay of workers in both factories, comparing the differences between the two. Furthermore, we also used t test to compare the average values of each category of both factories, using linear regression and logistic regression to analyze the relationships between variables. We sincerely hoped that we could see improvement in labor conditions in Samsung’s supply chain, but again we discovered some disappointing labor rights violations in these two factories. Our main findings are shown as below:

First, we found that Zhonghuan probably concealed workers’ overtime hours by faking records.

In Zhonghuan’s paystubs, there is one item “Other pays”. Among the 65 individuals who received this pay, 58 of them had overtime hours of 59.98, and 56 of them received this pay during peak season. (See Graph 1) We suspect that during peak season, the workload was heavy, and Zhonghuan workers had to work overtime excessively. In order to conceal the real overtime hours, Zhonghuan paid the overtime pay above 60 hours in the name of “other pay”.

In its sustainability report, Samsung depicted us a promising picture of labor conditions in its supply chain. However, our discovery of Zhonghuan’s situation leads us to think to what degree is Samsung’s data real and trustworthy.

Second, both Samsung and its supplier ignore the Chinese Labor Law. The Chinese Law requires that monthly overtime hours not exceed 36 hours, but in Samsung and Zhonghuan, workers’ overtime hours are significantly above 36. (See Graph 2)

Moreover, despite Samsung’s claim that 99% of its suppliers are compliant with the voluntary work standard, through our multivariate regression analysis, we suspect Zhonghuan indirectly pushes workers to work overtime by lowering base wage and providing overtime-related compensation.

Third, Samsung claimed that 94% of the factory workers had wages and benefits which adhered to Samsung’s standards. Nonetheless, CLW discovered through our investigation of Zhonghuan, that there have been serious violations of labor rights.

Out of 108 Zhonghuan pay stubs, 99 revealed that social insurance was 168RMB, which is the minimum standard pension amount to be paid. In addition, as stipulated by law, workers and employers share the payment of medical insurance and unemployment insurance, but these two payments were not listed out on Zhonghuan’s pay stubs. As such, we suspect that Zhonghuan did not purchase medical insurance and unemployment insurance for workers. (Please see Graph 3 a comparison between Zhonghuan and Samsung workers’ insurance benefits)

Fourth, CLW investigation revealed severe unequal treatment between Samsung’s own facilities and suppliers. Even though both factories are making mobile phones for Samsung Electrics, and even though Zhonghuan workers’ overtime hours are much higher than that of Samsung workers, , their gross income, base wage, and insurance benefits are lower than that of the latter’s. On average, Zhonghuan workers work 41 more hours than Samsung workers, but their gross income is about 600 RMB lower than the latter. (See Table 1 for the comparison between Zhonghuan and Samsung workers’ pay)

In short, we believe Samsung has made limited improvements to their working conditions. In our interviews with Zhonghuan workers, we were explicitly told that “Others pays” were indeed workers’ overtime pay. In our paystub study we also confirmed this point statistically. Nonetheless, Samsung Electronics, as one of the largest and most profitable companies that has much more resources than China Labor Watch, cannot discover this simple fact, the effectiveness of its audit system is evident here. Relaxed monitoring mechanisms, in conjunction with the suppliers’ quest for greater profits, has led to Samsung’s tacit acceptance of the labor rights violations committed by its suppliers. The actions of Samsung may be legal but is a morally wrong means of earning profits.