So What if Samsung Violates Labor Laws in China?: Opinion
On Nov. 26, a labor rights group accused Samsung Electronics of hiring girls as young as 16 at two China plants, making men stand while working and requiring workers to sign blank contracts.
Overtime past China's legal limit of 36 hours per month, New York-based China Labor Watch says in a statement, "is perhaps the most persistent and abusive aspect of labor violations in Samsung factories." The non-governmental organization (NGO) cites the results of its own investigations since October.
You may have heard this kind of story before involving Foxconn, which builds iPhones and iPads for guess-who. The giant Taiwanese assembler has survived a riot, a rash of suicides and a strike involving about 3,000 workers in October.
The key word is survived. Apple (AAPL) gets something like 15% of its money from China -- a number that goes up each year -- as iPhone customers there line up to buy stuff. Chinese consumers still equate the Silicon Valley icon associated with quality among Chinese users and overseas users also hardly flinched at the labor reports. (Apple share prices have fallen since mid-September on supply issues concerning its iPhone 5, not a China problem.)
Given China's chronic chip on its increasingly buff shoulder about being pushed around by foreigners, you might expect consumers to start buying domestic stuff if a foreign firm is mistreating Chinese workers.
Not to condone blank contracts and relentless overtime, but Apple and Samsung are on such a roll that findings by labor rights NGOs are unlikely to dent their electronics.
That means that, whether fair or not, your investments in multinational corporations (MNCs) are safe even if those companies or their suppliers are stung by criticism of their labor practices.
"I don't think this is a key factor," says Wai Ho Leong, an regional economist and Korea specialist with Barclays Capital. "I think investments in Samsung are safe, given the significant improvement in its brand premium that we have seen."
Samsung (005930.KS) shares traded in Seoul also hit an all-time high last month and appear to be unfazed by reports about factories in China. ADR shares of the South Korean firm -- so large that it makes up more than a third of the MSCI Korea index -- also trade in the United States.
In Foxconn's case, the glare of labor issues may even put a shine on new Apple products. China Labor Watch itself says the October strike was due to "strict quality demands on workers" including some related to scratches on phone frames.
"With such demands, employees could not even turn out iPhones that met the standard," the labor group said in a statement on Oct. 5. "This led to a tremendous amount of pressure on workers."