Strategy

The CEO Poll: The trouble with outsourcing

Canadian CEOs on ensuring fair treatment of workers.

Business leaders give the federal mini-budget high marks.

Controversy has surrounded Foxconn International Holdings, the giant electronics manufacturer with facilities in China, for its labour practices and the suicide rate among its workers. Apple Inc., which contracts manufacturing to Foxconn, has also come under media scrutiny for its relationship to the company. Canadian business leaders, in a poll conducted by COMPAS Inc., are divided on whether Apple is likely to suffer damage to its reputation, and whether North American companies should insist on better standards when outsourcing.

Slightly more than a third of respondents said Apple is likely to experience any damage to its image, and fewer still expected the issue to affect the company’s share price.

Foxconn, meanwhile, has responded to the issue by hiking employee pay by 30%, which the CEOs see as both an appropriate response to the company’s mistreatment of its workers, and a sign of further wage pressures in China. ‘We must expect more than moderate cost increases during the next year or two,’ according to one respondent.

The panel was divided, however, on the issue of North American companies imposing management standards on foreign suppliers. ‘We don’t have the right to tell China how to run its economy,’ wrote one respondent. ‘We have the choice to buy, or not to buy.’

Others echoed this belief. ‘I don’t think that one can enforce North American management standards in a foreign country,’ wrote another respondent. ‘However, due diligence and continued monitoring should be done to ensure that employees are fairly paid.’

In their comments, many of the CEOs suggested a shift in manufacturing back to North America is the only way to truly ensure fair treatment. ‘Bring manufacturing home,’ wrote one. But North Americans’ reliance on inexpensive labour and products makes that an unlikely prospect, according to others: ‘Until our insatiable desire for cheap goods begins to wane, we will learn of more Foxconn situations,’ said another respondent.