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Disney taking heat over China

The company vows to step up enforcement as criticism grows about conditions at factories that make its products

March 10, 2008|Dawn C. Chmielewski | Times Staff Writer

SHENZHEN, CHINA — A year after Walt Disney Co. banned Hao Wei Metal Plastic Manufactory as a supplier, Huang Renzhong got a job there sculpting melted globs of poly-resin into statuettes of Mickey Mouse, Donald Duck and Snow White.
Starting at 8 a.m., Huang regularly pulled 15-hour shifts. Sometimes he worked through the night in the dust-filled factory. Sometimes a month would pass before he had a day off. He said he was never compensated for overtime. When he demanded back pay, he said, the factory owner threatened to have him beaten up.
Huang and four co-workers sued the labor bureau in Shenzhen, scoring a victory when a court ruled that the bureau hadn't properly considered their demand for more than $90,000 in unpaid wages. The ruling, and the five workers' audacity, was extraordinary in China. The local press picked up the story.
It was only then, Disney executives said, that they learned that Hao Wei Metal Plastic Manufactory was still in the business of making Disney merchandise. Hao Wei ran afoul of the code of conduct that Disney asks manufacturers to follow, but the company was powerless, the executives said, because it was unaware.

If that seems implausible, consider the way Disney, like many other multinational corporations, has managed its international supply chain.


Licensing deals

Disney has agreements with 6,000 licensees that make their own production contracts with factories. Although Disney investigators conduct spot-check audits and the company keeps a database of 40,000 plants around the world to eliminate problematic suppliers, Disney must rely on its licensees to follow the rules -- and to tell the truth about which plants have been hired to make Disney goods.

In the case of the Shenzhen factory, a Japanese licensee had hired it on the sly, said Mark Spears, Disney's director of international labor standards, telling Disney that another plant was making the figurines.

To some labor-rights activists, Disney's arm's length dealings with manufacturers have given it an easy out, said Jenny Chan, chief coordinator of Hong Kong-based Students & Scholars Against Corporate Misbehavior, which is pressing Disney to change its policies with a campaign called Looking for Mickey Mouse's Conscience.

"Whenever there are problems, Disney tends to shift the responsibility to its licensee," said Chan, who wrote to Disney's board asking that it open its outsourcing practices to more public scrutiny, timing the letter to arrive before last week's annual shareholder meeting. "They just shift responsibility downward."

At Disney, a $35.5-billion corporation that does business around the world, executives disputed Chan's characterization. But Spears said the Hao Wei factory was something of a wake-up call for the company, which said last week that it planned to step up enforcement of its code of conduct.

"The tremendous growth of our business over the last several years requires us to further increase our efforts" to ensure the well-being of factory workers, he said. "Immediate steps" would be taken to "more effectively enforce our policies," he said, declining to give specifics.

The pressure on multinational corporations that outsource to China has never been more intense since Chinese factories in the last year have been found to have been producing tainted -- in some cases deadly -- prescription drug ingredients, pet food and toys. Labor-rights activists have kept up the drumbeat.

"The brands, up until recently, have been able to say, 'This is not our problem. We were lied to. We were deceived,' " said Mary E. Gallagher, an associate political science professor at the University of Michigan and an associate at its Center for Chinese Studies. "That's getting less convincing over time. More and more activists are saying, "You're responsible.' "

Unlike Nike Inc., Gap Inc. and a handful of other companies that have been praised by the labor-rights community, Disney doesn't maintain long-term relationships with factories. It won't identify factories that produce licensed merchandise, as does Nike, or follow the example of Gap, which provides an accounting of how many factories it inspects, for example, and the exact nature of working condition violations it discovers.

As a media company, Disney isn't mainly in the business of manufacturing consumer products, and Spears said that put the company in a situation very different from Nike and Gap.

"We are a creative content company which licenses our intellectual property to other outside parties, who then use their supply chain to manufacture the product," he said. "We're not directly contracting, in virtually any case, with a factory. Our strong suit . . . is relying on influence."

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