US: Report Says Global Accounting Firm Overlooks Factory Abuses

Publisher Name: 
The New York Times

In a rare inside look at the auditing firms that inspect overseas
factories to see whether they are sweatshops, an M.I.T. professor
contends that the world's largest factory-monitoring firm does a
shoddy job and overlooks many safety and wage violations.

The professor, Dara O'Rourke, said in a report to be issued today
that inspectors from the firm, PricewaterhouseCoopers, had a
pro-management bias, did not uncover the use of carcinogenic
chemicals and failed to recognize that some employees were forced
to work 80-hour weeks.

He also said the firm overlooked other basic problems, including
timecards that were falsified and machines that were missing safety
guards to protect workers' fingers.

"PwC's monitoring efforts are significantly flawed," said Dr.
O'Rourke, a professor of environmental and labor policy at the
Massachusetts Institute of Technology. "PwC's audit reports glossed
over problems of freedom of association and collective bargaining,
overlooked serious violations of health and safety standards, and
failed to report common problems in wages and hours."

Pricewaterhouse officials defended their monitoring, saying their
inspectors often uncover violations of minimum wage, overtime and
safety laws. But these officials acknowledged that the firm's
inspectors occasionally missed things that an expert on industrial
hygiene, like Professor O'Rourke, would uncover.

"I think we do very good work in this field, and we're
contributing to improving conditions on behalf of our clients,"
said Randy Rankin, the partner in charge of Pricewaterhouse's
global contractor compliance practice.

Many apparel companies and universities have hired
factory-monitoring firms in recent years to reassure consumers who
want to know that the clothes they buy were not made in sweatshops.
Pricewaterhouse, which performs more than 6,000 factory inspections
a year, is the world's leader in doing inspections for companies,
like Nike, that want monitors to check on conditions in the
factories they use.

Professor O'Rourke accompanied Pricewaterhouse inspectors and
officials with Business for Social Responsibility, a nonprofit
group in San Francisco, to factories in China and Korea after
Harvard, Notre Dame and three other universities asked them and
several other groups to review conditions at more than a dozen
plants that make apparel with the universities' logos. That broader
monitoring report was presented to the universities last week but
is not scheduled to be released until early October.

Professor O'Rourke's report comes during a fierce debate in which
many student groups, labor unions and human rights groups are
criticizing corporations and universities that rely on auditing
firms to inspect their factories. These groups assert that the
auditing firms often have a pro-corporate tilt, do not do thorough
inspections and should work with nongovernmental organizations,
like human rights groups, to gain a fuller picture of factory
conditions overseas.

Professor O'Rourke, who has inspected more than 100 Asian
factories for the World Bank and various United Nations
organizations, called on universities and companies to demand more
rigorous monitoring efforts. He criticized Pricewaterhouse
inspectors for failing to identify that workers in a garment
factory in Seoul, South Korea, used a spot remover containing
benzene, a carcinogen. When he visited a factory outside Jakarta,
Indonesia, he found that the firm's inspectors had overlooked the
same problem during an earlier inspection.

He also faulted the firm's monitors for not noting that the labor
union at a Shanghai garment factory was, like most Chinese unions,
controlled by management. And he criticized the inspectors for
failing to note that little information was given on chemicals used
in the factory and that some workers did not wear proper gloves,
masks or shoes while doing dangerous tasks or handling dangerous
materials.

In addition, his report said Pricewaterhouse monitors received
most of their information from managers, not workers, and did
perfunctory interviews with workers inside the factory instead of
in-depth interviews outside, where workers would probably talk more
openly.

His report questioned why Pricewaterhouse monitors found that the
Shanghai employees worked 50 to 60 hours a week, while his
inspection of time cards found that one employee worked 316.5 hours
in a month, or 75 hours a week, and 20 consecutive days.

Pharis Harvey, executive director of the International Labor
Rights Fund, a nonprofit group based in Washington, said, "The
lesson to be drawn is that Pricewaterhouse has to learn how to
monitor before it can claim it's doing a serious job."

Defending Pricewaterhouse, Mr. Rankin said his firm received
information not just from managers, but by observing factories,
examining their records and interviewing their workers. He accused
Professor O'Rourke of bias and of failing to appreciate that his
firm found many overtime and safety violations.

"The allegation that we rely on management at the expense of all
other things, that's absolutely wrong," Mr. Rankin said.

He said the firm's inspectors might not have found some of the
timecard problems that Professor O'Rourke found because they looked
at only a sampling of timecards. And he acknowledged that his
firm's inspectors might not have recognized that the spot remover
was a benzene derivative because they were not trained industrial
hygienists.

Allan Ryan, university attorney at Harvard, said he was not in a
position to judge whether Professor O'Rourke's criticisms were
valid. "We know monitoring has shortcomings," he said. "What Dara
O'Rourke is saying is that it might have more shortcomings than we
thought."

For view the full report "Monitoring the Monitors" in PDF at http://web.mit.edu/dorourke/www/

AMP Section Name:Financial Services, Insurance and Banking
  • 184 Labor
  • 204 Manufacturing