[News analysis] Samsung’s potential global management crisis

Posted on : 2019-07-04 18:07 KST Modified on : 2019-07-04 18:07 KST
More European countries are pushing for legislation that punishes overseas labor rights violations
A Samsung brand experience center along Paris’ Avenue des Champs-Élysées.
A Samsung brand experience center along Paris’ Avenue des Champs-Élysées.

Samsung’s global management is facing a global crisis. With a French court indicting Samsung Electronics on charges including violating the basic labor rights of its Asian workers, analysts are saying Samsung’s practices – which have triggered allegations of labor rights infringements around the world – have emerged as a potential threat to its management stability.

The direct charge applied against Samsung Electronics in its indictment by a Paris district court was “misleading commercial activities” according to the French Consumer Act. The court concluded that Samsung had failed to properly notify consumers of labor rights violations taking place at some of its factories throughout Asia.

Fundamentally, the basis for Samsung Electronics’ indictment – in France rather than its home country of South Korea, and in connection with alleged labor rights infringements in Asian factories – is a societal consensus in France regarding management practices and human rights. In February 2017, France became the first European country to enact a law on human rights due diligence. Called the “French Corporate Duty of Vigilance Law,” it states that companies can be held accountable for labor rights violations not only within France but also overseas. The provision was seen as reflecting activities by multinational companies operating across national borders.

According to this law, a company with over 5,000 employees is required to determine whether abuses related to human rights and/or working environments are taking place not only with the workers it employs directly, but also with its subcontractors’ employees. The law also states that companies must cooperate with labor unions on formulating a response plan and conducting ongoing monitoring if they are found to be implicated in serious violations of human rights and working environments. In cases of violations, they may be subject to up to 30 million euros in punitive damages.

Samsung France‘s website
Samsung France‘s website

Because Samsung employs fewer than 5,000 workers locally in France, it was not charged on the basis of violations of this law. Instead, the French court used the roundabout approach of indicting Samsung on the basis of the Consumer Act – a decision seen as reflecting a consensus in France that Samsung’s global human rights violations can no longer be overlooked. SHERPA and ActionAid France, the French civic groups that lodged the accusations against Samsung in court, quoted the recent Hankyoreh series, “Global Samsung: A Report on Unsustainable Labor Practices,” noting that some Samsung workers in Asia were assembling 1,600 mobile phones a day while receiving the equivalent of less than 260,000 won (US$222.07) a month in pay. French consumers, they said, should feel “guilty” for purchasing Samsung products made amid serious violations of worker rights.

While a French court’s indictment may be the signal of Samsung’s crisis, the signs are not only appearing in France. In June, the Finnish government officially announced that it was pursuing legislation to require inspections of human rights observance. Finland is attempting to introduce legislation that would require checking for human rights violations not only by its own companies but by all businesses that supply items to the country. The United Kingdom has introduced a “Modern Slavery Act” that chiefly includes a ban on forced labor, while countries like the Netherlands, Germany, and Denmark have begun discussing legislation to require inspections of companies’ observance of human rights.

That trend appears poised to intensify further with Finland assuming the EU presidency this month – raising a strong likelihood that Europe will move to quell the “Samsungification” of labor.

Samsung had it coming, experts say

Experts on Samsung and its practices said the French court’s indictment ruling was “in the cards.”

“Labor exploitation, union suppression, and occupational diseases are occurring at Samsung factories around the world, yet Samsung has claimed to be protecting the human rights of its local workers according to its ‘migrant worker guidelines’ and the Responsible Business Alliance (RBA) code of conduct,” said Fahmi Panimbang, director of the Indonesian labor rights group LIPS.

“The problem is that this promise has gone more or less completely unhonored,” he said.

“The French court’s indictment will be a process of bringing to public attention the longstanding disparity between Samsung’s ‘global business’ image and the harsh reality for workers at Samsung factories,” said Joe DiGangi, senior science and technical advisor for the international environment and labor group IPEN, which published a report on labor rights violations at Samsung’s factories.

“In South Korea as well, Samsung is facing a crisis with an investigation by prosecutors and an important ruling,” he noted.

The lack of discussion in S. Korea about Samsung’s egregious labor violations

In contrast with France and other European countries, almost no discussions have yet taken place in Samsung’s home of South Korea on legislation to require inspections of human rights observance. More or less the only development in that regard was an opinion submitted in March 2018 by Korean Transnational Corporations Watch (KTCW) – an organization with participants including the groups Korean Lawyers for Public Interest and Human Rights, Advocates for Public Interest Law (APIL), and GongGam Human Rights Law Foundation – recommending that a requirement on inspections of companies’ human rights observance be included in the upcoming third National Action Plan on Business and Human Rights (NAP).

The NAP represents the basic framework for reflecting the direction and content of the South Korean government’s human rights policy. The administration also reflected some of the views of human rights groups when it included a new section on “Business and Human Rights” in the NAP when it came out the following August. The terms stated that the government should prevent human rights violations by companies, and the corporate activities should be “human rights-friendly.” But it did not include provisions requiring private companies to verify observance of human rights.

“The administration’s third NAP did include human rights observance verification requirements for public enterprises and public institutions, but not for private companies,” said Na Hyeon-pil, secretary-general of Korean House for International Solidarity.

“Given that labor rights violations chiefly occur in the global supply network of multinational corporations, we need efforts to also enact human rights observance verification requirements for private companies,” he said.

By Kim Wan, Ock Kee-won, and Choi Sung-jin, staff reporters

Please direct comments or questions to [english@hani.co.kr]

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