Today’s front page headline of the print edition of the Financial Times, Foxconn workers in landmark China vote,  (paid subscription or free metered view) is no doubt newsworthy for global supply chain audiences.

FT reports that the largest contract manufacturer in the world is paving the way for the first ever competitive level union representation elections within its China factories, in essence to step back from control of an in-house union. Labor unions within China have traditionally been influenced by state and local government, the Communist party, and employers, standing more for peaceful labor harmony among workers and their employers. Many Chinese workers do not feel an affinity toward labor unions because of a lack of perceived representation. This development is characterized as the first time where a Chinese private sector employer would support competitive union elections among its workforce while allowing a broader representation from younger workers.

Foxconn will seek the assistance of the Fair Labor Association (FLA) to begin a training process for workers on how to vote for their union representatives.  Readers will recall that Apple solicited the help of FLA in broadening its audits of supplier working conditions after the incidents of worker suicides were reported among Foxconn’s workforce in 2010. Workers will choose up to 18,000 union committees. The effort is reported as commencing after the upcoming Lunar New Year holiday.

In a supporting article, FT characterizes this Foxconn development as recognition from China’s political leaders that workers have increasingly turned to street unrest to voice their protests to working conditions, and that a more active voice on the factory floor may be needed. There is also the reality that Foxconn would not entertain the idea of open elections without party or key customer approval.  The FT is also quick to note that: “Free elections are not about empowering workers. They are about releasing pressures that might spark an explosion of discontent that authorities might find difficult to contain.”

In our view, this news is significant from two perspectives.

Foxconn by its sheer size (1.2 million workers) and association with global companies including many well-known western and Asian high tech OEM’s, has established itself as the de-facto benchmark for labor policies across China.  The first call for increased worker wages emanated from Foxconn, and has since quickly spread among other Chinese manufacturers. The call for more open union representation and younger worker participation in workplace grievances will surely spread as well.

Foxconn as we all know is synonymous with Apple’s production workplace strategies, which have been under the global looking glass for quite some time.  We have noted in previous Supply Chain Matters commentary that Apple induced pressures to increase volume output while adhering to stated supplier social responsibility practices and reduced worker unrest will lead to more automation of assembly tasks.  It has been publically reported that Foxconn has plans to invest in millions of new robots on the factory floor to accomplish these objectives.  A more open union representation and worker voice may help to ease some of the tensions that will surely come over the coming months.

Foxconn has also strived to be a more globally focused company, and has made investments in Brazil, Mexico, and Turkey, with other plans involving Indonesia, Malaysia and the United States.  The company’s significant expansion plan for Brazil, where union representation is historically strong, has already run into controversy and protest because of its perceived autocratic Chinese management style.  Having a good understanding of local culture and work practices, and now with a possible open process of union representation may indeed imply a broader voice for workers in working conditions across Foxconn, both in China and certain other countries.

Thus, this latest Foxconn development will indeed have broader implications across China and other geographies. The open question, of course, remains how much workers trust these union structures, as well as how autocratic managers respond to a potentially more expanded voice in mediating worker grievances.

Bob Ferrari