Corporate Responsibility
SUPPLIERS

Supplier monitoring: Audit analysis

Underage workers
In 2008, we identified two cases related to underage workers. One case involved a worker who was underage at the time and the other case involved workers who had been younger than the minimum age when they were hired, but at the time of the audit, had reached the minimum age.

The first case involved a sub-tier supplier to a Motorola supplier. During a planned audit at a tier-two supplier factory, the audit team found five workers a few months below the minimum working age. During a thorough follow-up audit conducted within two weeks of the original audit one additional underage worker was identified. The follow-up audit included a review of all employee records. The original audit team, plus representatives from the first-tier supplier and Motorola, participated in the follow-up audit.

Motorola's general policy when an underage worker is identified is to require the engagement of a third party to help oversee the remediation process. In this case, Motorola's direct supplier, the company that had sourced the sub-tier supplier, took direct control of the situation and assumed responsibility.

With Motorola's guidance, our supplier worked with the sub-tier supplier to assess the workers' needs and situations. Both suppliers met with each worker and the worker's parents to determine the best course of action. Since the workers were at most four months younger than the minimum age, they chose to return home for the short interval until they could return to work. Of the six workers, three chose to return to work at the sub-tier supplier after they reached the minimum age, and three went to work for other companies.

In both cases, Motorola required the suppliers to strengthen their hiring processes to reduce the risk of recurrence.

Protection of workers aged 16-17
The 93 issues regarding protection of workers aged 16-17 primarily involved unrestricted hours or working with hazardous materials or processes. Other issues included lack of proper documentation and completion of appropriate physicals. We continue to work with our suppliers to resolve those issues which are not yet closed.

Working hours
Similar to 2007, excessive or higher than legally permitted working hours is the most common finding of the onsite audits conducted in 2008, with 164 instances identified. Motorola measures suppliers' working hours against Motorola's supplier code, industry norms and applicable legal requirements. This means that a single supplier can have multiple working hours-related findings.

Corrective actions to reduce working hours continue to be a significant challenge for many factories in China that need to balance workers' monetary needs, availability of labor and production requirements against accepted social norms.

In 2008, Motorola continued its approach of monitoring and helping suppliers' reduce working hours according to approved plans.

Wages/benefits
Incorrect payment of wages and benefits was the fourth most common finding, with a total of 132 instances. The majority related to the improper calculation of overtime rates or the failure to implement timely wage increases in line with changing minimum wage laws. We also continue to see a number of situations in which workers are not provided the locally required insurance. Motorola will continue to work with suppliers to resolve any outstanding issues.

Hazardous substances
Hazardous substance issues were the third most common finding, with a total of 151 instances. The majority of these findings related to improper labeling, signage and storage of hazardous substances. Suppliers with these issues either have completed or are implementing corrective actions.

Emergency preparedness
Emergency preparedness was the second most common issue with 160 findings, such as lack of exit signs, fire extinguishers, first-aid kits and evacuation drills. Suppliers with these issues either have completed or are implementing corrective actions.

Occupational injury and illness
Of the 111 occupational injury and illness findings, most involved supplier short-comings concerning proper personal protective equipment or lack of documentation and injury investigation. Suppliers with these issues either have completed or are implementing corrective actions.

Freely chosen employment
In 2008, we identified 33 issues related to freely chosen employment. These mainly include inappropriate practices for managing worker contracts such as delaying signing contracts, keeping new employees on probation beyond the legal limit and early termination fees when employees leave the company. The most serious issue related to foreign contract workers being charged deposits by the contracting agency. We are working with the suppliers to resolve these issues.

Business integrity / no improper advantage
The 34 findings classified as business integrity / no improper advantage related to suppliers not having policies or programs in place. The majority of findings in the ethics category involve the lack of adequate programs, not necessarily violations of policy. Suppliers with these issues either have completed or are implementing corrective actions.

Humane treatment
Twenty-six audit findings related to humane treatment. Most involved lack of procedures for disciplining employees, lack of policies forbidding inhumane treatment and lack of appropriate training. We are working with the suppliers to resolve these issues.

Anti-discrimination
Of the 15 anti-discrimination findings, nine related to pregnancy and/or hepatitis B testing. The remaining issues involved lack of policies and procedures prohibiting discrimination. We are working with the suppliers to resolve these issues.