September 28, 2000

M.I.T. Report Says Global Accounting Firm Overlooks Factory Abuses

By STEVEN GREENHOUSE

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 in sweatshops, 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.

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."