SEOUL, Nov 27 (Reuters) - Samsung came under renewed criticism from a rights group on Tuesday for illegal work practices at its Chinese suppliers, a day after the South Korean electronics giant admitted excessive overtime and fines for employees in China.
A number of foreign companies have been accused in recent years of improper labour practices in China, seen as a cheap source of labour for their production lines.
New York-based China Labor Watch (CLW) said employees at one of Samsung's suppliers sometimes worked up to 16 hours a day, with only one day's rest a month.
Samsung Electronics Co, the world's largest maker of cell phones and televisions, said on Monday a review of 105 of its Chinese suppliers - involving more than 65,000 employees - found illegal work practices, but said the companies involved would be given two more years to change their ways.
The audit followed allegations by CLW in August that seven children younger than 16 were working in one of Samsung's suppliers in China.
Samsung said the audit had found no evidence of child labour.
It did, however, concede several instances of inadequate practices, such as overtime hours in excess of legal regulations and the imposition of a system of fines for tardiness or absence.
"We have identified the need for initiatives to reduce employee overtime as a top priority, and we are researching and developing measures that will eliminate hours beyond legal limits by the end of 2014," the company said in a statement.
AUDIT RELIABILITY QUESTIONED
China Labor Watch said on Tuesday a follow-up investigation found that workers usually work from three to six times the legal overtime limit.
"The worst situation is in a Samsung supplier factory called Chitwing Mould Industry (Dongguan) Co., Ltd, where workers' overtime hours surpass 220 hours per month. Workers here can work up to 15 or 16 hours per day with perhaps one day of rest per month," CLW said in a statement.
"Samsung uses an audit system to monitor factories, but audits are renowned for their lack of reliability. Instead of audits, Samsung should establish direct channels of communication with its workers, such as worker committees or a worker hotline."
Samsung said on Tuesday hotlines were being set up for workers at supplier firms to report anonymously any inhumane treatment or violations of labour laws.
Samsung is reviewing 144 more suppliers in China and said the review would be completed by the end of this year.
The firm also said that from 2013 audits of its 249 suppliers in China would be conducted by an independent third party.
The move reflects a growing attention on work practices in China by foreign multinationals including Apple.
Apple Inc and its main contract manufacturer Foxconn Technology Group, whose subsidiary Hon Hai Precision Industry assembles Apple devices in China, earlier this year agreed to tackle violations of conditions among the 1.2 million workers assembling iPhones and iPads. That landmark decision could change the way Western companies do business in China.
11. Sears Holdings Corp.
> Revenue per employee: $139,000 > No. employees: 293,000 > Revenue: $40.6 billion > 1-year revenue change: -2.9% Sears, which owns Kmart, Sears and several smaller retail brands, has 3,900 locations. Sales at the company have fallen so rapidly that management has decided, in the hope of getting better shareholder returns, to spin off of its Orchard Supply Hardware Stores and create a new public company to hold its Sears Hometown and Outlet Stores assets. None of these actions have done anything to reverse the long and seemingly endless slide of Sears store sales and corporate revenue. In the quarter that ended on July 28, revenue fell from $10.1 billion in the previous year to $9.5 billion. Sears lost $132 million in the period. Most of the trouble can be blamed on sales at the company’s two largest units. The parent company reported that for the most recent quarter Sears Domestic’s comparable store sales (sales at stores open at least 12 months) declined 2.9%, Kmart’s comparable store sales declined 4.7%, and Sears Canada’s comparable store sales declined 7.1%. The situation at Sears is not likely to get better. Rivals Target Corp. (NYSE: TGT) and Wal-Mart Stores Inc. (NYSE: WMT) are larger and have had relatively good revenue growth in the last year. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
10. Royal Caribbean Cruises Ltd.
> Revenue per employee: $128,000 > No. employees: 60,670 > Revenue: $7.8 billion > 1-year revenue change: 9.1% Royal Caribbean operates 40 cruise ships under several brands, including Celebrity Cruises, Pullmantur and Azamara Cruises. The cruise line’s ships sail to Alaska, Asia, Australia, New Zealand, Canada, Europe and South America. Royal Caribbean has one of the longest-serving CEOs of a major public company. Richard D. Fain has been chairman and chief executive officer since 1988. There is good reason for the length of his tenure. Revenue and net income have risen steadily for a decade. The company made $607 million last year. Although Royal Caribbean has a large employee base in relationship to its revenue, personnel costs are hardly its only major expense. The company spent $206 million on payroll and related expenses in the second quarter of 2012. It also spent $109 million on food and $238 million on fuel. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
9. Caesars Entertainment Corp.
> Revenue per employee: $128,000 > No. employees: 70,000 > Revenue: $8.9 billion > 1-year revenue change: 2.8% Caesars is a parent casino and resort company that manages a number of brands, including Harrah’s, Caesars, Horseshoe and the London Clubs. The primary locations for most of its casinos are Reno, Las Vegas and Atlantic City. Caesars also owns and operates the World Series of Poker. Caesars is not the only casino company with the low revenue per employee issue. Revenue per employee at rival MGM Resorts International (NYSE: MGM) is $150,000. The effects of the recession drove down Caesars’ revenue. In 2008, total sales were $10.1 billion. That number fell by more than $1 billion last year. Caesars continued to struggle financially in the first half of 2012. While revenue was up 2% to $4.4 billion, its loss of $522 million compared to a loss of $303 million in the same period of 2011. Caesars has been undergoing some restructuring recently, which probably will result in a smaller headcount eventually. In May, Caesars signed a definitive agreement to sell Harrah’s St. Louis to Penn National Gaming for $610 million in cash. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
8. The Gap Inc.
> Revenue per employee: $113,000 > No. employees: 132,000 > Revenue: $14.9 billion > 1-year revenue change: 1.6% Gap was once among America’s most successful clothing brands and retailers. Its position in the market has slipped substantially over the past several years. Its revenue has dropped fairly consistently since 2005 when it was $16.3 billion. To partially remedy the decline in activity, Gap announced a plan about a year ago to cut its retail capacity. It is currently in the process of closing 189 Gap stores in the United States, which is 21% of its locations there, which in turn probably will lower the firm’s total employee count. Gap is also the parent company of several other brands, including Banana Republic, Old Navy, Piperlime and Athleta. Gap’s fortunes have improved somewhat recently. In its most recently reported quarter, for the period that ended on April 28, revenue rose 6% to $3.5 billion. Earnings per share were up 18% to $0.47. More important than either of those figures, same-store sales, or sales at stores open at least a year, rose 4% year-over-year and were up for all three of the company’s major retail brands — Gap North America, Old Navy and Banana Republic. International sales were down. Gap joins a number of retailers with very low revenue per employee, among them Macy’s Inc. (NYSE: M) and Nordstrom Inc. (NYSE: JWN). <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
7. JCPenney Co. Inc.
> Revenue per employee: $98,000 > No. employees: 159,000 > Revenue: $15.6 billion > 1-year revenue change: -12.2% JCPenney has consistently posted some of the poorest revenue performance among large retailers for years. The situation has worsened after the arrival of new CEO Ron Johnson, the former head of Apple’s retail division. In the second quarter of this year, same-store sales dropped 21.7%. Total revenue fell 22.6% to $3 billion. JCPenney lost $147 million in the quarter. At first, management indicated that results in the second half would be better. But then, on Sept. 20, Johnson dropped a bomb. He said investors should not expect improvements for the balance of the year. Johnson tried to almost totally revamp the way that JCPenney attracts consumers, and the effort failed dismally. The retailer released a new pricing strategy in January called Fair and Square. It included three types of prices: everyday regular prices, month-long values and best prices, which occur on the first and third Fridays of every month. Shoppers were confused for obvious reasons. JCPenney currently has 1,100 stores, but it would not be surprising if the company had to cut that number. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
6. Starbucks Corp.
> Revenue per employee: $87,000 > No. employees: 149,000 > Revenue: $13.0 billion > 1-year revenue change: 12.7% Starbucks has been considered one of the breakout successes in the fast-food and coffee business. Because of the number of stores it manages and the large number of people needed to operate them, its revenue per employee is barely better than a lower tier fast-food company like McDonald’s. Starbucks is a relatively new company by the standards of major public companies. It was started in 1971. After current CEO Howard Schultz joined Starbucks in 1982, the company grew rapidly, save for a brief interruption during the recession. As of July 1, Starbucks had 17,651 stores. Schultz has drawn in a large customer base by turning what was a coffee store into a cool location. The food, a multitude of noncoffee beverages, CD sales and free wireless access helped encourage people to remain more than a few minutes. Starbucks also has created an aura as one of the most responsible, large “green” companies in the world. One such green program, “ethical sourcing,” focuses on “responsible purchasing practices, farmer loans and forest conservation programs.” Another program, “environmental sustainability,” looks at, among other things, the use of renewable energy in its stores. No matter what Starbucks does for its suppliers and the environment, revenue and profits have surged. In its third fiscal quarter, revenue increased 13% to $3.3 billion, and earnings increased 19% to 43 cents per share. Starbucks also forecasts strong growth for the next several quarters. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
5. McDonald’s Corp.
> Revenue per employee: $65,000 > No. employees: 420,000 > Revenue: $27.5 billion > 1-year revenue change: 7.5% McDonald’s is the world’s leading global fast-food retailer, with more than 33,500 locations serving nearly 68 million customers in 119 countries each day. Despite its massive size, McDonald’s continues to grow at an impressive rate, even in a relatively weak global economic environment. For the year through July, worldwide same-store sales were up 4.5%. For the first half of the year, excluding currency transactions, revenue was $13.5 billion, up 3% from the same period the year before. Net income was flat at $2.4 billion. Like most of its smaller counterparts, McDonald’s has looked to a portion of the 1.3 billion residents in China as a massive new pool of customers. In mid-2011, the company announced it would open one store a day in the People’s Republic over the next four years. The company recently announced it will open its first “vegetarian-only” store in China to cater to the tastes of many of its consumers. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
4. Yum! Brands Inc.
> Revenue per employee: $50,000 > No. employees: 263,000 > Revenue: $13.3 billion > 1-year revenue change: 14% Yum! Brands, the parent company of Taco Bell, KFC and Pizza Hut, wants to be what McDonald’s is today — the world’s most successful fast-food company. One region where it appears to have bested McDonald’s is in China where it has more than 3,900 KFC restaurants in more than 800 cities. Pizza Hut has been successful in the People’s Republic as well, with 690 restaurants in more than 120 Chinese cities. Yum! also has started to press into India, the world’s second-largest country by population. Despite its recent success, Yum!’s progress has slowed. Net income in the most recent quarter rose only 5% to $331 million. Revenue rose 12% to $3.2 billion, a slower pace than the one set in the previous quarter. Results from the critical China market were mixed. Same-store sales grew 10%, but operating profit declined 4%. And to make Yum!’s growth more challenging, U.S. sales among the company’s brands have been relatively slow. Yum! has a long way to go to catch McDonald’s. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
3. Cognizant Technology Solutions Corp.
> Revenue per employee: $49,000 > No. employees: 145,000 > Revenue: $6.8 billion > 1-year revenue change: 25.8% Cognizant is the only tech company on this list. It is also one of the most rapidly growing. The company is a global provider of IT, tech consulting and business process outsourcing services. Cognizant says it has more than 800 clients. For better or worse, the company’s business is highly concentrated in the financial services and health care industries. Sales at these segments made up 68% of the company’s total revenue of $1.8 billion in the last quarter. Despite global troubles in the financial services industry, Cognizant’s revenue was up 21% in the three-month period. Net income also rose 21% to $252 million. Much of the success of Cognizant is that a great majority of its workers are based overseas, particularly in India, where labor costs tend to be lower than in the United States. In a recent filing with the SEC, Cognizant stated, “The majority of our development and delivery centers, including a majority of our employees, are located in India.” By far, the company’s largest facilities are in Chennai, Pune and Hyderabad — all large cities in that country. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
2. Darden Restaurants Inc.
> Revenue per employee: $44,000 > No. employees: 180,000 > Revenue: $8 billion > 1-year revenue change: 6.7% Darden claims it is the world’s largest full-service restaurant company, a way to distinguish itself from fast-food operators like McDonald’s. Darden owns a large number of brands, including Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52 and Eddie V’s. Darden says it has approximately 2,000 locations. Although it likes to differentiate itself from companies like Yum! and McDonald’s, it is much less successful financially. In the three months ending on August 26, Darden revenue was $2 billion, up slightly from the same period a year ago. The company earned only $111 million. One of Darden’s problems is probably that none of its brands are as well known, or as well distributed geographically, as McDonald’s or Pizza Hut or KFC. Darden has struggled with same-store sales in some of its brands. In the last quarter, Olive Garden had only a 0.3% increase in U.S. same-restaurant sales. The figure for Red Lobster was a decrease of 2.6%. Darden also has to compete with a large number of single owner, or small multilocation full-serve restaurants. There is little evidence that this model is a financially better one than the fast-food model. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>
1. Starwood Hotels & Resorts Worldwide Inc.
> Revenue per employee: $40,000 > No. employees: 154,000 > Revenue: $6.2 billion > 1 year revenue change: 17.3% Starwood is among the largest hotel operators in the world. It manages several high-end brands, including St. Regis, The Luxury Collection, W, Westin, Le Méridien and Sheraton. Starwood also has several lower-end brands, including Four Points and Element. Starwood has a complex business model. Its 1,076 hotel portfolio includes owned, leased, managed and franchised hotels with approximately 315,300 rooms in about 100 countries. These include 59 hotels that it owns or leases in which Starwood has a majority equity interest, 518 hotels managed by Starwood on behalf of third-party owners and 499 hotels for which it receives franchise fees. Starwood may not be a fast-food company, a retailer, a low-end outsourcing firm or a cruise line, but it shares a number of characteristics with them. Like every other company on this list, it must manage a large number of facilities. And like most companies on this list, those facilities cater to millions of customers. Most of these customer-facing jobs pay very little, so these companies have armies of employees serving armies of clients. <a href="http://247wallst.com/2012/09/26/companies-with-the-least-valuable-employees" target="_hplink">Read more at 24/7 Wall St.</a>