Samsung Admits 'Inadequate Practices' In China Plants

Samsung Electronics Co. (Seoul: 005930), the No. 1 seller of smartphones, acknowledged “inadequate practices” in many of its plants in China, although it didn't acknowledge any abise of child labor.

Still, the two-month audit of factories launched in reaction to complaints by China Labor Watch, a New York-based group that previously called attention to abuses at factories of contractors for Apple (Nasdaq: AAPL) found many other problems.

Samsung said its own survey discovered “overtime hours in excess of local regulations” and failure to supervise labor contracts.

“Samsung holds itself and its suppliers to the highest standards,” the company said on Monday. The audit involved 121 employees who examined 105 Chinese suppliers with factories that employee 65,000 workers.

China Labor Watch had alleged abuses of children at six factories owned by South Korea's largest electronics company, with more abuses at plants owned subcontractors. The organization also charged abuses at plants owned by suppliers to Sony Corp. (NYSE: SNE) and others.

During his visit to China in March, Apple CEO Tim Cook visited two factories operated by top supplier Foxconn International Holdings (Hong Kong: 2038) and promised to end any outstanding abuses. Apple doesn't manufacture any of its products.

Samsung said it will complete a survey of another 144 plants by Dec. 31 and then assure independent compliance by working with the Electronic Industry Citizenship Coalition, a third party group.

Meanwhile, the Korean giant said it will be more conscientious in hiring and screening workers in China. Candidates will all be interviewed in person and their ID cards checked to ensure they are legitimate.

“Special guidelines on the banning of child labor” were provided to all factories, Samsung said. As well, factories will be advised to reduce overtime work, cap temporary workers at 30 percent of the total and implement practices tailored to each supplier.

Shares of Samsung fell 2.3 percent to 1.4 million won (US $12.93) in Monday trading.