March 30, 2012

Apple's Decision to Permit Third-Party Audit Reflects a Trend Toward Third-Party Monitoring

Arnold & Porter Advisory

Yesterday, March 29, 2012, the Fair Labor Association released a report on its independent investigation of one of Apple’s largest suppliers, and the largest private employer in China, Foxconn. The technology giant Apple, Inc. had made headlines last month by announcing that it would subject its largest final assembly suppliers to independent monitoring by the Fair Labor Association (FLA). Apple is the most recent major company to join an organization such as the FLA and seek external assistance to review and improve labor conditions in its supply chains. Other companies are likely to follow. This development reflects a growing trend by companies to respond to concern by customers, investors, governments, and shareholders about labor conditions in global supply chains. Importantly, a neutral and effective third-party audit offers companies a comfort level when answering questions from potential critics about their attentiveness to supply chain labor conditions. Indeed, the use of a third-party audit may head off bad publicity before it starts.

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