In the Summer of 1998, the Walt Disney Company released the animated film Mulan. Mulan is an ancient Chinese legend that tells the story of a young woman who takes on her father's responsibilities and duties when he is called to join the army. In order to protect her father, she dresses up as a man, fights bravely and wins a great victory for China. The Chinese Government initially banned the film in China because of Disney's distribution of Martin Scorsese's Tibet film, Kundun. But the Government finally relented and the film will premier February 23.

Although people in mainland China have not seen the film Mulan, they see and live a similar, real life story everyday. Millions of women workers in China are doing just what Mulan did. These young women leave their homes to work in distant cities in order to earn money for their parents and younger siblings, often for younger brothers the family hopes will go to school. But one thing is different: The average Chinese young woman cannot expect the happy ending that greeted Mulan.

There are hundreds of Disney licensees in China producing Disney toys, garments, and footwear. Between July 1998 and February 1999, researchers from the Hong Kong Christian Industrial Committee (HKCIC) visited four of the factories in China producing garments illustrated with Disney characters. The detailed survey of workers in those factories reveals that the Walt Disney Company's Chinese subcontractors consistently violate Chinese labor laws regulating wages, overtime and workplace conditions. The interviews with workers also found that factories regularly violate Disney's own corporate Code of Conduct, which is designed to guarantee that workers are being treated fairly.

Like many other transnational corporations, the Walt Disney Co. is finally recognizing that doing business overseas brings responsibilities as well as profits. Disney has adopted a Code of Conduct that seeks to guarantee that the company's overseas workers will be treated fairly and enjoy safe working conditions. Disney's code, which was patterned after the Workplace Code of Conduct developed by the White House Apparel Industry Partnerships in 1997, prohibits the use of forced or prison labor and child labor; discrimination; physical abuse and sexual harassment. The code also promises safe working conditions and a respect for local labor laws, including the right to form independent unions.

Disney claims that it is serious about implementing this code and ensuring that it is followed by all of its subcontractors. However, most workers at Disney licensees in China are unaware that Disney's code exists, and thus it is not surprising that they do not enjoy the protections the code is intended to guarantee.

The HKCIC researchers found that workers in South China producing clothes illustrated with Disney characters are working for cripplingly low wages and in poor conditions. Workers from one factory reported being paid only 10 cents above their standard wage for five-hour overtime shifts -- the lowest pay rate yet seen by either CAFOD or Global Exchange anywhere in Asia. In another factory, employees regularly work 16 hours, seven days a week. Workers in a third factory couldn't afford to go home for the Chinese New Year holiday because they had not been paid for three months.

Despite the Walt Disney Company's publicized commitment to such a code of conduct, it is clear that garment workers are still losing out to the pressures of maximizing profits. This new research shows that the Walt Disney Company is failing many of its workers and that its code of conduct is virtually meaningless.

According to HKCIC labor rights investigator Chan Ka Wai :

Based on our recent field study of Disney's suppliers in South China, Disney's Code of Conduct is not seriously respected in many factories which produce Disney's products. Most of Disney's suppliers that were covered in the study are brutally violating workers' basic rights and the Chinese Labor Law. Some workers are forced to work for more than 14 hours a day, seven days a week. Some are paid less than the minimum wage. Their wages are reduced through a system of deductions and fines. Their wages are often paid in arrears, as much as three months late. They have no insurance coverage. Very few are even aware that a Code of Conduct exists.

In its Code of Conduct for Manufacturers, The Walt Disney Company affirms its commitment to "respect[ing] the rights of all individuals" and to maintaining "ethical and responsible conduct in all [its] operations." The code requires manufacturers of Di sney merchandise to meet the following standards:

• Respect the rights of employees to associate, organize and bargain collectively

• Provide employees with a safe and healthy workplace

• Not require employees to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by local law. ...

  In addition, except in extraordinary business circumstances, employees will be entitled to at least one day off in every seven-day period

• Compensate employees for overtime hours at such premium rate as is legally required

• Ensure that provisions of this Code of Conduct are communicated to employees, including the prominent posting of a copy of this Code of Conduct, in the local language

• [Allow] Disney and its designated agents (including third parties) to engage in monitoring activities to confirm compliance with this Code of Conduct.

Entirely separate from Disney's internal policies, Chinese labor laws establish:

• An eight-hour day

• A 40-hour week

• Two days of rest per week

• All overtime is to be voluntary, conditioned on consultation with, and consent of the workers

• Overtime should not exceed one-hour per day; except under special circumstances, when a limit of three hours in permissible

• Overtime must not exceed nine hours per week. Therefore, by law, the maximum workday is 11 hours, the maximum work month is 196 hours

• The overtime rate is always to be paid at 150 percent premium, except Saturday and Sunday, when the premium is 200 percent, and holidays, when the rate is 300 percent

• The right to organize independent unions. In October 1997, China signed the United Nation's International Covenant on Economic, Social, and Cultural Rights, which guarantees workers the right to form trade unions and join the trade union of their choice.

But interviews with workers from the four Chinese factories found that these plants regularly violate Chinese laws and the Disney code. The investigators found abuses in the following areas:

Wages:

In the factories surveyed, workers are paid on a piece rate, with their earnings directly tied to production. This means that many workers earn as little as RMB300 ($36.82) per month. The average wage, including overtime for factories surveyed, was RMB600 ($73.64) a month. Top rate in high season, including overtime, was quoted as RMB1000 ($122.74). On an hourly basis, wages were found to average between 13.5 and 36 cents.

In China minimum wages are shockingly low. Disney's code says that employers should "recognize that wages are essential to meeting basic needs", but then only requires that they comply with minimum wages. While workers earn as little as 13.5 cents an hour, independent researcher groups in Hong Kong say that in order for a small family in a major Chinese city to meet basic survival needs, the wage earner needs to make about 87 cents an hour. This is why US and Hong Kong human rights groups call on US companies sourcing in China to pay workers a "living wage", not simply the legal minimum.

Overtime:

In all the factories featured in the report, Chinese laws and Disney's code of conduct with respect to overtime are consistently flouted. At high season, workers at the Gou Nian garment factory reported working between 11 and 16 hours a day, six or seven days a week.

Workers at Sheng Li said they are paid only RMB0.8 (ten cents) above their regular rate for an average of five hours overtime. At the Midway Daily Products factory, workers reportedly receive RMB0.8 (ten cents) an hour above their piece rate for an average of two hours overtime, increasing to four hours in high season.

At the Guo Nian factory, workers told HKCIC investigators that they regularly work eight hours overtime seven days a week in high season and are paid only 10 percent above their usual rate for this work. For over 400 hours a month, workers earn RMB500-600 ($61.36-73.65), which averages out at 13.5 cents an hour.

This is a flagrant violation of local law, as well as industry and company codes. Chinese labor law stipulates that the working time for an employee shall not exceed 49 hours a week on average, and that workers must have at least one rest day a week.

Local labor laws restrict overtime to one hour a day, or three in exceptional circumstances. Chinese labor laws also stipulate that all overtime should be paid time-and-a-half, while workers should receive double time for Saturdays and Sundays.Yet most factories do not recognize Saturday mornings as overtime and consistently cheat workers out of their legally mandated overtime pay.

Illegal Deductions and Delayed or Non-Payment of Wages:

In all four of the factories surveyed, workers are often subjected to hefty fines for being late or taking time off without permission.

Workers have to pay fees and deposits when they are first hired and this money is withheld to ensure that workers don't leave. In the Sheng Li factory that produces Mickey Mouse clothing, the deposit is not refunded if workers stay less than two years. Sheng Li workers also must pay a monthly "tool deposit."

At the Midway factory, workers must pay their own residential tax, which is supposed to be paid by factory owners.

It is common for factories to delay payment of wages. In the Guo Nian garment factory in Humen City, payment had been delayed for three months. In February 1999, many workers in the factory were unable to go home for the Chinese New Year, the most celebrated national holiday, because they had not been paid.

Two factories visited by the researchers, the Chi La An Footwear factory and the Fei Fan Footwear (Panyu) Ltd. Company, at one time manufactured Disney children's shoes, but had recently closed down. The owner, who absconded with the company's money, had failed to pay the workers for over three months. Moreover, workers had been forced to pay entry deposits of RMB100-500, and none of this money was returned.

According to international labor standards, wages must be paid in full, on time and as stipulated in the employee's contract. Workers should not be asked to pay deposits.

Living conditions:

Since 1993, when 83 workers died in a fire in the Zhili toy factory, fire precautions have improved and HKCIC has seen factory owners and the Government take safety more seriously. There are far fewer of the notorious three-in-one firetrap factories (factories combining production site, warehouse and dormitory in one building). However, researchers still found the Sheng Li factory seriously violating the Chinese fire regulations. More than sixty workers lived in dormitories at that factory, some in a four-story building where the lower two stories and a half of the third floor were used as a warehouse and the other floors were used as a dormitory, with extremely cramped quarters.

At the Midway plant, a worker said that according to her contract she should receive RMB350 every month as food allowance. Instead, that amount was deducted from her wages. Researchers at Midway also found overcrowded living conditions, including one room measuring about 150 square feet housing eight women.

Publication of Workers' Rights:

Workers regularly reported that they did not know their labor rights. Workers in one factory said Disney's code was not posted for workers to read.

Disney's code specifies that manufacturers must ensure that the provisions of the Code of Conduct are communicated to employees. This is obviously not happening.

Contracts:

In all the factories investigated there were irregularities with contracts. At Sheng Li, workers sign contracts but are not given copies of the contract. Some workers at the Midway factory had contracts while others did not. One woman complained that her contract stated a monthly wage but she was in fact paid on a piece rate basis, earning some RMB200 a month less than her contract said.

All employees should be given signed contracts of employment, and payment should conform to rates indicated in the contract.

As these findings prove, the conditions and daily management at factories manufacturing Disney products violate Chinese labor laws and Disney's own code of conduct, which applies to all manufacturers of Disney merchandise. The conditions in the Chinese factories investigated also violate the provisions of the labor rights stipulated by the International Labor Organizations (ILO).

During the 1990s, the largest international clothing companies have taken significant steps toward recognizing that participation in the global economy brings responsibilities as well as profits. Today most companies express a desire to guarantee minimum standards in their suppliers' factories and have written codes of conduct to this effect, as is the case with Disney.

But this research shows it is not enough for Disney to publish a Code of Conduct and hope for compliance. Companies must proactively find appropriate models for monitoring and verifying implementation of their codes. Otherwise, such codes risk being seen as a mere PR exercise.

Global Exchange and CAFOD therefore call on Disney to do the following:

1. Independent monitoring:

Disney should take immediate action to make sure that its suppliers fully respect its Code of Conduct. To do this, it should set up an independent monitoring team involving Hong Kong-based non-governmental labor, religious and/or human rights organizations. Until now, Disney has insisted that its own in-house monitors, with the help of for-profit auditing firms, are sufficient to ensure compliance with the company's standards. But this research proves that, at least in China, Disney's system is not working. Chinese factory workers, most of whom are vulnerable young women from the countryside, are more likely to be candid with local religious or human rights organizations they trust than with commercial auditing agencies. Disney must therefore augment its monitoring efforts with groups that workers trust. This monitoring team must have the right to make unannounced site visits, review factory records, and speak to workers without management's presence. Regular reports about implementation of the code of conduct by Disney's partners should be provided for shareholders of the Walt Disney Company and the reports should also be open to the public.

2. Educate workers about their rights and help open the space for workers to organize:

While the Disney code says that employees should have the right to "associate, organize and bargain collectively without penalty or interference", this right is violated on a daily basis in China. In China there is only one recognized trade union, the All China Federation of Trade Unions (ACFTU), which is controlled by the government. There are no authentic, independent trade unions and any attempts at genuine union organizing are harshly repressed. The repression of independent organizing sends a signal to factory managers and workers alike that China's Labor Law and codes of conduct such as Disney's code will not be enforced.

In this context, US companies sourcing in China have special obligations to help educate workers as to their rights, and to help open the democratic space for workers to enjoy these rights. Disney should press its contractors to allow outside groups to provide education and awareness-training to workers about local labor regulations and the company's Code of Conduct, and ensure that workers who attend such programs are not punished. Moreover, Disney should work with legitimate, internationally recognized human rights organizations to urge the Chinese government to free jailed labor leaders, to stop the firing and harassment of workers who stand up for their rights, and to allow workers to freely organize independent unions.

3. Publicly disclose the names and addresses of factories producing Disney products:

Researchers from the Hong Kong Christian Industrial Committee had a difficult time discovering what factories produce Disney products. Of the four factories they visited, one had been closed down. Presently there is an unhealthy veil of secrecy that surrounds production in China. Disney should help lift that veil by publicly disclosing the names and addresses of the factories where Disney products are made. Public disclosure is a necessary first step to ensuring decent working conditions in Disney's subcontracted factories. Such a move by Disney would send a positive message to other US companies sourcing in China.

4. Pay a living wage:

As this research shows, Disney obligates its contractors to only pay the minimum wage instead of a wage that can meet workers' basic needs and pull them out of poverty. As a company with revenues of $22.5 billion in 1997 and net income of $2 billion, Disney can well afford to share its prosperity with the workers who make its products. Workers in China who produce Disney products should be able to lift themselves out of poverty. Disney wages for a normal work week should provide for the basic needs (housing, energy, nutrition, clothing, health care, education, potable water, child care, transportation and savings) of an average family unit divided by the average number of adult wage earners. Disney should work with legitimate researchers to determine what a living wage is for the provinces where Disney is sourcing, amend its Code of Conduct to include a living wage, and then ensure that this wage is paid.