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conduct for its overseas suppliers. The proposal seeks
to increase management’s level of accountability to
shareholders in these important areas of corporate performance.
The proposal was prompted by serious concerns shared
by both consumers and shareholders about whether low
wages and abusive working conditions exist in McDonald’s
contract supplier facilities. For example, the company
purchases goods produced in countries like China where
human rights abuses and unfair labor practices have
been well documented.
McDonald’s Good Name At Risk: Last fall the
company became directly involved in this controversy.
In August 2000, the South China Morning Post (Hong Kong)
published a story alleging the use of underage workers
at supplier factories in China who make Happy Meals
toys for McDonald's. The story alleged that youth as
young as 14 worked 16-hour days for a wage equivalent
to the price of a Happy Meal and ice cream in guarded
factory complexes, sleeping in wooden beds with no mattresses.
The company investigated the problems and said it did
not find evidence to confirm the allegations. However,
it uncovered "serious record keeping irregularities
and related problems" that led to the termination
of the supplier, according to a report on supplier social
compliance recently posted on McDonald’s website.
Yet Simon Marketing, which contracts out McDonald’s
production to suppliers, told the South China Morning
Post it had recently audited the facility and found
it to be in "full compliance" with McDonald’s
Code of Conduct. Clearly something went wrong. These
types of problems are precisely the reason Domini Social
Investments has engaged the company in a dialogue to
improve the transparency of its monitoring of supplier
standards enforcement.
Executive Compensation & Social Responsibility:
Both social and financial criteria should be factors
in determining compensation packages for top corporate
officers. Too often, top executives receive increases
in compensation packages even when social performance
is mediocre or poor.
The proponents believe shareholders should challenge
executive pay packages that reward poor social or financial
corporate performance. For example, the company should
consider whether top officers' pay for a given year
should be reduced if the company is faced with consumer
boycotts or public relations problems because it inadequately
monitored compliance of its suppliers' code of conduct.
The proponents are encouraged that the company has
begun to address their lack of public transparency on
overseas labor issues by posting a report on vendor
standards on its web site. It is a good start but it
needs to include more data that demonstrate actual compliance
with the company’s code of conduct.
Please send a message to McDonald’s management that
executive pay should be linked in part to performance
on social and environmental issues.
Vote FOR Item No. 5.
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