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Executive compensation should be linked to progress
on other social issues. Our company should consider
whether top officers’ pay for a given year should be
reduced if our company is faced with consumer boycotts
or public relations problems because it inadequately
monitors compliance of its supplier code of conduct.
Case Study: Sweatshops
Sweatshop conditions, poor wages and worker abuse are
the dark side of our global economy. McDonald’s relies
on suppliers in China to manufacture toys distributed
with its Happy Meals for children.
--In August 2000, newspaper articles in Hong Kong alleged
that contract suppliers making toys for McDonald’s employed
underage workers and forced them to work for up to16
hours a day.
--The company said it performed an extensive audit
of the facility and said it did not find evidence to
confirm the allegations.
However, it uncovered other "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.
International Controversy
McDonald’s brand name is perhaps its most valuable
asset.
The trade publication Ad Age Global, in a commentary,
stated that "the ugly side of globalization hit
a U.S. multinational squarely on the jaw last month
in Hong Kong when McDonald’s was accused of employing
underage Chinese workers in sweatshops. "
Ad Age Global noted that the McDonald’s case made headlines
worldwide and that "scores of global marketers
with factories in Asia, such as Calvin Klein, Gap, Fruit
of the Loom and Ralph Lauren, surely are trembling at
the knowledge that they have, in all likelihood, been
put at risk by their own contractors." (Oct. 1,
2000)
Reporting to Shareholders
Following a request from Domini Social Investments,
management placed information about contract supplier
monitoring on the company’s website. The report is a
good start but it needs to include more data that demonstrate
actual compliance with the company’s code of conduct.
The company is willing to discuss the components of
the program but not how well it is performing. That’s
like saying the company is very profitable but not releasing
earnings figures.
Threat to Shareholder Value
McDonald’s products are discretionary purchases. Consumers
may turn to other food providers not associated with
these problems. Without reports validating progress
towards implementing its code of conduct, lasting damage
could occur to our company’s reputation, brand value
and its long-term profitability.
Your YES Vote on Proposal #5 Will:
Encourage management to continue working diligently
to resolve contract supplier problems and other social
and environmental challenges before they damage the
company’s reputation.
This resolution was filed by Domini Social Investments,
General Board of Pension and Health Benefits of the
United Methodist Church, and Missionary Oblates of Mary
Immaculate.
For more information contact: Conrad MacKerron at As
You Sow at (415) 291-9868, asyousow, or Adam
Kanzer at Domini Social Investments at (212) 217-1027.
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