[Date Prev][Date Next][Thread Prev][Thread Next][Date Index
][Thread Index
]
Wal-Mart removed from DSI: Burma co
- Subject: Wal-Mart removed from DSI: Burma co
- From: darnott@xxxxxxxxxxx
- Date: Fri, 18 May 2001 06:33:00
Wal-Mart removed from DSI: Burma contracting cited
Domini 400 Social IndexSM Decision Series:
Number Three
Wal-Mart Stores Inc.,
Summary
Kyle J. Johnson, Peter D. Kinder
Kinder, Lydenberg, Domini & Co., Inc.
On February 1, 2001, KLD removed Wal-Mart Stores, Inc. from the Domini
400 Social IndexSM (herein referred to as "DSI" or "the Index"), KLD's
proprietary socially screened equity index. KLD removed Wal-Mart from
the DSI primarily because the company has not done enough to ensure
that its domestic and international vendors operate factories that meet
adequate human rights and labor standards. Wal-Mart is the second
company that KLD has removed from the DSI for vendor contracting
problems. KLD removed Nike from the DSI in 1997.
In determining whether Wal-Mart's vendor contracting record constituted
grounds for removal from the DSI, KLD principally considered:
Wal-Mart's documented contracting with vendors that operate
"sweatshops" or that were based in Myanmar (formerly Burma)
Wal-Mart's vendor contracting policies and practices
Wal-Mart's unresponsiveness to shareholders on this issue
Wal-Mart's role as a market leader
Vendor Contracting Issues
In the 1980s and 1990s, the practice of sourcing products from factories
in developing countries became prevalent in the US retail and apparel
industries. Such factories commonly pay wages that are far below those
paid to workers in similar occupations in the US. In addition, many of
these factories operate as "sweatshops." Sweatshops are factories that
subject their workers to one or more inhumane working conditions such
as forced, prison, or child labor; physical and mental abuse; exceedingly
long hours; unhealthy and unsafe working environments; and/or pay
wages that do not support workers' basic needs.
Numerous firms have also regularly purchased products made at factories
based in Myanmar. The government of Myanmar is a military dictatorship
that has been accused of perpetrating grave human rights abuses. In the
early 1990's, Aung San Suu Kyi, the leader of the country's
pro-democracy movement and winner of the 1991 Nobel Peace Prize,
called for companies to pull out of Burma until the political climate
there
improves.
Both of these issues have been of major concern to a number of
constituencies, including social investors. These groups have called on
companies to work to improve conditions in their vendors' factories and
to cease contracting with Myanmar-based facilities until that country's
regime is ousted.
Wal-Mart was a constituent of the Domini 400 Social Index from the
DSI's launch in May 1990 until its removal in February 2001. At the point
of its inclusion on the Index, Wal-Mart was regarded favorably by social
investors as a leader in its industry in areas such as employee relations
and community involvement. Over the past decade a number of
controversies and concerns have arisen over Wal-Mart's practices in
several areas, particularly its vendor contracting policies and practices.
Wal-Mart's Vendor Controversies
Wal-Mart's involvement in high profile vendor contracting controversies
extends back to 1992. At that time, NBC's television news magazine
Dateline reported that some of the company's clothing had been made by
Bangladeshi children, despite being advertised as being "Made in the
U.S.A." Another major controversy erupted in 1996, after the National
Labor Committee, a US anti-sweatshop non-profit organization,
discovered that some of the company's Kathie Lee Gifford clothing line
had been made in Honduran sweatshops.
However, three more recent incidents compelled KLD to take a harder
look at Wal-Mart's vendor contracting record and its implications for the
company's standing on the DSI.
First, in July 2000, the National Labor Committee reported that Wal-Mart
Canada had been purchasing products from factories based in Myanmar
through December 1999. Numerous firms of similar stature (Levi Strauss,
Liz Claiborne, Walt Disney, etc.) had terminated their relationships with
suppliers in Myanmar by 1997. These purchases seemed to contradict
Wal-Mart's stated policy to "favor Vendors who have a social and
political commitment to basic principles of human rights . . ." Wal-Mart
Canada has since stated that it will no longer purchase from factories
based in Myanmar. Wal-Mart USA's position remains unclear.
Second, an October 2000 article in Business Week reported that
Wal-Mart lied about its involvement with the Chun Si Enterprise Handbag
Factory, a sweatshop based in China. In early 2000, the National Labor
Committee accused Wal-Mart of contracting with this factory, which
subjected its workers to 90-hour work-weeks, beatings by factory
guards, exceptionally low-wages, and prison-like conditions. Wal-Mart
adamantly denied that it had ever had a relationship with the factory
until BusinessWeek confirmed the company's involvement with Chun Si
through December 1999.
Third, Wal-Mart decided against piloting a third-party independent
monitoring program (IMP), using locally based NGOs, at its vendors'
facilities in Central America. Religious, human rights, and labor groups
agree that IMPs provide the most effective means to ensure that vendor
factories avoid labor and human rights abuses. In November 2000,
Wal-Mart had entered into protracted negotiations with the Interfaith
Center for Corporate Responsibility (ICCR), the leading organization
in the
shareholder resolution process, on the issue of independent monitoring.
Although Wal-Mart had hinted that it planned to move ahead with such a
program in the BusinessWeek article referenced above, it ultimately
rejected the idea.
Wal-Mart's Vendor Contracting Policies and Practices
These incidents led KLD to re-examine Wal-Mart's vendor contracting
policies and practices. The company's code of conduct for vendors does
not stipulate that its vendors permit workers to bargain collectively, nor
does it require them to pay laborers a sustainable living wage. The
company does not issue any public reports on the working conditions at
its vendors' factories. Other companies that have been similarly exposed
to sweatshop and Myanmar controversies, including The Gap, Liz
Claiborne, Nike, Timberland, and Reebok, have taken steps to improve
their records on these issues. In contrast, Wal-Mart's progress has been
minimal.
Wal-Mart's vendor contracting record is particularly troubling in light of
its position as the largest retailer in the world. As a market leader,
Wal-Mart wields tremendous influence over its industry. As a result,
advocacy groups believe that Wal-Mart's example compels other
companies to set a similarly low bar for monitoring labor conditions at
their vendor's factories. Furthermore, given its sales volume, a move to
ratchet up the standards in its vendor contracting policies and practices
could improve the lives of proportionately more laborers than similar
operational changes at Wal-Mart's smaller peers.
KLD is cautious about removing companies from the DSI for social
reasons, preferring instead to communicate with companies to advocate
for change and monitor companies' efforts to improve. However,
Wal-Mart's sub-par vendor contracting policies and practices and its
unresponsiveness to calls for change, amplified by its role as the retail
industry's market leader, convinced KLD that Wal-Mart's removal from the
DSI was the most appropriate course of action.
From the KLD website:
http://www.kld.com/benchmarks/walmart.html