Mattel and Disney under pressure again for Human and Labour rights violation

According to a resent study done by Sacom is the toys produced by Disney and Mattel who also make the Barbie dolls produced under poor working conditions. This is not the first time that Mattel in specific have been under scrutiny on their ethics.

A Chinese factory that produces, among other Disney characters, Fisher Price toys, Barbie dolls, have been accused of using child labor, toxic chemicals and to push employees to illegal overtime.

These claims have been put forward by the Hong Kong-based human rights organization Sacom who has studied the working conditions at the factory Sturdy Products.

The factory, located in Shenzhen city, has more than 6,000 people on the payroll, and according to the survey, employees were among other things pressured to work 120 hours extra a month.

In addition, they must work for a salary far below minimum wage, and earlier this year one of the employees, a 45-year-old woman, committed suicide after several supervisors had yelled at her.

Among the accusations that is made by Sacom are:

■ The employment of a 14-year-old. Staff also reported the presence of other child workers, according to the investigator.

■ Routine excessive overtime. Employees produced a “voluntary” document they said they had to sign agreeing to work beyond the maximum overtime legal limit of 36 hours a month, along with wage slips that suggested they were averaging 120 hours of overtime a month.

■ A harsh working environment in which workers complained of mistreatment by management. One worker injured on the production line was shouted at and ordered back to work despite needing medical treatment.

■ Concerns about the chemicals in use and poor ventilation. Employees claimed three workers had fallen ill. They said they had to hide pots of adhesive and thinners during audits of the factory by its client companies.

■ They also claimed that they were paid by the factory to give misleading answers during audits and that they were fined for failing to hit targets. The calculation of wages for different workers was described by Sacom as arbitrary.

Disney and Wall Mart are prone to take action

As this is not the first time that the big retailers Mattel and Wal-Mart is under pressure to get more control over their supply chain.

“We take reports like this very seriously and we will implement a corrective action plan if our investigations confirm any of the findings,” said Wal-Mart spokeswoman Megan Murphy told the South China Morning Post

“As soon as we learned of the suicide at the Sturdy Products Factory, we immediately launched an investigation.”

According to the Human rights group was Wal-Mart also in contact with the International Council of Toy Industries (ICTI), a trade association that certifies legal compliance and decent working conditions in toy factories worldwide, which was pursuing a separate investigation.

Winson, who owns Sturdy Products, According to The Guardian newspaper declined to comment on the new report from Sacom. But the study has however shaken Disney Group, and supermarket chain Walmart, which sells some of the products being produced at the factory.

Disney said in a statement that they “always take cases dealing with licensees and business partners very seriously” and that the group, will now “evaluate the situation” from the information they have available. Wall Mart, which has more than 8,500 giant stores around the world have decided to, launched an independent investigation of working conditions.

This and other instances where factories in China or some of the other market in Asia have been monitored using different types of codes just shows the limits of what these can do for business when it comes down to running the everyday business. Big companies in the developed world can implement and make supply chain partners sign as many Codes of Conduct or Ethics as they want to if it is not followed by real action it will mount to little more than window-dressing.

Institutional investor drops Lundbeck

The first institutional investor Unipension have dropped their Lundbeck shares due to its controversial drug Nembutal that have been used in executions.

Lundbeck have been under attack for several months due to its unwillingness to take a definite stand on capital punishment in the United States. While the issue has been growing in Denmark and several key stakeholders have raised their voice there have not been much movement in terms of real economic pressure until now.

While Unipension is a relative small shareholder (40 million Dkr) in Lundbeck they do represent a group of stakeholders who have significant influence on the general discourse on ethical investments.

“We are an active owner and always try to establish a constructive dialogue with the companies we invest in. We have done this many times and in most cases, we have detailed and complete answers to our queries. This also applies to Danish companies, which usually take their social responsibility and reputation seriously. Contrary to what we normally experience, it has actually been our impression that Lundbeck did not want to engage in a genuine dialogue with us as an investor ” said Niels Erik Petersen, Chief investment officer at Unipension. And he continues.

“It has not been possible for Unpension to get a detailed report on Lundbeck’s efforts to ensure that its products are not being used in undesirable ways.”

While there hasn’t been much movement in terms of negative share price on the contrary the company have experienced a steady increase in the last year but this could be a turning point for the company. There are several ingredients, which can make this case troublesome for the company.

  1. Lundebeck have until now been one of the model companies in terms of CSR commitment and reporting. This have in it self created a platform from which critical stakeholders can hold the company accountable.
  2. The company has in the past been involved in somewhat dubious affairs when it was engaged in the UN food-for-oil-program despite the company had a very explicit anti-corruption policy. For this it the company was heavily criticized together with a number of other companies.
  3. The company is involved in the production of drugs, which normally would be associated with improving people’s life not helping life come to a rapid end.
  4. Lundbeck is a major player in the anti-depressant drug industry and have a major stake in the US and European market making them highly visible to a lot of consumers. It is estimated that about one in twenty will have a depression at any given time making the decease common place among the majority of the population.

All of these factors, and properly one or two more, can create a situation were Lundbeck’s image and the brand value of the company could suffer resulting in a fall in its total value and share price. From an investors point of view I would rather miss the 1% of total sales that Nembutal is then risking the value of the remaining 99%.

The Lundbeck case in short:

  • In January this year U.S. Hospira stopped production of the anesthetic, as 35 U.S. states use when they execute death convicts. Hospira would produce it in Italy, but the U.S. authorities intervened.
  • Since the first German and later British authorities, under pressure from grassroots organizations slowed other European companies’ exports of anesthetic to the U.S..
  • Therefore, the preliminary four U.S. states have switched over to using the Lundbeck product Nembutal, which Lundbeck is the only supplier of the U.S..
  • The means is the longest course of the patent. Last year sold Lundbeck 50 million. doses, which according to IMS earned 25.5 million. dollars.
  • Lundbeck has protested against the use, but will not pull the product back, particularly as it approved for treating severe epileptic seizures.