Violations in Its China Businesses
By Thomas Wilkins
The Coca-Cola Company denied and protested emphatically charges of dangerous work conditions and human rights abuse in China at its annual stockholder’s meeting in Georgia. A shareholder proposal from a California investment firm cited publications and reports claiming Coca-Cola used prison labor in China and the company, its bottlers and suppliers “have been associated with human rights controversies.”
Mr. Neville Isdell, outgoing Chairman of the Board, denied these claims, saying the cited reports were not updated . He also said regarding China: “We take labor practices seriously. Our internal investigations found no use of prison labor.”
The heated exchange between Ray Rogers, director of Corporate Campaign Inc was a fire storm as shareholders considered whether to vote yes or no on a proposal by a shareholder connected with Harrington Investments of Napa, California. This organization has pressed for shareholder advocacy over a twenty five year period. It claims to have persuaded 120 publicly traded corporation to expand economic, social and environment accountability and responsibility. Another stockholder was evicted from the meeting hall of an estimated one thousand in attendance after he refused to stop propelling charges against Coca-Cola management.
The California advocacy firm has campaigned since the early 2000’s to ensure that the rights of Chinese workers and citizens be protected by asking companies to sign the China Business Principles. This is a code of conduct written by Amnesty International, the International Labor Rights Fund and Global exchange.
The International Labor Rights Fund claims that labor conditions in a factory in China are pitiful and that U.S. tax dollars are used to buy products made in sweatshops which violated labor laws and human rights. The charges include children as young as 14-15 years old working the same hours as adult workers and instructed to hide when customers inspect the factory, poverty wages, excessive production quotas and excessive mandatory overtime with as many as 100 overtime hours per month, unhealthy work environment from suffocating heat, and dust causing chronic respiratory problems and crowded dorms with 12 workers to a room of 18 square meters (less than 200 square feet), and in a factory that discharging into a river, resulting in black and foul smelling water. All of these charges appeared in a report issued last week.
Not only has Cola-Cola been singled out by Harrington Investments with human rights proposals, but also proposals have been made at Wal-Mart. At today’s meeting in Georgia, Cola-Cola shareholders were asked to vote on Harrington’s proposal to create a committee of the board of directors on human rights. The proposal is built on the thesis that directors have a fiduciary duty to avoid complicity with foreign government that consistently violates internationally recognized human rights. The proposal argues that this action would protect shareholder value and reputation and would avoid costly litigation and loss of investor confidence.
Regarding the shareowner proposal for a board committee on human right, the resolution argued that the “company’s existing governance process does not sufficiently elevate human rights issues within the company or serve the interests of shareholders in expediting effective solutions.”
Coca-Cola’s Board of Directors denied the allegations in the proposal and cited that it has already established a committee with the authority to review the implications of the company’s policies on human rights issues. It asserted that it works diligently for human rights of individuals in the US and worldwide. The Board of Directors concluded that “In practice, the Public Issues and Diversity Review Committee has regularly reviewed the company policies, procedures and positions relating to human rights issues,” including “workplace accountability generally, and specifically relating to employees of the company and its suppliers in China.”
The shareholders voted 96% against the shareholder proposal to amend the Bylaw so as to have a Board Committee on Human Right after the Chairman of the Board said emphatically “we cannot tolerate child labor.”
After the meeting, Mr. John Harrington, President and CEO of Harrington Investments, Inc. spoke to ChinaStakes from his office in California. He said he was trying to raise awareness of human rights issues in China.
“Coke’s has policies which are meaningless. We want to make it a fiduciary responsibility that they consider human rights. The fiduciary issue is important to protect human rights.”
He cited one very large socially conscious institutional investor which divested itself from its Coca-Cola stock.
Mr. Harrington claimed authorship of this particular shareholder proposal that was defeated today. “However, I have written four or five proposals for Mr. William Wardlaw, a good friend, that have carried. One such proposal two years ago asked for information relating to ground water usage in India.” Harrington is the author of High Returns Using Socially Responsible Investing and Investing with Your Conscience. He intends to present a resolution at Goldman Sachs annual meeting in a few days in New York on U.S. economic security. His similar proposal with Bank of America was denied by the Securities and Exchange Commission in Washington. Harrington said: “This SEC action is shameful, especially since President Obama’s Director of National Intelligence; retired Navy admiral Dennis Blair, recently testified by the U.S. Senate Intelligence Committee that national security is threatened by economic instability.”
Mr. Harrington’s argument relates to ensuring that companies take steps to support U.S. economic interests. He may one day end up having an effect on China. But since he only got 4% of the vote at the Coca-Cola meeting today in Georgia, any negative effect on China is a long way off.