This excerpt taken from the MAT DEF 14A filed Mar 30, 2009.
According to Mattel 2007 Global Reporting Initiative report, Mattel also licenses its brands and trademarks to approximately 1000 licensees companies for the production of specialized consumer products such as apparel, software, durable goods and other childrens products. The licensees independently manufacture these products in approximately 3000 contracts factories around the world.
Shareholders cannot but be concerned by the above figures and by the potential risks they represent.
In 2008, no new data were available that would reassure shareholders. On the contrary, audit reports reveal blatant violations of Mattels code of conduct not only in subcontractors facilities but also in Mattels own facilities. To shareholders this is very disquieting news, because it shows that Mattels management is not seriously controlling the facilities and not seriously trying to implement the code of conduct. Since the links between licensees and Mattel are even looser, shareholders have every reason to fear major problems regarding safety, quality or working conditions.
The numerous recalls of 2007 have battered the share value of Mattel. More than that they have battered Mattels reputation. Despite the damage control, Mattels recall of lead-tainted toys remains the reference for tainted products. All over the world, in every media, no information about tainted products, whether milk, toothpaste or food, as far from the toy industry as it may be, appears without a reference to Mattels recalls. Time and again, people are reminded of Mattels lead-tainted problems. In the US as well as Europe, legislation has been modified due to Mattels recalls. The new legislation with its more stringent standards will increase production cost hereby making the improvement of working conditions even more improbable.
Shareholders faith in Mattel has been shaken by the recalls of 2007. They fear further problems due to the number of the licensees and their contract factories which represent an obvious risk. Only yearly serious reports about the licensees will help shareholders restore their faith in Mattel.
* * * * * * * * * * *
This excerpt taken from the MAT DEF 14A filed Apr 24, 2008.
According to Mattel 2007 Global Reporting Initiative report, Mattel also licenses its brands and trademarks to approximately 1000 licensees companies for the production of specialised consumer products such as apparel, software, durable goods and other childrens products. The licensees independently manufacture these products in approximately 3000 contract factories around the world.
Shareholders cannot but be concerned by the above figures and by the potential risks they represent as manifested by the following cases.
In 2005, in a Mexican plant belonging to an American licensee, a case of an underage worker triggered worldwide media coverage, a demonstration in front of a Target in New York and the filing of a public communication with the Office of Trade Agreement Implementation by the trade union Frente de Trabajatores Vanguardia Obrera, with the support of the Washington Office on Latin America.
In 2006, Mattel recalled an American Girl jewelry with unacceptable high levels of lead. As stated by Mattels Chairman and Chief Executive Officer at the 2007 annual meeting, the jewelry was manufactured by a licensee. The jewelry was rated one of the worst products of the year by BusinessWeek.
In November 2007, the National Labor Committee published a report about the working conditions at a Chinese facility producing for Mattel such articles as Barbie electric guitars and keyboards, Barbie cassette players or Barbie Hug N Heal Pet doctor sets for instance. Its conclusions are devastating: working time of over 80 hours a week, weeks on end without a rest day, overcrowded and overheated facility, renewed temporary contracts, workers cheated on overtime pay, primitive dormitories. Mattel claims that the facility is operated by one of its licensees.
Shareholders have greatly suffered from the numerous recalls of the past few months. Their faith in Mattel is shaken. The number of the licensees and their contract factories represents an obvious risk. Only yearly serious reports about the licensees will convince the shareholders to keep their faith in Mattel.
* * * * * * * * * * *
This excerpt taken from the MAT DEF 14A filed Apr 12, 2007.
Up to now, Mattels code of conduct has failed.
The latest audit reports, released in June and October 2006, only confirm former reports. Working and living conditions have barely improved. Regarding the longer and longer working hours, they have even deteriorated.
How could such a promising code, now almost ten years old, have failed to fulfill its goal?
The main reasons are the lack of will and the lack of resources. Time and again, Mattels management has not corrected obvious violations of the code of conduct privileging instead the short-term bottom line. Time and again, Mattel has preferred cutting the ties to a subcontractor rather than spending money to help implement the code of conduct. Time and again, in order to avoid improving working and living conditions, Mattels management has hidden behind the generalities of corporate social responsibility or the excuse that other toy companies or retailers have similar or worse working and living conditions.
Shareholders may be interested to know that the same companies that brag about their corporate social responsibility are now intensely lobbying in China to prevent the adoption of a new labor law with stricter regulation. And shareholders should be aware that corporate social responsibility has become a big business for consultants, distributing awards to the very companies sponsoring their plush conferences.
The hypocrisy of companies with many good words but very little concrete progress could be counterproductive, consumers and workers will not be fooled for long. Fair trade products have a double digit growth in Europe. Furthermore, workers in China no longer put up with appalling conditions. Last July, there was a first social movement in a facility manufacturing toys for Mattel and due to labor shortage in China in the toy industry Mattel has been compelled to ship some toys by air thus damaging the bottom line and hurting the shareholders.
Shareholders need to know how much Mattel is doing to move beyond window dressing. By reporting yearly on the concrete measures and the money spent, the Board could assure shareholders that the issue of the working and living conditions is properly addressed and is no longer a potential liability.
* * * * * * * * * * *
This excerpt taken from the MAT DEF 14A filed Apr 13, 2006.
In 1997, Mattel announced its first code of conduct (the Global Manufacturing Principles, GMP) and the creation of Mattel Independent Monitoring Council (MIMCO). Since 1999, regular audit reports have been published.
The latest reports, released in January and April 2004 and August 2005, are cause of major concern. It is obvious that, eight years after their adoption, the Global Manufacturing Principles have failed: working and living conditions have barely improved.
Year after year, audit report after audit report, in Mattels own plants and at subcontractors facilities, the same complaints are voiced: too many overtime hours, no living wage, discomfort due to noise, heat and poor ventilation, overcrowded dormitories, very short lunch breaks, harassment. The recommendations by the auditors often are not followed by the necessary corrective measures.
And what about working conditions at plants run by companies to which Mattel has sold a licence and which manufacture Mattel products? No audit report has been published as of November 2005.
A recent example shows how Mattels reputation could be damaged. In 2005, in a Mexican plant belonging to an American company to which Mattel had sold a licence, a case of underage worker has triggered worldwide media coverage, a demonstration in front of a Target in New York and the filing of a public communication with the Office of Trade Agreement Implementation by the trade union Frente de Trabajatores Vanguardia Obrera, with the support of the Washington Office on Latin America.
Money spent on improvements has been too little and/or inefficient. Shareholders need to know what and how much Mattel is doing. Shareholders need to be assured that, in times of growing overall difficulties in the toy industry, the issue of the working and living conditions is properly addressed and will no longer be a major Mattel liability.
* * * * * * * * * * *
This excerpt taken from the MAT DEF 14A filed Apr 13, 2005.
Seven years ago, Mattel announced its first code of conduct (the Global Manufacturing Principles, GMP) and the creation of MIMCO (Mattel Independent Monitoring Council). Since then, regular audit reports have been published.
The latest reports, published in January and April 2004, are cause of major concerns.
The January report regarding twelve subcontractors plants in China corroborates the facts revealed by NGOs and describes shocking conditions and systematic violations of the laws and of Mattels code of conduct.
The April report regards two Mexican plants which are owned and operated by Mattel. Even in these facilities, Mattels code of conduct is not fully implemented. Workers have the same complaints of heat, noise and overtime as they did during the previous audits. Cases of harassment are on the rise and a third of the workers are afraid of reporting injuries because of the risk of being fired. Overtime wages were not always paid as they should have.
It is true that Mattel has had the integrity to keep its commitment and to make all the audit reports public. This was but a first step. To have the conditions really improved, the laws and the GMP respected, drastic changes are required. It is obvious that the resources already committed to improve Mattels own facilities, to advise and assist its vendors have been insufficient and/or ineffective. More is needed than cosmetic measures and press releases used as a public relation device.
Consumers awareness of the issue of the working and living conditions in the toy industry is growing due to NGOs studies and an important media coverage, especially in Europe where even the European Parliament is being informed.
A rapid action is needed in order to avoid further damage to the value of Mattel and to meet the expectations of the consumers.
* * * * * * * * * * *
EXCERPTS ON THIS PAGE: