Free 7-day Trial
All Articles and Columns »

Foxconn's Global Clients Don't Get Much Disclosure

September 25, 2012 | About:
GMI Ratings

GMI Ratings

1 followers
After around 2,000 workers brawled at a Foxconn Technology Group dormitory, the Taiwanese electronics maker said it would close a plant in China on Monday, according to Reuters. Although the Apple product supplier continues coming under fire, the international disclosure about its corporate governance remains relatively murky, signaling that its global clients don’t require much information in order to strike a deal.

The Foxconn facility involved is in the Chinese city of Taiyuan and employs about 79,000 people, according to media reports. A fight between Foxconn workers reportedly started on Sunday night and escalated into a riot that police eventually controlled, the media said. Public critics have also berated Foxconn for worker suicides and other incidents in recent years.

Despite the apparent scrutiny, Foxconn publishes fewer details about its managers on its website in English than many other publicly traded foreign companies. To be sure, the most recent corporate responsibility statement on Foxconn’s website is 84 pages long, if out of date as it pertains to 2010. It includes a picture of people applauding amid a burst of confetti at the talent singing show event that the Foxconn labor union launched that year. The company lists awards such as being “Regarded by Common Wealth as the Most Admired Company in Taiwan.” Foxconn also explains not only what kinds of courses it provides to its staff, ranging from “management skills” to “common knowledge,” but also how many hours (more than 8,628,000 in 2010!) and how many attendees (more than 19,620,000!).

Amidst this wealth of information, Foxconn’s description of its corporate governance says that Hon Hai Precision Industry Co. Ltd., which controls Foxconn, had two unspecified independent board directors and one unspecified independent statutory auditor on its board as of 2010. In contrast, the Swiss pharmaceutical Roche Holding Ltd. presents a list of its management that enables readers to drill down to individual resumes. It is a common practice among global firms to post at least the names of senior managers in English in an obvious part of the corporate website.

Taking a closer look at the limited information available, Foxconn Technology Co. Ltd (TPE:2354) could have more safeguards in place to ensure that senior managers don’t abuse their powers. For example, Foxconn’s board chairman Dongliang Lin also serves on the board of at least three unspecified companies, according to Reuters, and overboarded directors can struggle to fulfill their duties when they have too many responsibilities. Meanwhile Foxconn’s director Hanming Li serves in the same role at numerous companies, ranging from True Value International Ltd. to Atkinson Holdings Ltd. Director Xuekun Li serves on the boards of three other companies, and director Zhiqian Hong is board chairman of two other companies as well as a director of four.

Hon Hai Precision Industry Co. Ltd. consists of many interwoven business units, which makes it challenging for international investors, customers or business partners to see and evaluate who does what at the company and in which subsidiary. Some similarly named companies associated with directors that sit on the board of Foxconn Technology Co. Ltd. (TPE:2354) include Foxconn Precision Components Holdings Ltd., Foxconn Technology Pte. Ltd, and Foxconn Technology Co Ltd. Foxconn International Holdings Limited (stock code 2038) is incorporated in the Cayman Islands as an entity with limited liability.

Foxconn discloses such limited information about its financial results, it is impossible to calculate an AGR® score that would indicate the level of its accounting and governance risk compared to peers, unlike thousands of other publicly traded firms around the world. Even so, Foxconn supplies products not only to Apple (AAPL) but also other global technology companies, according to the media.

Frequently named in reports of worker suicides and safety violations at Foxconn since 2010, Apple said this February that it has audited every final assembly factory in its supply chain each year since 2006, including more than 40 audits of Foxconn manufacturing and final assembly facilities. At Apple’s request, the Fair Labor Association conducted special voluntary audits of final assembly suppliers, including Foxconn factories in Shenzhen and Chengdu, China, interviewing thousands of employees about conditions and inspecting facilities including the dormitories. While the group noted progress on March 28 this year and said Foxconn had committed to bring working hours in line with the Chinese legal limit of 49 hours per week, including overtime, by reducing monthly overtime hours from 80 to 36, China Labor Watch fired back that the average overtime in most Foxconn factories was between 100 and 130 hours per month and the basic salary around $200 a month.

"The inspections now underway are unprecedented in the electronics industry, both in scale and scope," Apple's CEO Tim Cook in the company’s statement this February. If that is indeed the case, many people in the global economy have some way to go before they can explain how they came by their gadgets so cheaply.

foxconnchart-300x99.jpg

Region: All Other

Country: Taiwan

Sector: Technology

Industry: Computer Hardware

Market Cap: TWD 148,441.9 million (Large Cap)

ESG Rating: D

AGR Rating: N/A

techbellcurve071012-300x136.png


Rating: 3.6/5 (7 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Hide