Celebrating Stakeholder Failures

Celebrating Stakeholder Failures

Again, the following commentary/forecast is one I wrote in my capacity as a senior fellow at “the nation’s oldest consumer protection agency,” Consumers Research, where, among other things, I compile a weekly letter for public pension-fund managers.  I am sharing it here today because I thought it might be useful to some of you.


So Shall You Reap

In a series of recent LinkedIn posts, As You Sow – the vaunted shareholder activist group and ESG enthusiast – quoted the executives of some of the world’s largest and best-known companies, all extolling the virtues of sustainability in business and the importance of ESG.  Ironically, however, in so doing, the group also exposed the underbelly of the normative stakeholder movement as well as the extreme complexity of the effort to promote morality through investment schemes.

Among the executives cited in this As You Sow campaign are Andy Jassy, the CEO of Amazon, and Tim Cook, the ubiquitous Chief Executive of Apple.  While the inclusion of these two companies and their CEOs among the socially and environmentally “chosen” is hardly surprising, it is also rather revealing.  Both companies have, traditionally, been considered ESG darlings, largely for their domestic behavior and professed dedication to domestic environmental and social justice causes.  Nevertheless, when one looks beyond the superficial – and especially in Apple’s case, beyond the border of the United States – things are a bit murkier and indicative of less-than-ideal corporate behavior.  It is a fortuitous coincidence, in short, that As You Sow would highlight these two companies as stakeholder archetypes, while I highlight them – in my book The Dictatorship of Woke Capital – as stakeholder hypocrites.

Much of the case against Amazon and Apple as exemplary stakeholder corporations can be found in plain sight.  Both companies and their CEOs are, for example, aggressively and publicly anti-union.  To date, more than a year after its Staten Island warehouse became the first of its facilities to unionize successfully, Amazon continues to contest the election, continues to fight unionization more generally, and flatly refuses to negotiate with union representatives.  And that’s hardly the full extent of Amazon’s “stakeholder” failures:

Four years into a plan to eliminate its carbon emissions, Amazon.com Inc. has lost a key endorsement from the world’s leading watchdog of corporate climate goals.

The Science Based Targets initiative, a United Nations-backed entity that validates net zero plans, has removed Amazon from its list of companies taking action on climate goals after the tech behemoth failed to implement its commitment to set a credible target for reducing carbon emissions.

The move raises questions around Amazon’s status as a preferred stock among funds marketing themselves as ESG. The world’s largest ESG exchange-traded fund, which is managed by BlackRock, lists Amazon among its top three holdings. The company is also held in over 900 ESG funds registered in the European Union alone, representing about 2% of outstanding shares, according to data compiled by Bloomberg….

Amazon’s emissions are up by about 40% since setting out its net zero target….

As for Apple, its ESG entanglements are the stuff of legend.  No major Western company is, for example, more reliant upon and better connected to the Chinese Communist Party than is Tim Cook’s Apple.  No company needs Chinese workers and Chinese customers more desperately than does Tim Cook’s Apple.  While the United States continues to reduce its CO2 emissions, China’s emissions continue to increase rapidly.  Apple pledges that its facilities are entirely carbon neutral or will be soon, even as its contractors in China (where the bulk of its manufacturing is done) continue to rely on the Chinese electrical grid that builds and incorporates the power of more coal-fired power plants every year than the rest of the world combined.  As for the company’s treatment of its de facto employees (presumably the most important of all stakeholders), its record is notoriously abhorrent.  Not only has Apple been associated with slave labor in Xinjiang province, but it also allows its manufacturing contractors to operate some of the most oppressive facilities on earth.  From The Dictatorship:

In December 2019, Apple was one of five American companies named in a lawsuit filed by International Rights Advocates, a Washington, DC–based human rights law firm, on behalf of fourteen parents and children from the DRC. According to Manchester’s Guardian newspaper, “The lawsuit, which is the result of field research conducted by antislavery economist Siddharth Kara, accuses the companies of aiding and abetting in the death and serious injury of children who they claim were working in cobalt mines in their supply chain.” According to the suit, the children were working illegally for the British mining company Glencore. Glencore sold all its cobalt to Umicore, a Belgian company, which then supplied “battery-grade cobalt to Apple, Google, Tesla, Microsoft and Dell.” Among the contentions in the suit was the claim that Apple et al. knew that their cobalt was coming from mines using child labor.

The DRC lawsuit is hardly the first time Apple has been accused of profiting from child labor. Apple has admitted several times to “discover­ing” that some of its contractors use child labor—defined as employees under 16 years old. Generally, the company blames the problem on the contractor and promises to do better next time.

Sometimes, however, doing better next time can’t erase the horrors of the working conditions in Apple’s manufacturing plants. The company that claims to want to create “a better, more just world for everyone” has a long and sordid history of profiting from grotesque labor practices. In 2017, the journalist Brian Merchant published a book called The One Device: The Secret History of the iPhone. It is worth quoting from at length, given the shocking nature of what Merchant found at Apple’s Foxconn iPhone factory at Longhua:

Foxconn’s enormous Longhua plant is a major manufacturer of Apple products. It might be the best-known factory in the world; it might also be among the most secretive and sealed-off. Security guards man each of the entry points. Employees can’t get in without swiping an ID card; drivers entering with delivery trucks are subject to fingerprint scans. A Reuters journalist was once dragged out of a car and beaten for taking photos from outside the factory walls. The warning signs outside—“This factory area is legally established with state approv­al. Unauthorised trespassing is prohibited. Offenders will be sent to police for prosecution!”—are more aggressive than those outside many Chinese military compounds. . . .

Foxconn is the single largest employer in mainland China; there are 1.3 million people on its payroll. Worldwide, among corporations, only Walmart and McDonald’s employ more. As many people work for Foxconn as live in Estonia. . . .

In 2010, Longhua assembly-line workers began killing themselves. Worker after worker threw themselves off the towering dorm buildings, sometimes in broad daylight, in tragic displays of desperation—and in protest at the work conditions inside. There were 18 reported suicide attempts that year alone and 14 confirmed deaths. Twenty more workers were talked down by Foxconn officials. . . .

Foxconn CEO, Terry Gou, had large nets installed outside many of the buildings to catch falling bodies. The company hired counsellors and workers were made to sign pledges stating they would not attempt to kill themselves. . . .

This culture of high-stress work, anxiety and humiliation contrib­utes to widespread depression. Xu says there was another suicide a few months ago. He saw it himself. The man was a student who worked on the iPhone assembly line. “Somebody I knew, somebody I saw around the cafeteria,” he says. After being publicly scolded by a manager, he got into a quarrel. Company officials called the police, though the worker hadn’t been violent, just angry.

“He took it very personally,” Xu says, “and he couldn’t get through it.” Three days later, he jumped out of a ninth-story window.

So why didn’t the incident get any media coverage? I ask. Xu and his friend look at each other and shrug. “Here someone dies, one day later the whole thing doesn’t exist,” his friend says….

None of this is a secret, of course.  It’s all been public – and well known – for years.  And yet groups like As You Sow continue to hail Apple and Amazon and countless others with questionable “stakeholder” records as laudable companies.  What this tells us, in turn, is that As You Sow and its ilk are not really all that concerned about stakeholders or about corporations’ behavior.  Rather, they are concerned about a specific set of political goals and the power that would accompany them.  And they willingly turn a blind eye to serious ethical failures in the pursuit of that power.

Tim Cook talks a good game about Apple’s stakeholder friendliness, but his actual record is rather unflattering.  The campaign by As You Sow that cites Cook as a model sadly suggests that much the same can be said of Andrew Behar, that organization’s CEO.

Stephen Soukup
Stephen Soukup
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Steve Soukup is the Vice President and Publisher of The Political Forum, an “independent research provider” that delivers research and consulting services to the institutional investment community, with an emphasis on economic, social, political, and geopolitical events that are likely to have an impact on the financial markets in the United States and abroad.