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IMPROVING LABOUR PRACTICES

Working with a Taiwanese electronics manufacturer to engage across the company’s approach to labour practices and human capital management to ensure an evolving business model in a highly competitive business environment.

A Taiwan-based manufacturer of computer, communication and consumer electronics products and one of the largest electronics manufacturing service providers in the world has been involved in several controversies relating primarily to the treatment of its employees in China with regard to working conditions and wages. While its early success has been linked to the popular brands of its customers, more recently the acquisition of a Japanese electronics firm showed a commitment towards innovation in its consumer products. At the same time, serious competitors in its core business have emerged.

Engagement

Initial engagement was focused on working conditions and wages. Over time our engagement has progressed from the company's approach to labour practices and then human capital management more broadly.

2014 AGM

We led a collaborative engagement, which included delivery of a statement at the company's 2014 AGM on behalf of a group of investors owning more than 300 million shares, or 2.3% of the company.

2015

The adviser to the chair/CEO joined a teleconference with a small group of responsible, long-term asset owners.

In 2016, we visited a new key manufacturing site, residential quarters of its employees and training and recreational facilities. We discussed how its at-risk processes are now subject to additional physical and procedural safeguards. We also addressed employee benefits systems and grievance mechanisms with the labour union and spoke to a group of assembly line workers on their maternity leave about the perception of the company.

An independent assessment by the Fair Labor Association in 2012 showed the company has made good progress on employee relations. The company has also enhanced its disclosure, and in 2015, launched its vision and strategy website and published an improved sustainability report. The adviser to the chair/CEO credited our feedback with contributing to the improvements the company has made. An audit committee composed of three new independent directors was set up in 2016. In early 2017, a third-party research firm took the company off its controversial companies list. With regard to board composition, effectiveness and succession, we have so far only been given limited assurance.

These case studies are examples of companies we have either held or engaged with. 
Source: Hermes Investment Management