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Wednesday, October 19, 2011

Hasbro’s Earnings Call and Corporate Social Responsibility

By IceBreak23

Being less than enamored of capitalism, I prefer to think of the show as coming from the artists who create it. Ultimately, however, those artists are at the whim of corporations. In some cases and for a while, this may work out just fine for them and for us—in other cases, shows go the way of Fyre-Flye Firefly.

While disregard for creative vision and for educational missions that don’t pander to the preconceptions of a large-enough target demographic are legitimate concerns, much graver and more immediate problems arise for the workers in low-wage countries who are exploited by our companies to produce, e.g., toys.

I certainly don’t think that the fault for this situation lies with any individual corporate executives, but if they could be made to care more deeply about their social responsibility, and about the values central to their shows and to fan communities like us, they could probably use their power and acumen to ameliorate some of the misery their corporations cause.

Nonetheless, the transcript of the earnings call was an interesting read. I’m a complete ignoramus in the field, but I assumed that such disclosures are mostly intended for stockholders, and thus biased toward the positive. I tried to read it with such an inclination in mind, but I didn’t know how much leeway the facts and statistics really leave for tendentious rhetoric. Furthermore, I repeatedly came across statements that could have easily been made to sound more favorable, so their strategy was probably more intricate than that. On a related note, things like “softer U.S. consumer demand” sound euphemistic to me but may just as well be mere jargon.

For the main points, see Phoe’s post on Equestria Daily (that’s /fi/, by the way). Her observations seem slight extrapolations from the source material, but may very well still be accurate. The comments, though, are gold.

“Business executives couldn’t care less if something stifles a creative vision so long as it’s profitable. Their primary focus is to generate as much profit as possible. They see the rampant success of MLP continuing, but the moment that starts falling off the chart and fails to generate more revenue than expenses, it’s gone.”
“However, I also find it disconcerting that at no point, do they even come close to recognizing MLP as having an internet-based, non little girl fanbase, …. … Either way, it seems to me that this all reads like a self-deluded, self-congratulatory company party, then a serious self-review of their stock. … I think this review and Hasbro in general seems to operate under the assumption that we’re money cows to squeeze gold coins from.”
“Reading this, I think they’ve completely missed the importance that the internet as a marketing medium has played in the success of the brand. At little more awareness, Hasbro?”
“I want to see the ratings on the show. Let’s see those statistics.”
“Thinking about the business side of things reminds me of the whole… you know… children making dollar(note the lack of s) per hour making these toys. It’s kind of disconcerting…”
“Set aside your ethics for a moment: from a practical standpoint, they are doing very well selling bad (by general consensus) transformers movies.”
“Christianity is an evil corporation looking to get as many fans and followers in as short time as possible and it ain’t afraid of using whatever means necessary to obtain their goal.”
“Wait, the Battleship movie is a real thing? I thought that was just an internet joke!”

What SirHCNitram is referring to is that Hasbro has outsourced much of their toy production to Chinese factories some of which made headlines with their abominable working conditions, including in one case in 2007 “the hiring of under-age workers, mandatory overtime, unsafe working conditions and managers who engaged in verbal abuse and sexual harassment.”

The list of third-party factories producing Hasbro toys is information that Hasbro views as “proprietary and competitively sensitive,” as they state in the FAQ of the CSR section of their website. In the same section they repeatedly tout their participation in the ICTI CARE (International Council of Toy Industries Caring, Awareness, Responsible, Ethical) audit program. The Date Certain Database of the program, however, lists Hasbro with a compliance date of January 1, 2006. Hence the audits of the enormous international foundation, comprising (by now) 774 toy companies, had been ineffectual in revealing or preventing the abovementioned practices—it took a New York–based nonprofit, China Labor Watch, to bring them to light. ICTI’s short statement doesn’t shed much light on how this could have happened.

A February 2011 report by Students and Scholars Against Corporate Misbehavior (SACOM), a nonprofit operating from Hong Kong, is more enlightening. By conducting undercover investigations of the facilities and numerous interviews with workers, they “found many labour rights violations to be prevalent, including the denial of employment contracts or falsified contracts, underpayment, excessive and forced overtime, absence of social insurance, and poor health and safety measures.” They posited that “while the foundation has successfully expanded its membership and sphere of influence, it has systemically neglected to enforce compliance with its own business code and has ignored labour rights violations at factories it certifies,” and even went so far as to ask “Is the tolerance of labour rights violations the secret of the foundation’s success?”

The ICTI responded to these allegations, but mainly to a much shorter document released a few days later. They point out a few possible errors in the report regarding the nature of the CARE process, but at no point contradict its key findings. They even admit that while they “respect SACOM’s desire to ensure ‘a living wage,’ for workers,” all they are focusing on at the moment is merely “ensuring that wages required by law are paid.” Better than nothing, I guess, but given the power of the foundation and its hundreds of toy companies, this already seems like very minimalistic social responsibility.

In another paragraph they explain that SACOM apparently put exaggerated expectations in the ICTI’s Continuous Improvement Process (CIP), a three-tier process, which “is intended to move factories into full compliance with Chinese law over time,” so that they “move steadily toward eventual compliance.” However, “there is a firm requirement that all factories currently registered in the process must achieve ‘A’ level seal status by 30 June 2012, or one year after they register, whichever is later.” Interestingly, the highest class A only requires a limit of sixty-six hours per week, while they admit in their own CIP FAQ that it is merely their ultimate goal “to comply with Chinese law, which stipulates 40 regular hours per week plus a maximum of 36 hours per month of overtime, which translates to approximately 49 hours per week. Under certain conditions, provincial and local governments may permit longer hours.


It should be noted that these are the specifications for the highest compliance class. The lowest conditional class allows for “weekly working hours above 72” under the condition that the “factory must have in place an agreed corrective action plan (CAP) to progressively reduce to less than 66 hours no later than June 30, 2012.” The CIP has been in place since 2009, but looking through their factory database, I found that each seal number starts with the letter C. If this letter, in fact, designates the compliance level of the factory, then there is not a single factory that has achieved B or even A level so far. The next summer is going to be interesting. (I asked them by email whether this C is, in fact, the compliance class. I’ll update this paragraph once I know more.)

Update 2011-10-31 21:42Z: Today I received the answer. The C simply stands for Certificate and appears to be remnant of bygone times, since they immediately added that the ICTI CARE Process did not award certificates but seals of compliance. They said that the number of factories achieving class A and B were increasing according to a certain survey-based report. The seal classes, however, are not publicly listed but have to be individually requested from the factories. I haven’t found out what this report is, or whether it is public. I’ll also try to find out about the crucial differences between certificates and seals of compliance.

So even if ICTI CARE audits are more than mere smoke and mirrors, and even if the foundation, in fact, lives up to the standards it espouses, then these standards are still a far cry from humane working conditions.

Besides the third-party vendors, Hasbro also operates its own factories in Massachusetts and Waterford, Ireland. Let’s hope that when they actually start to produce show-accurate ponies, they’ll come from one of those factories.


  1. Sincere questions: What would be humane working conditions? What steps would you recommend to remedy the issues you have identified?

  2. What humane working conditions are is something that, in my opinion, ought to be decided through a working democratic process. That of course is an ideal that is not easily achieved, and especially not in China, but in countries that may be seen as coming somewhat closer to this ideal, workers have demanded (often successfully) a 40-hour or a 35-hour workweek. To have such laws enacted and enforced (as well as laws for workplace safety, minimum wages, etc.), strong labor unions have been vital.

    I’m far from well-acquainted with the intricacies of the political situation in China and the steps that need to be taken to ameliorate the situation there, but I now have serious qualms of conscience whenever I’m tempted to buy a product labeled “Made in China.” I may not be an activist for declining to buy it, but at least I haven’t done my infinitesimal part in supporting the status quo.

  3. Man how the hell did I not know about the existance of this website before today?

  4. It seems that if workers get paid overtime, they should have the freedom to work more than 40 hours a week. Many jobs also simply require more than that. I work 60-70 hours a week. My job is salaried, so I don't get paid for any extra hours, but that's how much I have to work to get my job done. Would you accept the decision of the workers if they demanded to work longer hours so long as they got paid for them? It is also true that these manufacturing jobs have brought countries like China the level of wealth and prosperity they now enjoy. I completely agree with you that there need to be laws and standards to protect workers, but it's also in our interest as American consumers to take advantage of cheaper labor, and the Chinese benefit by getting jobs they would otherwise not have.

  5. As I said before, I support strong protections for workers, including occupational health and safety laws, minimum wage, and mandatory workers' compensation. I do think, though, that it's not "bad" that workers in other countries make much less money than workers at comparable jobs in the US would. In other words, I support free trade, because it is market efficient, and allows "me" the American consumer access to the goods I want at a price I can afford, while allowing "Lee" the Chinese factory worker (in an idealized world where he enjoys the protection of labor laws) a better life than subsistence farming. It's ok by me if his life isn't as plush as mine (or that of any other average "Joe" in America, because inequalities (on a global level) will in time be evened out in the market. Also, yes, there is extreme wealth disparity in these countries (and in the US), and I support laws to help address this issue, including higher (and simplified) taxes on the wealthy, and higher taxes on capital gains.

    As to who I am, I'm an attorney in California, part of the "1%" (barely), a believer in the "American dream," a staunch liberal, and a pony fan against my better judgment.

    I don't know what Ponysquare is, unfortunately!

  6. I’m sorry, I accidentally a whole comment of mine. He it is again. I originally posted it between the two comments by you, ponydoraprancypants, above.


    For one, SACOM documented several cases of forced overtime without premium, but even the less troublesome scenarios you presented can have radically different repercussions depending on the social context. Without sufficient minimum wages or solid social security and especially on an oversaturated job market, the workers’ willingness to work overtime, perhaps even without extra payment, will itself become a bargaining chip. If they have to work to earn their bare subsistence, or so their families can survive, such overtime can no longer be seen as voluntary. However, I’m very particular about not wanting to accept or reject any such kind of decision. Not only do I not have the qualification, it would also undermine my idea of democracy. The wealth and prosperity you refer to is highly unequally distributed, even more so than in the US, according to various measures listed. The only American consumers I can think of in whose interest all this might be—though I am hesitant to use that term—are those in similar straits or those who compartmentalize well enough to “take advantage of” the desperate situation without realizing that they are exploiting fellow human beings. Your last point is the reason why I realize that I’m doing close to nothing to alleviate the situation by merely not buying a product, and why such an act by itself is barely more than symbolic and possibly, in my case, even hypocritical, given the many products I already own whose origins I don’t know.

    But on an unrelated note, I’m somewhat interested to know who you are. You write well and you seem to have a job you love if you choose to invest this many work hours into it. Do you happen to have PonySquare account, so I can friend you? I’m Ponyleaks there.

    Also, Forderz, do you have one?

  7. Your ideal world certainly sounds swell, if only our version of the free market wasn’t so rarely anything other than detrimental to it, widening inequalities and providing incentives to erode worker protections. However, I certainly agree with you on a number of those points. Sorry for the plug but this seems like such a great opportunity to recommend another favorite TV show of mine, Democracy Now! You’ll probably even be in agreement with much of what their guests have to say.

    The 1% are of course still enough ponies to hold a very heterogeneous mix of opinions, and I wouldn’t be surprised if quite a number of them were actually among the Occupy protesters. What are your thoughts on the motivations behind the Occupy protests? (Oh, and while were on the topic, I happen to be second chair of the charity linked above and to the right as well as way down at the bottom of this page. ;-))

    PonySquare is the new Flankbook, as it were, a social network for us bronies. I still think we should ponify Diaspora, but the two admins of PonySquare are doing a great job maintaining the platform and thereby hosting what feels like a huge, virtual, 24/7 brony meet-up. If you like, and if you are as concerned about data privacy as I am, then you can sign up as a pony from the show or from a fanfic.

  8. I will check out Ponyquare. I'm sure that I share some of the beliefs of some of the Occupy protesters, including a general belief in the need to adequately fund social welfare programs including free and universal healthcare and education, and a belief in progressive taxation (wealthier citizens should pay a higher percentage). I think defense spending should be lowered. On the other hand, I deeply disagree with some things some Occupy protesters support, most obviously that it is legal to occupy public space 24/7. The First Amendment is (and always has been) subject to reasonable time, place and manner restrictions. Generally, Occupy has been a failure with a few small successes thrown in. They have brought attention to inequality, but failed to propose specific changes. They have chosen to eschew the political process, believing it to be too corrupted to be worth participating in. This I cannot abide, and in fact I believe that voting should be mandatory (as in other successful democracies like Australia). Worse, because Occupy has no central message or leadership, the camps have all largely been taken over by transients, violent youth, and the mentally ill. I see them personally on a daily basis. If they had been more organized, more political, and more hygienic, the camps would not have been (mostly) dismantled by the police, and more people would take Occupy seriously. I understand why they don't want to be the Tea Party (which was taken over by moneyed Washington insiders), but at they same time they can't just be a motley collection of hippies arguing for everything from legalized marijuana to squatters rights, with a dash of Wall Street reform thrown in.

    Even though I support many progressive ideals, I hate when people argue that it's impossible to come up from nothing in America today. I had a roof over my head and food to eat but not much else. I went to public school (not good ones) until college, and I paid for close to $200,000 in university education with student loans (now paid off). Yes, I was born smarter than the average person, and so I guess I had an "advantage," but that's life. The "less smart" person born into a low socioeconomic class should get social welfare benefits, but they don't deserve to make as much money as I do unless they provide as valuable a service as defined by the relevant market.

    I'm not going to re-read over this, so I hope it makes sense.

  9. I remember a friendly debate on Democracy Now! between Dan Choi and Mattilda Bernstein Sycamore. With all the great things to which Dan Choi has contributed—centrally the successful repeal of Don’t ask, don’t tell—he also still to some degree represents the military, but that was rarely part of the debate. It was good to see Mattilda point out that “if we could just, you know, take half the US war budget, we’d be able to have everything that we want in this country, whether it’s renewable energy, whether it’s, you know, housing for everyone, whether it’s healthcare, whether it’s food on the table. I mean, we need to get back to a struggle for basic needs.” I don’t know if she had the figures to back this up, but it sounds very probable.

    Social welfare is extremely important as you mention. I don’t know if what you meant by “market” is inclusive enough for the value of a service in a relevant market to be defined by more than just monetary revenue. That said, I don’t make a cent from my work with Your Siblings; on he contrary, I even pay some of the bills. And that is nothing compared to Lisa, the founder, who invests just about everything she earns into the organization and related projects. Without social security none of this would have been possible, and I do think that our service has value.

    I hadn’t heard about mandatory voting until it was mentioned on this show a few weeks earlier. It’s an interesting concept, but I would be afraid that all the new voters who are not actually interested in politics and thus not especially knowledgeable about it would be easily swayed by a well-funded PR campaign regardless of the factual merit of its message. I guess it would still be an improvement over the current situation, though. Personally, I’m a fan of delegated voting as a form of direct democracy. The German Pirate Party uses the system internally, where it works great and scales smoothly. From my perspective, a large chunk of the measures that require the authority of the state to intervene on behalf of the people are necessary primarily in order to offset the authority of large corporations. I’d much rather live in a world, a utopia no doubt, where authority of states and corporations alike is dismantled when it becomes illegitimate as defined by the people as a whole. This touches on your criticism of the Occupy protesters to not have proposed specific changes. For one, you listed a few common demands, so while there may be no one “central message,” their messages are still few enough to be clearly discerned. Also I’m sure that many of the individual protesters have very specific ideas of what should be changed and how. Until, however, such a massive number of people—not only the protesters but everypony who identifies with them—can agree on a system by which to reach agreements, a system other than the established political system of the US, such specific proposals can only spontaneously emerge as such memes are wont to do. The German Pirate Party was founded in 2006, and only by 2010 the delegated voting system really established itself nationally. So give them about four years.

    According to forecasts, it’s going to be 53°F in New York tonight. I don’t know why the occupations would attract “the mentally ill,” and I hope the violent youth will learn a lesson in love and tolerance while they are there, but to be willing to spend nights out in the cold, despite a ban on heating equipment like in the case of Albany, in my opinion, requires a very deep commitment to high moral and political ideals. If you want to hear thoughtful conversations and interviews with intelligent and inspiring occupiers: Amy Goodman will deliver. The only occupation I’ve taken part in so far was a very warm and comfy one, literally and figuratively, and even that was somewhat inconvenient. ^^

  10. As much as I admire the sentiment and doughtiness of the Occupiers, the movement is in a death spiral unless it can organize more effectively and exclude the elements that are bringing negative attention. In one of the camps here in Northern California, a man was recently murdered, and other tragedies have happened around the country. http://www.huffingtonpost.com/2011/11/12/oakland-police-plead-occupy-protesters_n_1090333.html. There is rampant internal crime, and now disease is spreading at the camp in San Francisco. The apolitical, mentally ill, homeless, and criminal elements are attracted by shelter from the cold, free food, and free medical care. It's great that the Occupiers want to extend a hand to everyone, but services are already in place (excellent services here in Northern California) to help these people.

    I fully admit and acknowledge that the media is heaping unfair attention on relatively small numbers of people at the camps who are causing trouble, when the majority of Occupiers are rational, intelligent people with legitimate concerns. The reality is, however, that Occupy needs to be clean, upstanding, and articulate in order to be taken seriously. I also recognize that poverty has damaging effects on people, and disproportionately impacts people of color, and that here in California the majority of the homeless, mentally ill, and criminal element at Occupy are people of color. But I am not implying that Occupy needs to be "whiter." I am saying that it needs to expel the criminal and chronically homeless elements, or help them find appropriate services, not because they are mainly black and latino, but because they are drawing so much scorn. In my opinion, Occupy will not survive 2011 unless it gets leaders who can unify supporters and present a pleasant and non-threatening image to the average curious but not yet committed citizen.

    I don't think delegated or proxy voting is a good idea - it turns the franchise into a commodity and devalues it, when it should be considered a priceless possession. Corporations are run via proxy voting, wherein shareholders give their votes up (mainly because they don't have the knowledge or time to become educated about the issues concerning the corporation), and the end result is that boards usually get away with whatever they want, and shareholders have no idea what's going on. I can easily imagine community organizers getting whole communities, especially marginalized communities and those for whom English is not the primary language, to sign away their votes to a proxy for empty promises or worse, under the table payments. The possibility for corruption is extraordinary.

    I believe in mandatory voting because I believe the old maxim that you can't fool all of the people all of the time, and therefore that no matter how much money is thrown into ads and pr, voters will generally make the right choice. To counter the likelihood that only rich candidates will become notorious enough to be elected, I believe in public campaign financing, strict limits on donations, and if necessary, an outright ban on corporate donations. I am not opposed to corporate "personhood," insofar as the fictitious corporate person limiting liability of corporate officers is a great way to spur investment and growth, but I do not believe that corporations are entitled to anything like the same free speech rights as human citizens. There must be a middle ground.

  11. Whew, by now I wonder if you can predict my views on any given issue?

    I support bans on plastic bags, bans on whaling, and bans on smoking. On the other hand I love the second amendment and I think the government should make firearms safety courses free for all citizens.

    I like the Endangered Species Act and the EPA, but I believe that airport body scanners violate my rights to privacy and free travel.

    I am pro-choice and pro death penalty, and I favor a playoff system for college football.

    Also, Sisterhooves Social was the best episode of Friendship is Magic so far, whereas The Cutie Pox was one of the worst. Rarity is best pony, followed by Twilight Sparkle.

  12. In my ideal world, democracy wouldn’t require such actions as occupations either. There sure are a number of grave problems for the occupiers to overcome. While you admire their doughtiness, I was actually surprised—more and more so as the weeks went by—that they still kept their ground. I was among those who would not have expected the protests to last long, especially given the weather, police brutality, and the bans on various sorts of equipment. Without knowing any details of the situation in California, it seems puzzling to me that those poor wretches you list would shun the help of the excellent services in place for them. To expel them, I think, would do more harm than good, as it would alienate most of the sincere supporters of the movement, who want to be inclusive and supportive. Your idea to help them find appropriate services seems much more viable, and on a larger scale, that is one of the goals of the movement. Our occupation was indoors and we took great care to keep everything clean and tidy, and to solve all conflicts amicably. At least in this regard we were successful.

    I don’t know how proxy voting is usually realized in the corporate setting but the Wikipedia article suggests that it is really just that, voting by proxy, at least in most cases. Or do you know if delegated votes are commonly re-delegated there? If not, the number of people to choose from is of course very limited again. Within the delegated voting system I’m referring to, anypony can delegate to anypony and those ponies can delegate the votes further. The problem that votes might be bought can be thwarted by making direct votes and the votes of those without incoming delegations secret, but finding the right balance of transparency and secrecy is certainly an important issue. The problem that influential ponies might use said influence to get the votes of not-so-well-informed voters is actually one of the strengths of delegated voting over the voting on representatives. For one, delegated voting gives them the option to delegate to somepony they trust and trust to be well-informed, an option they would not otherwise have, and secondly they vote only on individual proposals. If it turns out that heir proxy’s choice wasn’t in their best interest after all, they can correct their delegation immediately rather than after four years. They have to notice that first of course, but that applies in both cases. The same for the language barrier. That’s of course a problem. Free language courses, multilingual ballots, the babel fish, … I guess the perfect solution is still a long way off. At least they’d have the option to delegate to someone who speaks both languages like, hopefully, their children.

    And no, I can’t predict your views but I never expected that either. It seems you like not being readily categorizable, which is very endearing. I enjoyed Sisterhooves Social and The Cutie Pox at least as much as I enjoyed almost every episode so far (I’m not so sure about Feeling Pinkie Keen), and though I have trouble identifying with Rarity, I’ve come to like her a lot more thanks to Sisterhooves Social. However, neither episode, neigh, no episode compares to Lesson Zero! Still I’m a bit hesitant to outright state that Twilight is best pony, because Fluttershy almost pretty much shares that place with her. But I guess Twilight is best pony nonetheless, just by a small margin. And Nyx is cutest filly.