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.”
—GumballCrash

“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.”
—NightStarX

“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?”
—dexam

“I want to see the ratings on the show. Let’s see those statistics.”
—Cyl

“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…”
—SirHCNitram

“Set aside your ethics for a moment: from a practical standpoint, they are doing very well selling bad (by general consensus) transformers movies.”
—Mike

“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.”
—Dominatekiller6

“Wait, the Battleship movie is a real thing? I thought that was just an internet joke!”
—ladymoondancer

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.