Brand Risks Aboard
Samsung Electronics temporarily stopped its business with Dongguan Shinyang Electronics last week, one of its partner firms located in Guangdong Province, after the Child Labor Watch (CLW) exposed on July 11 that at least 20 adolescents were exploited by the mobile phone parts manufacturer. The human rights group and the Chinese media criticized Dongguan Shinyang Electronics as a factory in which Samsung mobile phones are made, and the international press reported the same news.
“We took proper action after detecting illegal acts through an internal investigation,” said Samsung Electronics. An industry insider mentioned that the label of child labor exploiter would have been a serious burden for Samsung.
Major Korean corporations are feeling pressed to better manage their reputations as their global market shares and presence are on the rise. At the same time, price fixing investigations and copyright disputes against them are becoming more and more frequent and NGOs around the world are keeping a closer watch. At present, the CLW’s main targets include Samsung Electronics, Walmart, Apple and IKEA.
Daewoo International, in the meantime, was criticized in April as one of the largest slave labor-based cotton manufacturers by the Walk Free Foundation. Last week, some members of the foundation staged a rally in the main office of Daewoo International holding banners with cotton drawings.
Daewoo International is currently running a cotton factory in Uzbekistan, but the cotton is supplied from the Uzbek government. “This is a situation we can do nothing about,” said the company, adding, “However, the repeated mentioning of our name is definitely not good for us.”
POSCO has also met with strong protests while moving ahead with a steel mill construction project in Odisha, India. The friction between the provincial government and local residents, which was caused during the preparation of lots for the 12 million ton-capacity plant, is now directed at POSCO. An anti-POSCO committee has even been set up by the locals.
Korean corporations are mulling over how to deal with such social risks. For example, Samsung has tightened its business rules applied to its partner firms while considering not just prices but also moral factors in selecting subcontractors. In addition, it has hired former diplomats as public relations managers and shored up regional public relations functions.
Daewoo International is launching more social contribution activities, too. It has been engaged in child education, medical services, and support for senior citizens in Uzbekistan. POSCO, on its part, renewed its behavior rules in 2012 to minimize possible reputation risks abroad.
The Hyundai Motor Company collects reports from its business partners on a monthly basis and reviews the monitoring results each quarter. If a problem is found in the result, it provides consulting services or suspends the transaction.