Last year NLPC sponsored nine “China Risk Audit” proposals at various corporations (here is the one for Apple, as an example), asking for improved disclosures about their risks related to conducting business and depending on supply chains in the communist country. And earlier this year we presented the “risk audit” proposal at Berkshire Hathaway‘s annual meeting. Additionally, we sponsored China-themed proposals titled “Congruency Report on Human Rights” at Apple, Mastercard, McDonald’s and Starbucks, and also a “Review of China Business and ESG Commitments” proposal at Boeing.
Suffice it to say, we called for boards of directors to increase their companies’ transparency regarding their exposure in China. Disclosures in their reports to the Securities and Exchange Commission are woefully inadequate. We also asked our fellow investors — including firms like BlackRock, Vanguard, State Street and others — to vote in support of the proposals, but they failed by a wide margin.
Now, Business Insider reports that “America’s business giants are starting to lose faith in their old friend Xi Jinping.” From the article:
For decades, Wall Street and corporate America have chased the promise of the ascendant Chinese consumer. As regular Chinese households got richer, there was money to be made selling them everything from fried chicken to Fendi. US companies like Starbucks, Apple, and Nike jumped in to gobble up market share. Sure, there were some boycotts and busts, but the trend line for returns was up and to the right. And as long as the Chinese consumer’s glorious rise was as inevitable as the Chinese Communist Party claimed, gains would multiply. That was the story. It was gospel. But now it’s falling apart.
The once-flowering Chinese consumer is languishing. US companies are losing market share to China-based rivals. Beset by political and economic forces, American brands can no longer count on China for growth. That changes the risk calculus. Why invest heavily in a market that’s boxing you out? Without the promise of profits, American firms are also becoming less willing to go to bat for China — to reinforce the idea that China’s market is crucial to the success of their futures.
Among the concerns we raised in our proxy memos to the SEC were China’s human trafficking, persecution of ethnic minorities, cyber warfare, military escalation, privacy and human rights violation, abusive trade practices, and wrongful detainment of U.S. citizens, among many other issues. All presented threats to the health and security for American businesses seeking increased revenues and cheap labor, while compromising their ethics by cutting deals to do business under Chairman Xi’s iron fist.
Our fellow investors, and corporate leaders, could have made it easier by cluing everybody in more specifically on what’s been at stake, considering the shaky geopolitical situation between the U.S. and China. Instead we all have to learn the hard way, which is too often the case, because shareholder proposals are usually reflexively dismissed by the elites.
(Photo: Former Starbucks CEO Howard Schultz in China)