Pointing to sweatshop conditions in overseas vendor factories and a history of contracting with firms in Myanmar, KLD & Co., Inc., Boston, released a white paper analyzing its decision to exclude the world’s largest retailer Wal-Mart Stores, Inc. from the Domini 400 Social Index SM (DSI 400). The DSI 400 is the recognized benchmark for measuring the impact of social screening on financial performance.
”KLD removed Wal-Mart from its Domini 400 Social Index primarily because the company has not done enough to ensure that its domestic and international vendors operate factories that meet adequate labor and human rights standards. Wal-Mart’s vendor contracting policies and procedures have failed to meet the standards set by prominent human and labor rights activists or those attained by other prominent companies that are similarly exposed to sweatshop controversies” according to the KLD white paper.
”Wal-Mart’s market dominance puts it in a unique position to lead retailers in a clean up of sweatshop abuses,” explained Peter D. Kinder, president of KLD, who collaborated with lead author Kyle J. Johnson on the report. ”To date it has declined to do so. Wal-Mart has some real positives, but its failure to lead on issues such as this has made it unacceptable to social investors. KLD concluded that it had to remove the company from the DSI 400.”
The KLD white paper notes the shortcomings of Wal-Mart’s existing vendor contracting guidelines, provides examples of documented human and labor rights abuses by Wal-Mart’s overseas vendors, and discusses the company’s failure to ensure vendor factory compliance with human and labor rights standards.
As of January 31, 2001, Wal-Mart, the largest retailer in the world, was the third largest holding in the DSI 400 and accounted for 3.87 percent of the Index’s weight.
KLD maintains the DSI in a manner analogous to the way Standard & Poor’s maintains the S&P 500(r) Index. KLD moves slowly to drop companies involved in controversies in social/ environmental issues monitored by the research firm, the company said. A combination of circumstances is usually required before KLD will eliminate a company from the Index. These circumstances include a controversy of major proportions, or a controversy that the company is unlikely to be able to fully address or to extricate itself from in the next year.
On December 9, 1997, KLD removed Nike from the DSI because of its involvement in international labor controversies. The Nike action is cited in the KLD white paper as a precedent for the Wal-Mart decision.
KLD, in its 12th year of operation, provides social research for institutional investors. KLD serves institutional clients who wish to integrate social criteria into their investment decisions. KLD offers performance benchmarks, corporate accountability research, and compliance and consulting services comparable to those provided by financial research service firms.
For a summary of the report, visit http://www.kld.com. Full copies of the report are available by contacting KLD Communications Manager Anjali Gupta, at 617/426-5270 or firstname.lastname@example.org.