Mark Makepeace
Chief Executive
FTSE Group
12th Floor, 10 Upper Bank Street, Canary Wharf
London E14 5NP
United Kingdom
Dear Mr. Makepeace:
The March 2007 decision to maintain Smithfield Foods, Inc. (NYSE: SFD), the worlds largest hog producer and pork processor and the fifth largest beef processor in the United States,1 in the FTSE4Good Index of socially responsible companies was disappointing and raises serious questions about the interpretation and application of your social screening criteria, as discussed below.
US courts and labor law authorities have on numerous occasions found Smithfield liable for violations of US labor law. For example, the United States Court of Appeals for the District of Columbia Circuit, in a May 2006 decision, summarized violations stemming from two earlier union representation elections, stating:
From the outset, Smithfield was exceptionally hostile to union organizing activities at the Tar Heel plant . . . [T]he company threatened to fire employees who voted for the Union, to freeze wages and shut the plant if the employees unionized, and to discipline employees who engaged in union activity. It also interrogated employees about their support, confiscated union materials, and videotaped and otherwise spied on its employees union activities.2
In another proceeding involving employees of Smithfields QSI cleaning contractor, the National Labor Relations Board (NLRB) ruled that Smithfield violated the National Labor Relations Act by assaulting QSI employees, by causing QSI employee Roberto Muñoz Guerrero to be falsely arrested, [and] by threatening QSI employees with arrest by Federal immigration authorities. Specifically, the NLRB said, Smithfields supervisors and agents, including its Special Police Force Chief [name omitted], physically assaulted and threatened QSI employees because they engaged in protected concerted activities.3
We have grave concern that these employer actions have resulted in a climate of fear and poisoned the atmosphere for any future elections.
These violations also run afoul of the International Labour Organization (ILO)s core labor rights of freedom of association and collective bargaining. FTSE4Good requires meat processing companies to commit to uphold ILO core standards and to implement that commitment through appropriate internal corporate systems. Despite Smithfields violations, FTSE4Good continues to include Smithfield in its Index.
An index intended to highlight socially responsible companies should only include the better performers or companies that may have had past problems but are demonstrating credible progress toward best practices. We believe Smithfield does not meet those criteria. Instead, the company benefits from its inclusion on the FTSE4Good Index while it flouts US labor law and the core ILO labor rights which are part of international human rights standards.
On April 30, 2007, shortly after your decision to retain Smithfield in your Index, the NLRB issued a new complaint finding merit in charges that Smithfield made threats and coercive statements to workers at the Tar Heel plant when they were attempting to exercise their right to form and join unions.4
Given Smithfields egregious workers rights record, we are deeply concerned that the companys continued inclusion in the Index misleads individuals and institutions seeking to invest in responsible companies by erroneously suggesting that Smithfield respects workers fundamental human rights. We believe that it also undermines the credibility of FTSE4Goods claim of highlighting companies that meet globally recognised corporate responsibility standards. Instead, it appears that companies like Smithfield may benefit from their association with FTSE4Good at the expense of the Indexs own goals and reputation. We hope that FTSE4Good can quickly remedy this problem by removing Smithfield from its Index until the company respects its workers basic human rights, including the fundamental right of association and to bargain collectively.
Yours truly,
Arvind Ganesan
Director, Business and Human Rights Program
Human Rights Watch
FTSE sent a reply to Human Rights Watch on August 22, 2007. That reply can be read at: www.ftse.com/ftse_response_to_hrw.
1 See Smithfield Foods, Inc., Form 10-K, filed with the US Securities and Exchange Commission, June 30, 2006, for period ending April 30, 2006.
2 See United Food and Commercial Workers Union Local 204 v. National Labor Relations Board, 447 F.3d 821 (May 5, 2006).
3 See Smithfield Packing Company, Inc., Tar Heel Division, and United Food and Commercial Workers International Union, Cases 11-CA-20240, et. al., April 28, 2006.
4 See Complaint and Notice of Hearing, Smithfield Foods, Inc., and United Food and Commercial Workers, NLRB Div. of Judges, Case No. 11-CA-21353 (April 30, 2007).
