Intel CEO Brian Krzanich revealed that his company made a commitment to comply with the conflict minerals disclosure requirement before it goes into effect
To comply or not comply – that will be a question that continues to come up regarding the SEC’s conflict minerals rule. The rule, which asks companies that manufacture products containing gold, tin, tungsten or wolframite to report their efforts to ensure the minerals used by it or its third-party suppliers are not from war-torn nations, is being questioned by an appeals court.
According to a recent Reuters article, after hearing arguments challenging the rule, conservative judges David Sentelle and Raymond Randolph from the US Court of Appeals for the District of Columbia Circuit have reservations about the rule and are questioning its objective and whether it is written too broadly. A number of arguments against the rule were discussed, including whether it restricts a company’s right to free speech, whether it will usher in even more disclosures in the future and whether it is intended to fuel boycotts of products instead of providing valuable information to investors. Although companies have been asked to comply with the disclosure law by May 31, 2014, the Reuters article notes that ‘the judges did not indicate a timeline for when they may rule.’
So what should companies do – comply or not comply? By coincidence, Intel CEO Brian Krzanich discussed how his company is handling the upcoming disclosure requirement at the International Consumer Electronics Show earlier this month. According to a press release, Krzanich announced that Intel had ‘reached a critical milestone and the minerals used in microprocessor silicon and packages manufactured in Intel’s factories are ‘conflict-free’, as concluded by third-party audits or direct validation by Intel’s supply chain organization.’
‘Two years ago, I told several colleagues we needed a hard goal, a commitment to reasonably conclude that the metals used in our microprocessors are conflict-free,’ Krzanich said. ‘We felt an obligation to implement changes in our supply chain to ensure our business and our products were not inadvertently funding human atrocities in the Democratic Republic of the Congo. Even though we have reached this milestone, it is just a start. We will continue our audits and resolve issues that are found.’
Intel made the decision to comply with this rule on its own rather than wait to have it batted around in the courts. Interestingly, its stock is up $2.12 or 9.03 percent over the two-year period from January 8, 2012 to January 7, 2014, so making the commitment doesn’t seem to have hurt it.
Practicing good governance isn’t just about complying with laws; it is also about doing what is right for business. Of course there is nothing wrong with waiting for the legal arguments to be made, but there are times when waiting goes against our core values. Krzanich and Intel’s leadership should be lauded for demonstrating that corporate values don’t have to be compromised – and for finding ways to comply with the conflict minerals rule and other governance disclosures that don’t have to be a burden.
