Disclosure under the California Transparency in Supply Chains Act and UK Modern Slavery Act
This Statement relates to our fiscal year ended April 2, 2016 (“fiscal 2016”).This Statement describes the activities of Michael Kors Holdings Limited and its consolidated subsidiaries (collectively, the “Company,” “we” or “our”) because we employ the same policies and compliance program relating to anti-human trafficking across our entire business. We conduct business in over 100 countries and most of our consolidated subsidiaries are not subject to the California Transparency in Supply Chains Act or the UK Modern Slavery Act.
We are a global accessories, footwear and apparel company. At the end of fiscal 2016, we had approximately 12,689 total employees, consisting of approximately 6,144 full-time employees and approximately 6,545 part-time employees, with approximately 10,410 of our employees engaged in retail selling and administrative positions, and the remaining employees engaged in other aspects of the Company’s business. As of the end of fiscal 2016, most of the Company’s employees were located in the Americas (primarily in the United States), with the remainder located in Europe and Asia.
Our products are manufactured to our specifications. We contract for the purchase of finished goods principally with independent third-party manufacturing contractors, whereby the manufacturing contractor is generally responsible for the entire manufacturing process. Most of our products are produced by third-party factories in Asia.
Risks of Slavery and Human Trafficking in Supply Chain
Due to the nature of our workforce and the locations of most of our employees, we believe that the risks of slavery and human trafficking in our own business are remote. While there are risks inherent with third-party manufacturing, we have established the compliance and other procedures discussed herein to mitigate the risks of slavery and human trafficking in our supply chains for our products. Our approach is to focus on our direct suppliers, since this is the level of the supply chain where we believe that we have the most influence and can therefore be the most effective.
Commitment to Ethics; Codes of Conduct
We are committed to principles of ethical business practice and recognition of the dignity of others, including responsible labor practices.
We have a Code of Business Conduct and Ethics (the “Employee Code”) that applies to our employees, officers and directors. In addition to indicating that employees, officers and directors must respect and obey the laws where the Company operates, the Employee Code indicates that we are committed to a work environment in which all individuals are treated with respect, that we prohibit discriminatory practices and that we are committed to providing a safe, healthy and comfortable workplace for all employees. New employees are provided with a copy of the Employee Code upon hire, which each employee must sign and acknowledge. A copy of the Employee Code is also available on the Company Intranet and on the Investor Relations page of the Company’s website at www.michaelkors.com. Failure to comply with the Employee Code may result in corrective action up to and including termination of employment with the Company. For a copy of the Employee Code, please see here.
We also have a Code of Conduct that is applicable to all of the Company’s suppliers (including our third-party manufacturers and product licensees) (the “Supplier Code”). The Supplier Code expressly prohibits the use of prison or forced labor, or the acquisition of any materials used in any stage of the manufacturing of our products from a third-party who utilizes prison or forced labor. In addition, the Supplier Code provides that our suppliers must comply with all laws regulating local wages, work hours and benefits. We communicate the Supplier Code initially as part of our supplier onboarding process and thereafter periodically from time to time, including when there are updates. The Supplier Code is also available on the Investor Relations page of the Company’s website at www.michaelkors.com. All of the Company’s suppliers are required to certify compliance with the Supplier Code. In the event of a violation of the Supplier Code, we reserve the right to either terminate our relationship with the supplier or to work with the supplier to implement corrective action to remedy the non-conformance. For a copy of the Supplier Code, please see here.
Verification of Product Supply Chains to Address and Evaluate Risks of Human Trafficking and Slavery
As part of our risk assessment, we conduct preliminary inspections of each new manufacturer’s facilities and require detailed questionnaires from potential manufacturers. When assessing the risks of human trafficking and slavery at any one manufacturer, we also review that manufacturer’s geographic location(s) and the nature of its manufacturing activities for us (including consideration of the anticipated output from such manufacturer).
We also have an audit program under which factory audits of manufacturers are conducted by an independent third-party auditor. Third-party manufacturers are selected for audits each year based on the risk assessment described above and the results of prior audits. Manufacturers are subject to announced audits at least every three years. As part of such audit, the independent third-party auditor evaluates, among other things, a manufacturer’s compliance with wage, hour and labor laws and health, safety and environmental regulations, as well as the working and other conditions within the facility. During the audit, the independent third-party auditor will visit and inspect the site, conduct interviews with supervisors, managers and employees of the facility, and review relevant books and records of such third-party manufacturer.
In most instances, where a deficiency is identified, corrective action is required on a specified timeline, followed by validation by the Company or its auditor that such deficiency has been remedied, including, if necessary through a re-audit of the manufacturer. In the case of a serious violation of the Supplier Code, termination of the Company’s relationship with the manufacturer may occur, particularly where corrective action is either not possible or determined to be an insufficient remedy.
Internal Accountability and Training
All employees are required to undergo compliance and ethics training, including with respect to the Employee Code, upon hire, and on a bi-annual basis thereafter. In addition, the Company’s directors and officers are required to complete an annual certification attesting that they know and understand the requirements of the Employee Code.
Employees are encouraged to raise any concerns and have multiple channels to do so, including through an ethics hotline staffed by independent third-party operators. The Company’s ethics hotline is also made available for external stakeholders.
The Company requires all employees and management who have direct responsibility for supply chain management to take a course directed at raising awareness regarding the risks of human trafficking and slavery in supply chains, identifying potential risks and addressing those risks when human trafficking and slavery may be suspected.
For a signed copy of this statement, please see here.
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Please note the information presented is given as at the date and the time of its original release. Changes in such historical information may occur due to adjustments in accounting and reporting standards & procedures.
In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude certain charges or credits such as transaction expenses related to the Company's IPO, Stock option expense and other offering fees. These amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company.