Sumaya Shakir Sumaya.shakir@gmail.co m

10/3/2012

Political Strategies to address nonmarket Issues – Hewlett Packard

IntroductionHP has been actively involved in political policies and civic engagements, numerous political processes and global public policy debate on a number of issues. HP believes getting involved in the political process and policy is important and appropriate for conducting its business. HP has a dedicated team called “HP Government Affairs” that is committed to participate actively in any government public policy according to laws and its business conduct standards. HP reaches out and builds relationship with key officials and political leaders to discuss emerging issues and understand the Government’s stand and offer HP’s expertise. HP is also member of almost every national and regional trade/industry associations in countries where it has a significant product and market presence.

HP also forms partnerships with various standard bodies and other industries to develop industry standards for various issues like energy utilization, carbon footprint, supply chain responsibility, etc.

HP is committed to make a difference in people’s lives, to foster innovation and to strengthen the global economy for which it focuses on being part of political policies. More information about HP’s government affairs can be found at http://www.hp.com/hpinfo/abouthp/government/index.htm l

This paper will describe the political strategies HP is using to deal with the three main market issues namely Labor Issues in China, Privacy Issues and Free Trade.

Labor Issues in ChinaSummary Background HP’s main line of business is selling Information Technology hardware products

to consumers as well as businesses. Foxconn, one of HP's key suppliers came under fire for violating

human ethics and labor laws.

Issue Fair Working conditions for Laborers in ChinaInterest Groups Students and Scholars Against Corporate Misbehavior (SACOM)

China Labor Watch (CLW) Fair Labor Association (FLA) China Labour Bulletin (CLB)

Institutions Chinese Government International Labor Organization

Information Poor unethical Labor treatment and violation of labor law in Chinese factories that make products for US companies Students being exploited at Foxconn factories to make iphones

Issue Life Cycle Issue is in late interest group formation and early legislative phaseMedia Attention This is going to be fully blown and will be covered by various media

both in China and rest of the world.What’s next? Issue will receive more widespread media attention and will

eventually call for better working conditions for labor in China and will require companies to mandate the code of labor ethics to its vendors/suppliers. The Chinese Government and various labor groups will pass a few labor legislations and put audits in place.

The various labor rights group both within China and internationally have criticized and called for action

against Foxconn and the major companies that source from it.

HP’s Business Strategic Political ActionsHP has a zero tolerance towards unethical humane treatment. HP being a large organization and operating in international scope follows a proactive public policy shaping approach. Even prior to Foxconn issue HP had described its code of business conduct while dealing with suppliers and vendors. HP has been very involved in shaping the policy about labor practices across its supply chain. HP always followed an integrated market strategy addressing its economic and political environment.

Forming Coalitions

Electronic Industry Citizenship Coalition (EICC)HP formed coalition with other companies like Apple, Microsoft, Nokia, Ericson and other big tech companies called the Electronic Industry Citizenship Coalition (EICC). The primary purpose of this group is to set labour guidelines amongst other things.

The EICC is established as a longstanding and formalized coalition and using this coalition HP can increase the effectiveness of the individual stakeholders on an issue by combining their numbers and resources.

HP is working with EICC to establish standards to ensure that working conditions in the electronics industry supply chain are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible. The HP Suppliers Code of Conduct is based on the EICC. HP is collaborating with the EICC to continue to work with other industries and nongovernmental organizations to identify best practices and to collect key performance indicator (KPI) data in order to improve and simplify data collection methods of managing working hours within their supply chains. HP is working with coalition on how to best implement reduced working hours initiative‟.

Details of each of the standards that HP has been working with EICC can be found at http://www.hp.com/hpinfo/globalcitizenship/environment/pdf/supcode.pd

Global e-Sustainability Initiative (GeSI)HP has also formed another major coalition called Global e-Sustainability Initiative (GeSI) with 30 leading Information and Communication Technology (ICT) companies and organisations around theglobe.

Through the GeSI coalition, HP is working towards „Responsible Supply Chain‟ initiative. HP is engaged with the coalition to promote human rights and responsible business practices, labour and environmental standards by implementing educational programs and assessment tools for suppliers to identify potential corporate responsibility risks. HP is actively working with the coalition to promote privacy and freedom of expression, UN Guiding Principles on Business and Human Rights and other fair labour treatment initiatives.

By being part of the coalition, HP as part of GeSI holds a seat on the European Commission’s ICT Sector Advisory Group that is leading the development of human rights guidance.

United Nations Global CompactHP is also a main signatory to the United Nations Global Compact coalition. The Global Compact is a set of voluntary commitments for companies that pledge to improve the 4 categories namely human rights, labor conditions, the environment, and anti-corruption controls.

What is the UN Global Compact?

“The Global Compact asks companies to embrace

universal principles and to partner with the United Nations. It has grown to become a critical platform for the UN to engage effectively with enlightened global business.” – UN Secretary-General Ban Ki-moon

The Ten Principles of the Global Compact Human Rights Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

Labour Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

As part of the Global Compact collation, HP has a solid ethics and compliance governance structure that exclusively takes care of ethical issues occurring along its supply chain process. Foxconn has violated the first 6 principles of the UN Global Pact and HP being a big signatory is responsible for Foxconn's conduct. HP is actively investigating the allegations against Foxconn and committed to take action to fix the violations. HP is working with China Labor Watch to audit and investigate if Foxconn has violated any laws while manufacturing HP’s products.

Public AdvocacyHP has started advocating responsible global sourcing practices by achieving greater supply chain transparency by posting the full list of its outsourcing suppliers on its website for public scrutiny. HP has made available to the public the results of its supply chain audits to provide to the public the message that HP takes it supply chain responsibility seriously. HP has also provided all details of its ‘Supply chainResponsibility Program‟ to the public to show it cares for global labor rights. Amongst other things, HP has openly published its Global Citizenship Report to show to the public the different initiatives and measures it is working on. HP is keen on advocating that it is in to advance humane globalization by working with the ILO and other global institutes toward building a better community.

HP has also shared its annual goals publicly to show its commitment on achieving higher standards of supply chain responsibility.

Awareness RaisingHP with its global reach has greatest impact protecting and promoting human rights and demonstrate to the rest of the world how it treats its employees and how it manage its supply chain. HP has worked with other groups and associations to raise awareness of human rights issues.

HP continues to drive its labour rights awareness training program for all its Chinese supplier factories and also has set up workers’ hotline and providing labor issues resolution and tailor-made training to the workers‟ representative committee.

HP was a key player in raising awareness and advancing the mission of the Business Leaders Initiative on Human Rights (BLIHR) by developing the „The Guide for Integrating Human Rights into Business Management’. This is an excellent online tool to educate and offer practical guidance to business leaders around the world.

Section Summary

HP’s Political Strategy for addressing Labour Issues in ChinaCoalition Electronic Industry Citizenship Coalition (EICC)

Global e-Sustainability Initiative (GeSI) United Nations Global Compact

Public Advocacy Supply chain Responsibility Program Global Citizenship Report

Raising Awareness „The Guide for Integrating Human Rights into BusinessManagement’

Global Citizenship Report Worker’s Hotline

Section ConclusionHow good is HP's response?  HP is on the right track by proactively engaging and forming coalitions to address labour rights. HP is also working with various labor groups to ensure better standards and working conditions. All the steps that HP has been implementing and pursuing are appropriate in accordance to its business and to the industry. Not only HP but HP-like industries are all impacted by same labor conditions in China and HP is ahead of the game by merging its core values on being a good global corporate citizen with its economic environment. HP in this case has been a true example of an integrated market strategy. As Human Ethics and Rights are a very important issue, HP did not risk the potential cost of not participating in the political process that decides how the issue will be resolved.Is there anything it should be doing?Yes HP should lobby more internationally governments about protecting its international supply chain labour’s rights.

Cloud Computing Security Risks

Issue Summary

Issue Security vulnerabilities in Cloud ComputingInterest Groups Cloud Security Alliance

Consumer and Enterprise Business using Cloud Services Banks, Payments Card Industry(PCI) Government Organizations like US Military

Institutions UK Government Digital Service, Federal Financial Institutions Examination Council ( FFIEC), European Network and Information Security Agency (ENISA)

Information Jurisdictional issues of data storage Cloud Computing conflicting laws and regulations between borders and

countries needs to be resolved Safety of hosting cloud services from China

Issue Life Cycle Late issue identification, early interest group formationMedia Attention Currently the story is published by a few technology magazines. Main

stream media is yet to pick up the story but eventually in the next few months, this issue will be a hot topic.

HP’s Business Strategic Political Actions for Security Risks

LobbyingHP, Microsoft and other internet companies who are offering services on the Cloud have been lobbying for safer cloud computing laws since 2010. Microsoft general counsel Brad Smith insisted on electronic privacy laws being updated during a Senate Judiciary Committee in Washington in 2010. Since then, there have been continued lobbying efforts for cloud security.

HP as part of the Cloud Security Alliance group has been lobbying against the Cybersecurity Act of 2012 and has been successful in protecting the cloud initiatives.

The above graph shows HP’s spending on lobbying for various causes including trade legislations, cloud security, data security and privacy regulations, patent approvals, free trade, broadband subsidies and defense funding. HP is one of the biggest spenders on lobbying efforts. It hires lobbying firms like Palmetto Group, Mehlman Vogel Castagnetti Inc, Sternhell Group, Innovative Federal Strategies and Akin, Gump et al. HP has spent $3,750,000 so far in 2012 on various lobbying.

There are a number of individual cloud computing legislations that HP along with Microsoft, Google, Facebook and other companies have been lobbying like the policy issues in cloud computing, Electronic Communications Privacy Act (ECPA) and the number of other policies as below -

Cloud Physical Location and Access Issues Jurisdictional issues affecting the Cloud. Example: “safe harbor law - a European law enacted in reaction to the U.S. Patriot Act. Another example is the Trade Agreements Act of 1979 (TAA) prohibits government contractors from using cloud services that are set up in countries that don’t have trade agreements with United States. 

Privacy, Security and the Cloud Concerns around data stored in the Cloud is less protected than other in other contexts.  Fundamental concern about the security of essential business and government information and processes maintained in the Cloud.

Law Enforcement and the Cloud Concerns with privacy issues in law enforcement context and legal protections against unreasonable search and seizure of data stored in a Cloud context. Example: Congress is currently reviewing a proposed update to the Electronic Communications Privacy Act

Intellectual Property (IP) and the Cloud Concerns regarding valuable intellectual property, trade secrets or copyrighted material in a Cloud environment. Example: The Digital Millennium Copyright Act provides a safe harbor to cloud service providers from infringement liability for copyright violations if they adhere to guidelines and immediately block access or remove copyrighted materials from their website upon notification.

Global Competition and the Cloud:  U.S. companies can compete for a share of global cloud market but U.S. put them at a competitive disadvantage. Example: U.S. Patriot Act

Sen. Amy Klobuchar has introduced a new bill called the “Cloud Computing Act of 2012” (S.3569), which is supposed to “improve the enforcement of criminal and civil law with respect to cloud computing.”  The proposed bill’s main purpose is to give “cloud computing services” protections under the CFAA. HP as part of the CSA alliance is lobbying for this bill.

Eric Goldman, Internet Law professor from Santa Clara University has written an article on forbes.com regarding the Cloud Computing Act. The article can be found at http://www.forbes.com/sites/ericgoldman/2012/10/02/the-proposed-cloud-computing-act-of-2012-and-how-internet-regulation-can-go-awry/

Forming Coalitions

HP is part of the Cloud Security Alliance group to promote the use of best practices for providing security assurance within Cloud Computing. All the top companies like Google, Microsoft and even US Department of Defense are members of this alliance group. The Alliance aims to provide education on the uses of Cloud Computing. The Cloud Security Alliance is led by a broad coalition of industry practitioners, corporations, associations and other key stakeholders.

HP along with the CSA has developed a number of useful and valuable resources like the secure best practices for cloud computing, tools for managing governance, risk and compliance, cloud user certification and cloud security knowledge certification, registry of cloud services amongst other cloud security standards.

Public Advocacy & Awareness RaisingFor the last 8 years, every year HP has used events like “HP Protect” to raise awareness and increase visibility on security infrastructure, security risks and breaches, security landscape, cloud security information, security and compliance standard. HP raises awareness in the industry by hosting a two day event where it invites experts, architects, and gurus under one roof. It also makes the event open to anyone to participate. It then makes public all the lectures, information shared during the summit to the general population.

HP along with CSA has provided a number of toolkits, handbooks, standards, guides to educate various businesses and public interested in cloud security. HP provides this information on its website and also on CSA website.

HP also attends other security conferences like the RSA and shares its knowledge/research with the community. HP has also set up community forums, knowledge base, FAQs, social media and blogs to reach out the general public on its efforts on Cloud Computing Security.

Section SummaryHP’s Political Strategy for addressing Cloud Security Issues

Lobbying Cybersecurity Act of 2012 Cloud Physical Location and Access Issues Privacy, Security and the Cloud Law Enforcement and the Cloud Electronic

Communications Privacy Act Intellectual Property (IP) and the Cloud The Digital

Millennium Copyright Act

Global Competition and the Cloud: U.S. Patriot Act Cloud Computing Act of 2012

Coalition Cloud Security Alliance

Public Advocacy & Raising Awareness

Protect 2012 RSA HP website – community groups, forums, blogs,

social media

Section ConclusionHow good is HP's response?  HP is taking cloud computing security seriously and is using every avenue to be as close as possible to meeting the mandates of the Cloud Security Alliance and the various Government policies in order to avoid any costly mistakes. It is staying close by lobbying to the various legislations and forming coalitions related to cloud computing. HP is has done a good job in securing its political position on the issues and it should continue the momentum.Is there anything it should be doing?HP is already doing everything and is in fact ahead of the game and top of the issues since this is its chance to re-launch itself in the market to gain its position as a silicon valley leader.The one thing that it should focus more on is to form coalliation with its international partners specifically European and Asian entities to make sure it covers itself on all International laws.Is there anything it should not be doing?HP should watch that it is not violating the US Patriot Act and Trade Agreements by offering cloud services that are set up in countries that don’t have trade agreements with United States.

HP Free Trade Market AccessHP advocates free trade policies and is involved in negotiations with several of the trade agreements in order to benefit from a positive outcome from IT liberalization. HP has already been working and stating its position on free trade through various coalitions, lobbying, advocating and engaging in social dialogues. It has an entire department ‘Office of Global Government Affairs’ that addresses concerns of Free Trade with dedicated organizational resources.

HP’s Business Strategic Political Actions for Free Trade Market Access

LobbyingHP has been an active lobby participant for free trade issues for several years. It lobbies both directly and through its numerous trade coalitions and associations to voice its stand on trade agreements. HP has also met with congressional and federal leaders to promote its agenda on free trade policies.

The above graph shows HP’s spending on lobbying for various causes including trade legislations, cloud security, data security and privacy regulations, patent approvals, free trade, broadband subsidies and defense funding. HP is one of the biggest spenders on lobbying efforts. It hires lobbying firms like Palmetto Group, Mehlman Vogel Castagnetti Inc, Sternhell Group, Innovative Federal Strategies and Akin, Gump et al. HP has spent $3,750,000 so far in 2012 on various lobbying.

Currently HP is lobbying for the International Service Agreement. The U.S. coalition members including the European Union are now actively building and strategizing the case for an International Service Agreement and launch an open ground for successful talks. Emerging countries have shown positive signs to the proposal. There is enough pressure now to go ahead and the goal is to come to a pact in 12 months. All involved countries have expressed interest for a speedy agreement. The 20 countries are planning to meet in Geneva in October 2013. . The talks will cover all service sectors and will aim to liberalize the sectors from trade limitations. More details and latest information can be found at http://www.reuters.com/article/2012/09/19/wto-services-idUSL1E8KJ8Q520120919

Forming CoalitionsHP believes its position on trade policy are better communicated through coalitions and collaborating with organizations, which enables it to reach government officials more efficiently and in line with other industry partners. Hence HP has formed industry coalitions to advance its business trade objectives.

National Foreign Trade Council (NFTC)HP has formed coalition with 300 other companies and formed the National Foreign Trade Council (NFTC). HP is one of the board of the directors of the NFTC coalition. The NFTC is focused on advocating a rules-based world economy and supports an open world trading system.  Through this coalition, HP has its Trade and Investment Agenda set and reaffirming its role regarding international trade and investment issues. Through this coalition, HP has been able to represent and voice on various political trade agreements and roundtables.

 Washington International Trade Association HP has also formed coalition with the Washington International Trade Association (WITA). The WITA is a non-profit, non-partisan organization which acts as a neutral for the open and robust discussion of international trade policy issues. Currently WITA has 1800+ members. The coalition with WITA allows HP access to Congressional Trade Agenda, and Governors and Ambassadors World Trade Reception. This coalition strengthens HP’s position and enables it to pursue its strategic political actions.

The Federation of International Trade Associations

HP’s biggest coalition at the international level is with the Federation of International Trade Association (FITA). FITA has over 450 association members and 450,000 linked company members. FITA is dedicated to promote international trade, import-export policies, international logistics management, and international finance among several other international trade related policies. Through FITA, HP has access to resources, benefits and services to the international trade community and business community. This enables HP to engage in social dialogue regarding its political stand on

Trade issues and hence able to drive its political agenda for its benefits in free trade.

Other International Trade CoalitionsHP has partnered with several international trade associations to promote its agenda on free trade policies based on the countries. The full list of HP’s coalitions and associations can be found at http://www.hp.com/hpinfo/abouthp/government/ww/assoc.html

More recently, HP has supported U.S. coalition members to advance the International Service Agreement . The goal is to set high-standard of market openness such that trade commitments will be "multilateralized" among all WTO members. The talks will cover all service sectors and will aim to liberalize the sectors from trade limitations.

Public Advocacy & Awareness RaisingHP has published and made publicly available a comprehensive report in May 2011 called ‘HP in Global Capitals” about its initiatives as it works with stakeholders involved with Government Affairs on free trade. HP has dedicated a permanent home on its website addressing this and has made this one of the more important agendas of HP's global citizenship report.

HP has also created ‘HP Public Policy’ that is available to the public where it advocates the benefits of free trade and its benefits to the consumers and HP.

Section SummaryHP’s Political Strategy for addressing Free Market Trade

Lobbying Meeting with congressional leaders Lobbying via coalition associations

Coalition National Foreign Trade Council (NFTC)  Washington International Trade Association The Federation of International Trade Associations

Public Advocacy & Raising Awareness

HP in Global Capitals Report HP Government Affairs website HP Public Policy

Section ConclusionHow is HP’s response ?HP has stood by Free Trade legislation for a long time ever since Doha Agreements surfaced 11 years ago and is still in the game to ensure its agenda is met as it hopes to benefit from liberation of free trade. What it should be doing?Trade agreements are a very complex issue and most of the trade agreements address the issues of all trades in general. HP should lobby to separate out issues specific to its domain in order to get IT liberation from trade laws. The International Service Agreement is a first step towards it, HP should lobby not just within the US but also other governments through its international coalitions.

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