Foxconn shares hit by bribery claims

PUBLISHED : Friday, 11 January, 2013, 12:00am
UPDATED : Friday, 11 January, 2013, 3:56am

Shares of Foxconn Technology Group, a main manufacturing contractor for Apple products like the iPhone, fell 1.6 per cent yesterday after the firm said some of its employees accepted bribes from suppliers and were under investigation by authorities.

The Taiwan-based and listed company said "a number of employees" were under investigation over allegations of taking bribes on a long-term basis from more than 30 suppliers, including mainland agents of Samsung, Panasonic and Sony.

The company received reports several months ago that its senior employees at the surface mount technology (SMT) procurement/sourcing department had asked for illegal payments. The report came with accounts information that illustrated the problem, and Foxconn then asked law enforcement officials to work with its own internal audit team in investigating the allegations, the company said.

Most of the suppliers are located on the mainland, and the probe will be conducted mainly by mainland authorities. Police in Shenzhen had arrested a manager at the SMT department, according to Taiwan media.

"Clearly the sourcing party is in a good position [to say] I can buy from you or I can buy from others," said Xiang Ligang, an independent market commentator. The sums involved could be substantial, he added, since a company such as Foxconn would spend several billion yuan a year on purchases.

Foxconn is now reviewing its policies to prevent employees from becoming involved in illegal payments. It said in a Taiwan stock exchange filing yesterday that it was still waiting for the results of authorities' investigations and in the meantime its supply chain was operating normally.

Foxconn is the trade name under which Hon Hai Precision Industry owns and operates dozens of electronics manufacturing subsidiaries. Foxconn International, a subsidiary listed in Hong Kong, dropped 2.9 per cent in yesterday's trading, while the benchmark Hang Seng Index inched up 0.6 per cent.

"Though Foxconn International is not directly involved in the scandal, bad news always travels fast," said Francis Lun Sheung-nim, managing director of Lyncean Securities.