On 6 June 2018, the Council on Ethics recommended to exclude the company Texwinca Holdings Ltd from the Government Pension Fund due to an unacceptable risk of the company being responsible for systematic human rights violations.
Texwinca is a Chinese company that produces yarn, knitted fabrics and garments. Texwinca owns 50 per cent of the shares in Megawell Industrial Ltd, making it that company’s largest shareholder. Texwinca has had the same shareholding in Megawell for more than 20 years. Megawell owns the garment factories Hugo Knit and Kollan in Vietnam as wholly owned subsidiaries. Texwinca states that it does not have a controlling influence over Megawell, and that it has no responsibility for the working conditions at the factories in Vietnam.
The recommendation is based on investigations into working conditions which uncovered systematic norm violations at Megawell’s factories in Vietnam, including discrimination against women, numerous occupational health and safety hazards and restrictions on freedom of association. Texwinca’s dominant shareholding, combined with the fact that several individuals have been members of the boards and managements of both companies for many years, leads the Council to presume that Texwinca has significant influence over Megawell. The Council attaches importance to the fact that Texwinca has not helped to clarify this case and concludes that neither Texwinca nor Megawell are taking any responsibility for the prevention of human rights violations at the factories in Vietnam. The Council on Ethics considers that when a company in this way disclaims responsibility for preventing norm violation and fails to provide information about conditions or its own initiatives in its operations, the risk of systematic labour rights violations becomes unacceptably high.