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Motorola

Last edited by Ian Elwood on July 11, 2008 - 2:19pm
Company Snapshot: 

Motorola is the second largest maker of wireless handsets after global leader Nokia. After its spin-off of its semiconductor unit, Motorola reorganized to focus on enterprise mobility, mobile devices, and home and networks mobility. It also supplies wireless infrastructure equipment such as cellular transmission base stations, amplifiers, and servers. In 2006, it had sales of $43 billion and profits of $3.6 billion.

2008 Global Fortune 500 rank: 
200
Corporate accountability
Accountability overview: 

Adelphia Accounting Scandal

On May 8, 2007 the US Securities and Exchange Commission issued a cease and desist order against Motorola for entering into a "round-trip cash transaction" in 2001 with Adelphia Communications Corporation, the cable television systems operator. "Under a purported marketing support agreement, Adelphia paid money to Motorola which was immediately returned to Adelphia in the form of marketing support payments. The agreement, which was backdated and applied retroactively to the prior fiscal year, provided that Motorola would increase the price of digital cable television set-top boxes it was selling to Adelphia and pay the amount of the price increase back to Adelphia in the form of payments to market Motorola's cable television set-top boxes. Adelphia did not use the marketing support payments to market Motorola's cable television set-top boxes. Instead, Adelphia recorded the price increase it paid Motorola as a capital expense, and recognized the marketing support payments as a contra marketing expense, thereby artificially reducing its marketing expense and increasing Earnings Before Interest, Taxes, Depreciation and Amortization."

It wasn't the first time Motorola had been caught up in an accounting scandal. In 1997 the NYTimes reported that the SEC questioned Motorola's accounting in deferring a gain on a $1.65 billion deal with Nextel. In the deal, announced in August 1994, Nextel acquired Motorola's wireless licenses in the United States in exchange for a 20 percent stake in Nextel. Motorola considered the deal a swap of assets and recorded no gain for 1995. But the S.E.C. asserts that the company should have recognized a gain by accounting for the transaction at fair value, according to a Motorola filing cited by the Times.

Tax issues: 

An IRS audit of Motorola's 1996-2000 filings concluded in 2004, resulting in a disputed report that Motorola could owe as much as $ 500 million. The adjustments were primarily related to transfer pricing-related adjustments.

The Multinational Monitor reported that Motorola participated in a joint private sector-government committee on e-commerce as part of the FTAA process. The U.S. government has taken the position that a "de-regulated" (i.e. tax-free) approach to e-commerce is particularly important for the economic future of the developing world.

In June 1980, Multinational Monitor reported that Motorola was one of the largest beneficiaries of aid from the taxpayer-funded Overseas Private Investment Corporation.

Labor: 

Motorola claims in its policy for suppliers that it is committed to ensuring its suppliers do not violate workers’ rights.

In early 2006, Students and Scholars Against Corporate Misbehavior (SACOM), learned that nine women in the Shenzhen (China) Hospital for Occupational Disease Treatment & Prevention were poisoned by n-hexane as a result of working at a plant contracted to produce for the company (Hivac). "Hivac agreed to give every worker suffering n-hexane poisoning a tiny sum of seven to eight thousand yuan. However, they pressured workers to agree, among other things, not to raise future complaints in connection with their disease. Otherwise, the employer said they would get no recompense at all. These efforts to silence workers from discussing the long term effects of their poisoning no doubt influenced the quality of the "independent" audit commissioned by Motorola." Hivac makes lenses for Motorola phones out of Nanshan, Shenzhen Special Economic Zone in southern China.

In the late 1980s, bitter and often violent battles broke out at the company's South Korean subsidiary over the right to form a union, according to the New York Times: We still don't understand, said Park Joon Hee, country manager for Motorola Korea (employer of 3,800 workers), reflecting on how workers' demands for union recognition escalated into nightmarish days of demonstrations, hunger strikes, near self-immolations and a long siege at the computer center. In January/February 1989 Multinational Monitor reported that an IMF study concluded that the company set up a kusadae - "save the company corps" - which consists of 'thugs' who offer their services to Korean companies. The primary work of the kusadae has been to intimidate trade union activists. The IMF charged that the Motorola kusadae has disrupted union meetings, attacked union organizers with iron bars and cattle prods, and set four union leaders on fire. Motorola had 5,000 employees in Seoul and in 1987 Motorola in Korea made $8.8 billion in profits.

Outsourcing Jobs

In 2004 Motorola CEO Mike S. Zafirovski told the Hindustan Times he was hoping to save money by shifting work to India which has a large pool of engineers willing to work for half the salary of U.S. or European workers.

According to the Communication Workers of America (CWA), Motorola froze its pension plan, announcing it would instead use 401(k) plans for employee benefits.

Environment and product safety: 

Motorola Inc.'s "Race to Recycle" Web site has a prepaid postage label to use on a mailer that can contain an old mobile phone from any manufacturer. "It's part of a multi-pronged approach to giving consumers an easy way to recycle their phones," Chip Yager, director of channel development for Motorola PCS, told the New York Times. "We weren't trying to drive a lot of traffic to it." According to one report Motorola recycles just over 3 percent of past sales.

In February, 2003 The US Federal Communications Commission and Motorola, Inc. (``Motorola'') entered into a Consent Decree resolving possible violations by Motorola of 911 call processing method rules after the company notified the commission that two of its mobile phones (models 120E and T720) did not meet the required specifications.

According to research by The Calvert Investment Fund, a leading SRI fund, between 2004 and 2005, Motorola's volume of recycled product increased from 1182 metric tons to 3777 metric tons. "Motorola discloses information pertaining to the environment through its annual Global Corporate Citizenship Report (GCR) and on its website. All of Motorola's facilities conform to ISO14001, and have audits carried out and certified by Lloyd's of London. From 2004 to 2005, Motorola reduced its water use by 13% and its energy use by 9%, normalized for production. At the same time, the company has been identifying processes that can be improved to minimize the environmental, health and safety impacts throughout a product's life cycle, through product design, supplier management, manufacturing, distribution, sale, product use, and end-of-life management. Suppliers must also meet stringent sustainability criteria as a condition of doing business with Motorola."

Human rights: 

Motorola's human rights policy is posted here.

Chinese worker rights watchdog groups suspect Motorola and other companies have refused to hire Hepatitis B carriers in their Chinese facilities.

In 1998, the US State Department objected to Motorola employee and former Clinton White House National Security Council member Richard Barth's (ultimately successful) effort to sell encrypted (secure) radios and cellular phones to the Chinese People's Armed Police. In the end, however, Motorola got the waiver. President Clinton overrode the objections of his diplomats and approved the export with his signature. The CEO of Motorola, Gary Tooker, wrote a personal note to Ron Brown, expressing his gratitude for Clinton’s signature.

According to the Right to Know Network, Motorola is listed as a responsible party at the following Superfund (CERCLA) contaminated sites:

  1. MOTOROLA CERAMIC PRODUCTS, 9733 COORS RD. NW, ALBUQUERQUE NM 87114
  2. MOTOROLA PORTABLE PRODUCTS, 8000 W SUNRISE BLVD., FORT LAUDERDALE FL 33313
  3. MOTOROLA, INC. (52ND STREET PLANT) 5005 E MCDOWELL RD, PHOENIX AZ 85008

The company is the target of toxic tort lawsuits for the 52nd Street plant. In 1998, EPA ordered the company and Allied Signal to build a water treatment plant as a result of contamination at their sites.

Anti-competitive and consumer protection: 

On June 20, 1990, the New York Times reported that a Texas judge barred Motorola from selling selling one of its high-speed computer chips, in a ruling stemming from Motorola's 18-month dispute over patent and contract violations with Hitachi. Motorola initiated the court battle in January 1989, accusing Hitachi of incorporating some of Motorola's private chip design techniques in developing for the first time its own series of proprietary microcontrollers and microprocessors, known as the H series. Hitachi responded with a suit against Motorola, saying the American chip maker had infringed a Hitachi patent in developing the 68030. Three months before (in March 1990), Federal District Judge Lucius D. Bunton in Austin, Tex., concluded that both complaints had merit and that, unless settlements were hammered out, he would impose the sales ban.

On March 16, 2005 CNET News.com reported that open source programmer Harald Welte accused Motorola and other companies of embedding Linux in their products without releasing the underlying source code, as required by the General Public License, or GPL, that governs the operating system. Motorola is a founding member of the LiMo Foundation, an industry foundation which wants to put Linux technology onto mobile handsets.

Political influence: 

Through February 7, 2008, individuals employed by Motorola have given $82,000 to a variety of candidates. In the 2006 cycle Motorola employees gave $132,706.

Lobbying Expenditures

Motorola reported spending $3,420,000 on lobbying the federal government in 2007, down from $ 6.46 million in 2006 and $7,588,155 in 2005. As of 2000, Motorola was one of John McCain's top ten political patrons, according to the Center for Public Integrity.

After Motorola voluntarily disclosed the facts underlying the situation, the US State Department issued a letter alleging the company violated the Arms Exports Control Act for transferring technological information to Eurokot (Germany), Daimler (Germany) and the Kruschev Institute (Russia).

Securities (Investor) Class Action

In March, 2005 a class action was certified against Motorola and other companies alleging that the companies issued materially false and misleading press releases concerning Motorola's business with a Turkish telecommunications company known as Telsim, overstated Motorola's financial results for five quarters, and failed to disclose certain material information concerning Motorola's business with and lending to Telsim during the Class Period - February 3, 2000 through and including May 14, 2001 - all in a scheme to artificially inflate the value of Motorola securities. The defendants agreed to pay $190 million to settle the case.

Icahn Pressuring Motorola to Break Up

On February 2, 2008 CNET News. com reported that activist investor Carl Icahn, intent on breaking up Motorola, planned to nominate former Viacom chief Frank Biondi and WR Hambrecht's chairman along with two other directors to Motorola's board. Reportedly in response to the pressure, Motorola management indicated two months earlier that it was considering a "structural realignment" that would split off its cell phone division. The company's cell phone market share dropped from 20 to 12 percent the previous year. (In 2003 Motorola announced plans to divest its semiconductor business and focus on wireless communications.)

On Nov. 26, 2002, the New York Times reported that the SEC had filed a Regulation FD (which bars companies from making material disclosures to a select group of people) report against Motorola, without any additional penalty, after the company publicly disclosed on Feb. 23, 2001, that it was facing significant weakness in orders and calling analysts afterwards to ensure they understood the meaning of the disclosure. The SEC agreed the calls were made in good faith.

History
Other Information: 

[2006 Annual Report http://www.crocodyl.com/sites/crocodyl.com/files/2006.motorola.annual.report.10k.pdf]

Financial information
Stock ticker symbol: 
MOT
Total revenue: 
$41.2 billion
Fiscal year: 
2006
Net Income: 
$4.578 billion
Fiscal year: 
2005
Major lines of business/segments: 

"Enterprise Mobility Solutions"; "Home & Networks Mobility" and "Mobile Devices" for details go here.

Link to annual report: 
Yahoo Financial Results
Sources
Watchdogs and related campaigns: 
Free Software Foundation
Students and Scholars Against Corporate Misbehavior
CWA Local 4250 (Illinois)
Specialized Information
More detailed market share/concentration data: 

The company's share of the mobile phone market has dropped from 27% to 13 %.

Links to federal contract rankings in U.S.: 
38 of Top 100 Federal Federak Contractors of 2007
Shareholder resolutions: 
United Methodist Church resolution on Human Rights
Summary data on executive compensation and director compensation: 

Motorola CEO Ed Zander received $13.2 million in compensation in 2006, according to the company's proxy statement, during a year in which the cell-phone maker boosted sales and market share but saw profits decline under pressure from rivals. Zander was paid $1.5 million in salary and $2.2 million in other compensation. He also was given stock or stock options worth $9.5 million. (Source: USA Today, 3/07)

Zander was paid $20.7 million in 2005.

Zander stepped down from his post on January 1, 2008, but remains chairman until May. Succeeding him will be COO Greg Brown, who began serving in the post in March, 2007.

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