Great minds at Google, Sprint, AMD & more…
Yesterday, the Securities and Exchange Commission adopted a measure intended to try to slow demand for materials mined under often-brutal conditions in the Democratic Republic of Congo and nearby countries. Essentially, it says companies have to tell investors if their products depend on gold, tantalum, tin, tungsten or other materials mined from those countries in the central part of Africa.
These “conflict minerals” have helped fund the region’s long-running wars. The Dodd-Frank financial-regulation bill passed two years ago included the provision because advocates hope better disclosure will help stem the warring parties’ financing.
Companies that use or supply the minerals, needless to say, aren’t too happy about becoming pawns in a foreign-policy gambit. They complain that the provisions will prove punishingly expensive to carry out: Figuring out where these materials come from, documenting their provenance, avoiding tainted minerals. Plus, companies anxious to avoid bad publicity could drive up prices for conflict-free minerals.
There’s a meaningful debate here, but when we went looking for what companies had already said about conflict minerals, we found a curious coincidence instead: Some big names in tech are using surprisingly similar language.
Although most of the disclosures are typically vague, some key phrases cropped up across multiple companies. As a baseline, here’s the conflict minerals paragraph from the 10-Q that Google (GOOG) filed on July 24 (emphasis ours):
“The Dodd-Frank Wall Street Reform and Consumer Protection Act included disclosure requirements regarding the use of ‘conflict’ minerals mined from the Democratic Republic of Congo and adjoining countries (DRC) and procedures regarding a manufacturer’s efforts to prevent the sourcing of such ‘conflict’ minerals. While final rules are not yet implemented, these rules could limit the pool of suppliers who can provide us DRC ‘conflict free’ components and parts, and we may not be able to obtain DRC conflict free products or supplies in sufficient quantities for our operations. Also, since our supply chain is complex, we may face reputational challenges with our customers, stockholders and other stakeholders if we are unable to sufficiently verify the origins for the conflict minerals used in our products.”
We’ll spare you the full disclosures from other tech companies, which tend to be equally vague (understandably, given that all of these were published well before yesterday’s rule was adopted). But before we continue, re-read that italicized sentence above.
Now consider an obscure Form 424B5 filed by Sprint Nextel (S) on August 13, in which the company notes:
“Also, because our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins for all metals used in the products that we sell.”
Even Barnes & Noble (BKS) gets in on the act, in the 10-K it filed on June 27:
“Also, because the Barnes & Noble supply chain is complex, the Company may face reputational challenges with its customers, stockholders and other stakeholders if it is unable to sufficiently verify the origins for the defined conflict metals used in its products.”
But our favorite might be Nvidia (NVDA) and the 10-Q it filed yesterday, where we think someone mis-heard or mis-typed the word “stakeholders,” to come up with this:
“Also, since our supply chain is complex, we may face reputational challenges with our customers and other stockholders if we are unable to sufficiently verify the origins for all metals used in our products.”
You get the idea. And this phrasing has been floating around for a while. The very first example of this general phrasing that we could find was from the 10-Q filed on August 4, 2010, by Advance Micro Devices (AMD):
“Also, since our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins for all metals used in our products.”
We’ve never actually drafted any SEC filings (even if it sometimes feels like we could after all the ones we’ve read), so we don’t know how much cribbing really goes on, or whether the lawyers who do the drafting pass around handy phrasing snippets.
Whatever the case, the main event is yet to come. When companies have to say whether their minerals are in fact conflict-free starting in May 2014 (for calendar year 2013), we’ll see how similar the ultimate disclosures turn out to be.
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