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TOP GLOVE: 10 Questions & Answers

Established in 1991 and headquartered in Malaysia, Top Glove Corporation Bhd is the world’s largest manufacturer of gloves capturing 26% of the world’s market share for rubber gloves. The company has manufacturing operations in Malaysia, Thailand, China and Vietnam. Top Glove offers a comprehensive product range, which now includes a non-glove segment comprising condoms, face masks, dental dams and exercise bands. Link to

1. What are some notable developments that Top Glove’s shareholders can look forward to? • We believe that global demand for gloves will continue to be robust, growing by c.25% in 2021, especially given the current pandemic. Average Selling Prices (ASP) have also been increasing monthly, along with higher raw material and operating costs. We have since allocated 30% of our total capacity for spot orders and are fully sold for the next 3 months.

• Post-pandemic, global demand for gloves is expected to grow at 15%, higher than pre-pandemic given the increased awareness and best practices adopted in medical and non-medical sectors.

• Pre-pandemic, we had a lead time of around 30 to 40 days. Given the increased demand, our current lead time has extended to 620 days for nitrile gloves, 400 days for natural rubber gloves, 250 days for vinyl gloves and 110 days for surgical gloves. • The lead time for natural rubber gloves has shortened since July 2020, following new natural rubber glove production lines coming onstream and the switching of some surgical glove production lines to produce natural rubber gloves. Lead times by product are depicted below:

• As a protective barrier for medical personnel in the healthcare sector • Increasing hygiene standards and healthcare awareness for both medical and non-medicalsector • Progressively stringent healthcare regulations • Healthcare reforms in US and China, and regulations such as OSHA in US, EU-OSHA in Europe, SESI in Brazil • Emergence of health threats such as COVID-19, H1N1, SARS, bird flu, Ebola, bio-terrorism

6. What are Top Glove’s plans to increase its manufacturing production capacity and how much capital spending is budgeted over the next few years for the different phases of its capacity enhancements? • We will continue to expand our capacity to ensure that we are well-positioned to fulfil global glove demand, which is expected to grow from a pre-COVID-19 level of about 10% per annum, to about 15% per annum postCOVID-19, on the back of increased usage in both the medical and non-medicalsectors. • We have earmarked RM10 billion of capital expenditures over the next 5 years from FY2021 to 2025, to provide us with additional capacity of 100 billion pieces of gloves. Factory F41, which is the Group’s first factory in Vietnam, is expected to come onstream in October 2020, the initial production capacity for which is approximately 2.4 billion pieces of gloves from its 10 production lines.  7. What research & development (R&D) plans does Top Glove have to boost efficiency? • Top Glove continues to focus on R&D, invest in talent by recruiting researchers to develop more automation and artificial intelligence, and embark on industry 4.0 digitalisation. We now have 752 researchers and 6 R&D centres as at September 2020. We also employ 1,500 graduates and experienced talents annually to ensure a strong staff force. • Over the years, we have improved our productivity by 80%, reducing from 8.4 Workers Per Million (WPM) pieces of gloves to the current 1.8 WPM and expect this number to continue to decrease. We will continue to invest in R&D towards enhancing the Group’s productivity and efficiency – hence Top Quality, Top Efficiency. 8. What is the Group’s current dividend policy? Will the Group maintain or change this policy going forward? • Top Glove has a dividend payout policy of 50% of PAT after minority interests. For FY2020, we have a dividend payout ratio of 51%, with 8.5 sen final dividend to be paid on 3 November 2020. We have revised the dividend payments to be on a quarterly basis effective FY2021 in January, April, July and November, and we will review the policy going forward. 9. What is Top Glove’s value proposition to its shareholders and potential investors?

• Top Glove has delivered a shareholders’ return of 40,679% over the past 20 years since our IPO in 2001. In just 4 years of our listing on the SGX, we have generated total shareholders return of 987% since 2016.

• We have seen steady growth since our listing in 2001, with Revenue CAGR grown 23.1%, PAT CAGR grown 28.6%, average PAT margin grown 12.2%. (Data for FY ending 31 Aug 2020) • We achieved stellar performance in FY2020, with strong growth in sales quantity of 17% and added additional 21 billion pieces of capacity with production utilization of above 95%. We also saw higher operational efficiency from ongoing upgrading and productivity enhancement, and higher ASPs in line with strong market demand. 10. What do you think investors may have overlooked about Top Glove’s business? • Top Glove is committed to delivering sustainable economic performance and generating attractive returns for our shareholders. We have taken steps to ensure that our internal supply chains are sustainable, by establishing our own plants and factories which include 2 latex concentrate plants, 3 chemical factories, a glove former factory and 2 packaging material factories. • In addition, we have a nitrile latex plant and a gamma sterilisation plant in our pipeline, as we work towards establishing a comprehensive in-house supply chain. This integrated supply chain will enable us to be more competitive in the industry. • As a healthcare products manufacturer, we believe that we are well able to increase our product range in terms of medical gloves, face masks and dental dams to cater to the very strong global demand for personal protective equipment and continue to expand our capabilities in producing healthcare related products.

Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials. This report contains factual commentary from the company’s management and is based on publicly announced information from the company. For more, visit . For company information, visit Click for FY2020 Earnings Announcements

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Labor Exploitation: Case Study of Top Glove

By londra ademaj.

This case study examines the allegations of forced labor in the manufacturing process of gloves by Top Glove, a prominent Malaysian rubber glove manufacturer. Malaysia, a diverse Southeast Asian country situated on the Malay Peninsula, serves as the home of this multinational corporation. Founded in 1991 by Tan Sri Dr. Lim Wee Chai in Malaysia, Top Glove Corporation Bhd has emerged as the global leader in rubber glove manufacturing, making a profound impact on the industry. Starting as a small local enterprise with just one factory and a single glove production line, Top Glove has experienced rapid expansion, solidifying its position as a global leader in the glove manufacturing industry (Top Glove). The case study explores the factors behind Top Glove’s success, examines the labor exploitation allegations that tarnished its reputation, considers the ethics regarding worker treatment, and details the responsibilities of corporations and governments. 

Unravelling Top Glove’s Path to a Distinguished Status

Figure 1 – Data sourced from (Hughes et al.)

The growth of multinational corporations like Top Glove in the rubber glove industry is heavily influenced by the contextual factors at play. The diagram presented below serves as a visual representation of the pivotal events that have played a significant role in contributing to its global success [Figure 1].

Remarkably, the expansion of Top Glove can be traced back to a series of unforeseen events, which carried both positive and negative consequences for the company. Although these events may not have been favorable for the overall economy, they played a pivotal role in propelling Top Glove’s ascent into the realm of a multinational corporation:

• In 1980, the demand for rubber gloves surged due to the HIV and AIDS epidemic. However, Top Glove was not established until 11 years later when regulatory changes mandated the transition from latex to synthetic nitrile gloves to address latex allergies. This move placed Top Glove in a highly competitive market, with approximately 250 other glove companies already operating by 1990 (Hughes et al.) Product differentiation was minimal, and competition was fierce.
• The Asian financial crisis of 1997-98 brought about an unexpected shift in the industry. Glove manufacturers collaborated, resulting in the formation of an oligopoly market where a few dominant players, known as the “big four,” controlled the industry (Hughes et al.). Since this development, the demand for gloves has remained stable over time due to their essential nature in hospitals and healthcare settings. This inelastic demand has provided a foundation for Top Glove’s continued expansion. This market structure presented an opportunity for Top Glove to consolidate its position and experience growth on an international scale.
• Since the Asian financial crisis, the COVID pandemic emerged as the next significant global event. The growth during the pandemic was significant, prompting Top Glove to expand its product line by manufacturing face masks. In 2020, Malaysian manufacturers, including Top Glove, captured a substantial 63% share of the global medical glove market, truly cementing their international presence. (Hughes et al.).

While the journey of Top Glove in the glove industry may seem remarkable, it is important to critically assess the factors that have contributed to its growth. Regulatory changes, financial crises, and the recent pandemic have all played a role in shaping Top Glove’s fortunes. The company has capitalized on market opportunities and adapted to changing circumstances. Yet, there exists broader implications, including the potential for labour exploitation to occur.

Labor exploitation can be challenging to define precisely. Marxists view exploitation as the unequal exchange of labor for goods (Roemer 30–65), while Adam Smith argues that it stems from the private property system, making worker justice unattainable under capitalism, particularly with profit-driven multinational corporations (Fairlamb 193–223). In the context of this case study, labor exploitation contains an element of criminal offences of forced labor or human trafficking which themselves constitute modern slavery.

Behind The Scenes: Top Glove

Top Glove has faced significant criticism and scrutiny regarding its labor practices. In 2020, the company came under the spotlight for alleged labor exploitation and poor working conditions (Business & Human Rights Resource Centre). Reports revealed mistreatment of migrant workers, excessive overtime, low wages, cramped living quarters, and other labor rights violations. These revelations raised concerns about the ethical practices and social responsibility of Top Glove, leading to international backlash and investigations by various organizations and authorities.

The allegations first emerged in 2018 through the diligent efforts of investigative journalists. The British Department of Health treated these accusations with utmost seriousness, recognizing the immediate need for further investigations (Marmo and Bandiera). As the investigations progressed, the shocking reality of illicit and inhumane practices resembling modern-day slavery became apparent. Top Glove, a prominent industry player, found itself implicated in a range of exploitative activities, including debt bondage, and forced labour (Marmo and Bandiera). For a more comprehensive understanding of the specific incidents that unfolded within the Top Glove factories, please refer to Figure 2.

Figure 2- Data Sourced from Marmo and Bandiera

Understanding the Roots of Labor Exploitation

Top Glove, Hartalega, and Kossan, the major Malaysian players in this industry, collectively employ nearly 34,000 workers (Zaugg). A significant proportion of these workers are recruited from abroad, primarily from countries like Indonesia, Bangladesh, Nepal, and Myanmar. This recruitment pattern is driven by the limited job opportunities available in their home countries, further intensifying their dependence on securing a job within these renowned Malaysian manufacturing companies.

The dependence on specific factories for employment creates an unjust power imbalance between employers and workers, leading to a range of adverse consequences. Employers are aware of the desperate need for jobs among workers, leaving the latter susceptible to exploitation. In their fear of unemployment and with limited options , workers may be compelled to accept unfavorable conditions such as low wages, long working hours, and inadequate safety measures. This power asymmetry perpetuates a cycle of disadvantage and erodes workers’ rights and well-being . Low wages not only impede their ability to meet basic needs but also hinder social mobility and trap them in a cycle of poverty. At the same time, workers are frequently subjected to long working hours without sufficient rest or breaks, leading to physical and mental exhaustion. This unfortunate outcome compromises their health and overall well-being.

Moreover, the absence of proper safety measures within these factories exposes workers to a multitude of significant risks and hazards inherent in the glove manufacturing process. Accidental exposure to toxins is a grave concern, as workers may come into contact with harmful chemicals and allergens during various stages of production (Boersma). Due to a lack of proper training and limited access to personal protective equipment (PPE), workers are exposed to the risk of developing occupational illnesses and enduring long-term health consequences. The improper handling of chemicals without adequate precautions can lead to immediate injuries, such as burns or skin irritations.  The manufacturing industry for latex gloves is known to carry a high level of risk due to the presence of carcinogens, acids, strong alkalis, and dangerous drugs, posing significant health hazards (Yari et al.).

The lack of resources became apparent during the COVID-19 pandemic when groups of workers contracted the virus. Despite engaging in a global effort to supply protective equipment for the coronavirus, the company experienced a troubling situation. While enjoying record profits from shipping gloves worldwide, critics argue the company’s low-paid workers in Malaysia faced a severe outbreak of Covid-19 due to inadequate protections provided by the company(Beech).

Furthermore, the rubber glove industry operates under an oligopoly market structure, exacerbating the problem of exploitation. In the Malaysian market, Top Glove reigns as the dominant force, holding an impressive 26% share of the world market (Top Glove), ironically, keeping their position at the “top”. During the pandemic, the market control of Top Glove was further intensified as there was a significant increase in global demand. To meet production targets, labour had to operate beyond maximum capacity.

Making the situation worse, Top Glove introduced a scheme called “Heroes for COVID-19,” where workers were requested to voluntarily work up to 4 additional hours on their day off to package gloves. However, this scheme has been criticized for bypassing labor regulations and coercing workers into working 7 days a week (Marmo and Bandiera). The intention was to portray these workers as heroes for those hospitalized by COVID-19, but in reality, it was merely a ploy to lure in workers. The harsh reality is that over 5,000 Top Glove workers tested positive for COVID-19, and tragically, one worker lost their life, making Top Glove facilities responsible for Malaysia’s largest cluster of COVID-19 cases(Marmo and Bandiera). 

Labor exploitation allegations predate the COVID-19 pandemic, indicating that it was not solely caused by the health crisis. However, the pandemic acted as a catalyst, making labor exploitation more noticeable and drawing attention to the issue. It is important to understand that labor exploitation may have been an ongoing problem before the pandemic, extending beyond its time frame. Top Glove’s dominant position in the industry often leads to cost-cutting measures, including the minimization of labor costs. Unfortunately, this strategy results in the exploitation of workers to maintain competitive pricing and maximize profits. Surprisingly, despite its monopoly power, Top Glove’s operating profit margin of 12.3% indicates inefficiencies in operating costs. These relatively small profit margins may directly contribute to labor exploitation, particularly when compared to competitors like Riverstone Holdings Limited, which enjoys a higher operating profit margin of 39.3% (Gek).

Exploring the Factors that Keep Workers in Harsh Conditions

Migrant workers are issued with a Visit Pass Temporary Employment (VP TE) for Malaysia. The VP TE enables a stay of 12 months after which it must be renewed if the worker remains in employment. Unfortunately, the Immigration Regulations prohibit a change of employer or employment, meaning a migrant worker’s VP TE is tied to a single employer and workers are unable to move elsewhere (Hughes et al). This means labor is  de facto  [la1]  immobile, and individuals cannot work elsewhere unless in illicit forms of employment.

As the reliance on foreign labor has increased, there has been a corresponding rise in concerns regarding working and living conditions faced by workers. Consider the labor laws and regulations in Malaysia, Thailand, China, and Vietnam, where these manufacturing facilities are located. While these countries have labor laws in place to protect workers’ rights, the effectiveness of implementation and enforcement can vary. Large corporations, including glove manufacturers, may take advantage of loopholes and weaknesses in the system, exploiting leeway’s in laws and regulations. Additionally, inadequate labor inspection systems and limited regulatory oversight further compound the issue. Notably, Malaysian law allows for working hours that exceed the widely accepted maximum of 60 hours per week and permits work on designated rest days (Lee et al.). This highlights how labor exploitation is more likely to occur when labor laws are inadequate or lacking in their protective measures.

Global Impact of Labor Exploitation

As investigations delved deeper into working conditions within the factories, the impact of these extends far beyond national borders, making waves in the international trading market. In response to the distressing revelations, many countries took swift action by imposing bans on Malaysia’s exports of medical gloves, starting with the USA in 2020.

This sudden shift cast Malaysia as the focal point of forced labor issues, attracting attention and concern from around the globe. Rosey Hurst, and the founder of Impactt, a London-based ethical trade consultancy, succinctly expressed, “Malaysia has become the poster child” for these pressing labor concerns (Lee et al.).

The ban on US imports on July 2020 was triggered by a tragic incident at Top Glove, where an employee succumbed to Covid-19. The virus rapidly spread throughout the company’s factories and worker dormitories, leading Malaysian authorities to describe the conditions as overcrowded, uncomfortable, and lacking proper ventilation. Subsequent measures were implemented to contain the outbreak (Palma). As a result, the US Customs and Border Protection took decisive action by ordering the seizure of Top Glove’s products upon arrival at American ports, citing allegations of forced labor. The consequences of such a reputation are not confined to public perception but also manifest in tangible economic damage. This development had a significant impact on the reputation of one of the world’s largest corporate beneficiaries during the pandemic (Palma). It contributed to double-digit declines in revenue and net profit. Revenue and profit fell 22% and 29% respectively (Kumar). It is a stark reminder of how labor exploitation can have profound and far-reaching implications, impacting not just individuals but also international trade dynamics (Lee et al.)

Around the time the ban was introduced, Top Glove released a press statement firmly denying all allegations and emphasizing their unwavering dedication to labor governance. In their official communication, the company asserted (Alam):

• “Top Glove’s workers do not perform excessive overtime and are given rest day in line with the Malaysia labor law requirement, which is 104 hours of overtime per month and one (1) rest day per week, respectively. “
• “Maximum allowable overtime is 4 hours per working day and solely on a  voluntary  basis.”
• “To ensure compliance with Malaysian labor law requirements, Top Glove has implemented a digital monitoring exercise.”

Just a few months after the press release, there came a significant development as the United States decided to lift the import ban on Malaysia’s Top Glove. As a testament to their ongoing efforts, Top Glove published a comprehensive improvement report, detailing the actions taken since the allegations surfaced, despite consistently refuting any involvement in exploitative practices. In this report, they highlighted significant improvements in several areas, including (Top Glove):

1.Fair Recruitment Practices of Foreign Workers 2. Continuous Improvement of Workers’ Accommodation 3. Fair Working and Wages of Workers 4. Continued Safety and Health of Our Workforce 5. More Stringent Safety Measures to Safeguard Our Workforce Post COVID 19

Not only did Top Glove make information about its standards available, but other leading companies also contributed by sharing their assessments. Amfori, a prominent global business association focused on open and sustainable trade, recently conducted a social audit of Top Glove. In this assessment, Top Glove was proudly awarded an ‘A’ rating, signifying their dedication to upholding exemplary social standards. This recognition from Amfori highlights Top Glove’s commitment to transparency and responsible business practices (Jaafar).

Top Glove’s ‘A’ rating was the outcome of a comprehensive social audit conducted from June 23 to 26. The audit results reflected 12 areas assessed as “very good ” and one area as “good,” showcasing some improvements. It is worth noting that Top Glove engaged with various organizations to enhance its social compliance and performance (Jaafar).

Because of these improvements, the bans on Top Glove’s products were lifted, causing an initial boost in the market. Top Glove shares rose by as much as 10% during early trading, although they later experienced a decline. With the ban lifted, Top Glove can now proceed with their previously disrupted plan of a $1 billion dual listing in Hong Kong, which was postponed due to the import ban (Ruehl and Langley).

Bengtsen argues that the import ban on Top Glove achieved what decades of voluntary corporate social responsibility (CSR) efforts by the global medical sector and actions by Malaysia’s labor inspectorate failed to accomplish. He suggests that the ban’s effectiveness was due to its direct impact on the company’s revenues, making it a crucial aspect to consider (Fanou).

These unfolding events give rise to critical questions regarding accountability and necessitate an examination of potential challenges within Malaysia. It raises the question of whether the responsibility should solely rest on Top Glove as a multinational corporation or if there is a larger systemic issue at play. The absence of appropriate legislation and the presence of exploitative practices indicate the need to scrutinize the wider labor landscape and regulatory framework within Malaysia (Palma).

The initial lack of response from Malaysia’s labor department regarding potential changes to the country’s labor laws, and the trade ministry’s silence on inquiries about potential investment losses, raises concerns about addressing labor rights issues (Lee et al.).  However, as time progressed, the labor department in Malaysia has charged Top Glove with 10 counts of failing to provide worker accommodation that meets the minimum standards of the labor department in 2021. (Lee) Despite this, an independent consultant, Impactt, said it “no longer” found any indication of systemic forced labor at Top Glove, which was making progress on some indicators, such as living conditions (Lee).

These observations emphasize the need for greater attention and efforts from both multinational corporations and government bodies involved in the industry to address and mitigate labor exploitation.

It calls for a deeper understanding of the challenges that allow labor exploitation to persist and raises the urgency to address them to ensure the well-being and dignity of workers for a more equitable and just society.

Ethics Evaluation

The emergence and growth of Top Glove, coupled with the allegations of labor exploitation, raise intricate ethical considerations that demand in-depth examination. The treatment of workers within the company’s operations reveals a troubling disregard for their fundamental rights and well-being.  

One of the fundamental ethical considerations centers around the principle of human dignity. Human dignity is crucial as it forms the foundation for justifying and upholding human rights .

At its core, the concept of human dignity asserts that every individual possesses inherent worth and value solely by virtue of being human. This belief is reflected in Article 1 of the Universal Declaration of Human Rights, which proclaims that “All human beings are born free and equal in dignity and rights.” (Soken-Huberty)

The idea of human rights is as simple as it is powerful: that people have a right to be treated with dignity. Human rights are inherent in all human beings, whatever their nationality, place of residence, sex, national or ethnic origin, color, religion, language, or any other status (Heard).

The alleged mistreatment of workers, including excessive working hours, low wages, and inadequate living conditions, violates their inherent dignity as individuals. Such practices strip workers of their basic rights, compromise their physical and mental well-being, and perpetuate a cycle of exploitation. Upholding the principle of human dignity is crucial in ensuring fair and equitable treatment of all individuals within the workforce.

Transparency and accountability are also critical ethical dimensions. Corporations like Top Glove have a moral obligation to operate transparently and be held accountable for their actions. The alleged labor exploitation within the company brings to light concerns regarding corporate responsibility, corporate governance, and supply chain management. Holding corporations accountable for their actions is crucial in fostering a culture of ethical behavior and ensuring labor rights are upheld.

Today, human rights have taken on a profound significance, akin to a form of religion. They serve as a powerful moral compass, guiding us in evaluating how a government treats its people (Heard). When it comes to addressing the ethical concerns surrounding labor exploitation, a multifaceted approach becomes crucial. 

The approach entails a commitment from corporations to prioritize the well-being and rights of workers, regulatory bodies to enforce and strengthen labor standards, and society at large to raise awareness and demand ethical practices. By fostering a culture of ethics and social responsibility within the industry, it becomes possible to create a labor environment that upholds the dignity and rights of all workers.

The United Nations’ “Protect, Respect, and Remedy” framework serves as a global standard for preventing and addressing the potential negative impact on human rights associated with business activities (Office of the United Nations High Commissioner for Human Rights). This framework consists of three pillars:

• The duty of the state to protect human rights.
• The responsibility of corporations to respect human rights.
• The necessity for enhanced access to remedies for victims of human rights abuses linked to business practices.

While international human rights treaties generally do not impose direct legal obligations on businesses, the International Bill of Human Rights, and the core conventions of the International Labour Organization (ILO) provide fundamental guidelines for businesses to comprehend the essence of human rights, how their own operations may influence them, and how to ensure proactive measures are in place to prevent or mitigate potential adverse impacts (Office of the United Nations High Commissioner for Human Rights).

While recognizing challenges in ensuring strong protections for human rights and labor rights in Malaysia, significant efforts have been made to improve the situation.

For instance, the Bureau of International Labour Affairs collaborated with the Malaysian government on projects aimed at enhancing labor rights and enforcement. These initiatives have included assisting the national government in drafting laws, decrees, and regulations to strengthen labor protections. Efforts have also been focused on providing information and guidance to employers regarding these regulations, promoting compliance and awareness (Bureau of International Labour Affairs).

Additionally, there have been endeavors to improve the efficiency and effectiveness of labor administration in Malaysia. This involves initiatives such as strengthening labor inspections to ensure that legal instruments are enforced. The labor ministry or relevant authorities play a key role in overseeing and conducting these inspections (Bureau of International Labour Affairs).

Mechanisms for resolving labor disputes have been established to provide workers in Malaysia with accessible avenues to seek justice and find resolution in case of rights violations. These measures aim to ensure that workers’ rights are upheld and protected in the country (Bureau of International Labour Affairs).

Labor rights involve not just corporations and the state, but civil society as well, playing a vital role. Non-governmental organizations (NGOs) focusing on social and economic rights are particularly instrumental in providing direct services to individuals who have suffered human rights violations.

These services offered by NGOs can take various forms, such as providing humanitarian assistance to those in need, offering protection for vulnerable individuals, or facilitating training programs to empower individuals with new skills. In cases where labour rights are legally protected, NGOs may engage in legal advocacy, offering advice and guidance on how to present claims or seek legal recourse. (Council of Europe)

The involvement of civil society organizations adds an essential dimension to the overall effort in promoting and safeguarding labor rights. Their direct services and support help bridge the gap between human rights violations and the necessary assistance needed by those affected. Through their dedicated work, NGOs contribute to creating a more just and inclusive society where individuals can assert their labor rights and access the support they require. (Council of Europe)

In Malaysia, non-governmental organizations (NGOs) have played a significant role in combating labor exploitation across various industries. Notably, Transparentem has emerged as a prominent NGO dedicated to bringing about transformation in the industry by shedding light on uncomfortable realities.

Transparentem’s primary objective is to uncover and disclose hidden truths, ultimately driving positive change within industries. By exposing the harsh realities and working conditions, the organization aims to raise awareness and prompt necessary action to address labor exploitation.

Transparentem’s leaders have learned from past experiences that when investigators reveal appalling conditions in Asia, embarrassed Western customers tend to hastily terminate their relationships with suppliers but make little effort to rectify the abuses (Greenhouse). To avoid this pattern, Transparentem takes a different approach. When they uncover serious problems, instead of rushing to publicize them and expose the factories’ Western customers, the organization discreetly informs these companies and urges them to collaborate with the factories to address the issues. The underlying understanding is that Transparentem will eventually disclose its investigative findings and how companies have responded. Western companies are aware that their reputation will be tarnished if they fail to take appropriate action (Greenhouse).

In conclusion, the case study of Top Glove, a Malaysian rubber glove manufacturer, highlights both the remarkable success achieved by the company and the concerning allegations of labor exploitation that have marred its reputation. The growth of Top Glove within the global industry can be attributed to various factors such as regulatory changes, financial crises, and the COVID-19 pandemic. The revelations of labor exploitation shed light on the ethical considerations and responsibilities that corporations and governments must address. Upholding human dignity, ensuring transparency and accountability, and fostering a culture of ethics and social responsibility help create a good labor environment. 

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‌Roemer, John.  Should Marxists Be Interested in Exploitation?  Wiley, 1985, pp. 30–65,  www.jstor.org/stable/2265236 .

Ruehl, Mercedes, and William Langley. “US Lifts Import Ban on Malaysia’s Top Glove over Alleged Forced Labour.”  Financial Times , 10 Sept. 2021,  www.ft.com/content/6e46bde0-355e-46fb-920b-f059fc5b84b5 .

Soken-Huberty, Emmaline. “What Is Human Dignity? Common Definitions.”  Human Rights Careers , 7 Apr. 2020,  www.humanrightscareers.com/issues/definitions-what-is-human-dignity/ .

‌‌Top Glove. “Continuous Improvement Report .”  Www.topglove.com , www.topglove.com/continuous-improvement-report.

‌Palma, Stefania. “US Import Ban Bursts Top Glove Bubble .”  Financial Times , 17 June 2021, www.ft.com/content/1f0634c0-8916-442b-a06a-ecde5507d2ea.

Top Glove. “The World’s Largest Manufacturer of Glove.”  Www.topglove.com , 2023,  www.topglove.com/corporate-profile#:~:text=Top%20Glove%20Corporation%20Bhd%20was .

Yari, Saeed, et al. “Assessment of Semi-Quantitative Health Risks of Exposure to Harmful Chemical Agents in the Context of Carcinogenesis in the Latex Glove Manufacturing Industry.”  Asian Pacific Journal of Cancer Prevention , vol. 17, no. sup3, June 2016, pp. 205–11,  https://doi.org/10.7314/apjcp.2016.17.s3.205 .

Zaugg, Julie. “The World’s Top Suppliers of Disposable Gloves Are Thriving because of the Pandemic. Their Workers Aren’t.”  CNN , 2020, edition.cnn.com/2020/09/11/business/malaysia-top-glove-forced-labor-dst-intl-hnk/ index .html.

Image courtesy of Top Glov

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• Posted on December 25, 2019 March 6, 2020
• by Shareinvestor Academy

Case Study of Top Glove Corporation Bhd (7113)

By Stella Goh – Market Data Analyst | 25 December 2019

Top Glove Corporation Bhd is an established Malaysia-based investment holding company founded in the Year 1991 by Tan Sri Dr Lim Wee Chai and Siew Bee Tong based in Shah Alam, which primarily involved as the world’s largest rubber glove manufacturer in Malaysia, specialise in both healthcare and non-healthcare segments.

TOPGLOV was listed in ACE Market in 2001 and successfully transformed into Main Market of Bursa Malaysia on 16 May 2002. The group serves a network of over 2,000 satisfied customers in more than 195 countries worldwide, and these numbers are still increasing. Their complete range of quality gloves at low efficient cost enables them to meet the needs of the company’s ever-expanding customer base.

Presently, TOPGLOV has few manufacturing operations spanning across Malaysia, Thailand and China. There are marketing offices in these countries as well as USA, Germany and Brazil.

Business Model

Top Glove Corporation Bhd principally involved in the business segment such as hand protection, sexual wellness, dental care and others.

TOPGLOV provides a comprehensive range of products such as latex examination gloves, nitrile examination gloves, surgical gloves, polychloroprene examination gloves, cast polyethene (CPE) gloves, thermoplastic elastomer (TPE) gloves, vinyl gloves, cleanroom gloves, household gloves, industrial gloves as well as non-gloves products such as dental dam, exercise band and condom.

Most of the glove products cater to the medical profession, surgeon, cleanrooms and industrial usage as well as aerospace, household, food and beauty industries.

Financial Review

Based on the past 5 financial years of revenue chart above, the group’s revenue grew years-on-years (y-o-y) from FY2015 (+10.33%), FY2016 (+15.06%), FY2017 (+18.03%), FY2018 (+23.81%) to FY2019 (+13.75%). On a CAGR basis, TOPGLOV has grown 16.11% based on 5 years. The increase in revenue was mainly due to robust growth in sales volume of nitrile gloves segments which saw a 30% surge, enhanced the marketing efforts as well as additional nitrile capacity which has increased by 54% over the past 2 years, with the plan for further expansion. (Source: Annual Report 2019).

Top Glove Corporation Bhd has successfully recorded a considerable RM41,627 million increase in gross profit, translating to a growth of 4.94% from RM842.4 million in FY2018 to RM884 million in FY2019. Based on 5 years CAGR basis, the group has grown 18.18%. The increase in gross profit was mainly attributed to 46% jump in volume sold for surgical glove segment which largely due to the contribution from Aspion and increases in demand for nitrile glove segment, which sales volume go up by 20.3% and 24% respectively chiefly by US and Japan. (Source: Annual Report 2019)

The Net Profit After Tax (PAT) of TOPGLOV has decreased 15.16% from RM433.2 million in FY2018 to RM367.5 million in FY2019. The decreased in Net Profit After Tax (PAT) was mainly due to the increase in latex concentrate prices, competitive environment for natural gloves as well as the losses occurred in the vinyl segment due to oversupply in China.

Cash Flow Statements

The net cash from operating activities has obtained a positive cash flow of RM526.2 million in FY2019 compared to RM341.2 million in FY2018 indicates that the company is healthy and have enough cash used for business expansion.

The net cash from investing activities in FY2019 is (-RM493.5 million) was mainly due to purchase of property, plant and equipment (RM568.1 million), purchase of land use rights (RM55.6 million), purchase of intangible assets (RM0.016 million), additions to investment property (RM0.393 million), purchase of investment securities (RM138.4 million), an increase in the bank balance pledged with banks (RM1.1 million). The negative cash flow indicates that the company is investing in its business to grow.

The net cash from financing activities in FY2019 is (-RM34.6 million) was mainly due to the transaction cost incurred (RM0.086 million), dividends paid on ordinary shares (RM217.4 million), dividends paid on non-controlling interest (RM2.7 million), repayment of loans and borrowings (RM1.2 billion).

Based on liquidity ratio calculation, TOPGLOV has a current ratio of 0.967 times in FY2019 indicates that the company may face some liquidity issue if any unforeseeable circumstances forcing the company to settle the current liabilities by using the current assets such as inventories, other current assets, tax recoverable, investment securities, derivatives financial instruments, trade & other receivables, cash and bank balances amounting to RM1.5 billion.

Prospect and Challenges

The domestic rubber sectors are expected to be a bounce-back in FY2020, as the US buyers will be likely to increase the Malaysian shipments as well as 15% additional tariff imposed on medical gloves made in China, effective from 1 Sep 2019. (Source: The Malaysian Reserve, 17Dec2019). The expected robust growth is underpinned by an expanding of the global healthcare sector as well as increased awareness of the importance of hygienic practices throughout the industry, especially the emerging markets such as India and China. (Source: TheEdge, 12Dec2019).

TOPGLOV will be in expansion mode as there is an influx of latex glove supply from Thailand-based Sri Trang Agro-Industry Pcl aims to increase the rubber glove output by about 74% to 30 billion gloves annually by the end of FY2020 from 22 billion in the nine months of FY2019. (Source: TheEdge, 12Dec2019).  TopGlove also has date established a total of 4 R&D Centres staffed by some 454 researchers (as at FY19) from across varied fields of expertise, working together to drive innovation and breakthrough at Top Glove. (Source: Annual Report 2019).

TOPGLOV has set aside about RM100 million for land acquisition in the country would be used for setting up the factories to produce vinyl gloves. TOPGLOV also will open its first Vietnam factory to meet a surge in demand for the hygienic gloves. As the construction of the plant has started in Vietnam, it is done deal there and the operation would commence in the first quarter of 2020. (Source: Daily Express, 21Mar2019).

In the year-end of FY2019, TOPGLOV has carried out large scale line modification, key process improvements as well as intensive training for factory floor personnel. They are also pleased to report that there is no impairment loss required for the provisional goodwill arising from the acquisition of Aspion as at 31Aug2019. (Source: Annual Report FY2019).

TOPGLOV is also developing the eco-friendly gloves, the first if which was their flagship green product, BiogreenTM Biodegradable Nitrile Gloves (Powder Free), launched in June 2019. They also continue to enhance their product portfolio with more specialised and cost-effective surgical gloves, while diversifying into non-glove products such as tourniquets. (Source: Annual Report FY2019).

Rating System

Return on Equity (ROE) = Average

Revenue [5 years CAGR] = Good

Net Earnings [5 years CAGR] = Average

Basic Earnings per Share [5 years CAGR] = Average

Interest Coverage = Average

Based on my calculation on Discounted Earnings Model, TOPGLOV has a fair value of RM8.40. The current market value of TOPGLOV is RM4.77 which is undervalued (Based on 23Dec2019). TOPGLOV has a beta of 1.020 (500 days) indicates that the company is more volatile than the current market, which means the investors/traders are actively trading in this stock, they may face a higher risk. Based on my computation of Compound Annual Growth Rate (CAGR), TOPGLOV has an expected market return of 6.27%.

In conclusion, Top Glove Corporation Bhd has achieved an outstanding performance for revenue in FY2019 due to the robust growth in sales volume of nitrile gloves segments and capacity of nitrile segment expansion. Even though the Profit After Tax has slightly decreased in FY2019, I still believe that the company is well-positioned to tap on the growing glove demand and prioritise R&D, innovation and Industry 4.0 initiatives.

Disclaimers The research information and financial opinions expressed by ShareInvestor.com website are for information and education purpose only. We do not make any recommendation for the intention of trading purpose or advice. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur, it would help if you did not rely upon the material and information on this website. We will not be liable for any false, inaccurate, incomplete information and losses suffered from your action. It would help if you did your research to make your own investment decision wisely.

One thought

The price of latex will fluctuate accordingly. This also means that the prices of the products made from it will increase, too. Nitrile products are less volatile compared to latex mainly because it is a mostly man-made product, and because production techniques are getting better, the price of nitrile is much less likely to fluctuate in response.

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Linking ESG to Remuneration: The Case of Top Glove

Posted by Mak Yuen Teen | Apr 4, 2022 | Articles

This article was first published in The Business Times on 30 March 2022

By Mak Yuen Teen

Top Glove, the largest glove manufacturer in the world with a primary listing on Bursa Malaysia and a secondary listing on the Singapore Exchange, had stellar financial performance when the COVID-19 pandemic hit, as it benefited from the huge surge in global demand for gloves. Its net profit attributable to shareholders grew by 381% from FY2019 to FY2020, and another 340% from FY2020 to FY2021, while its return on equity over the same period increased from 14.4% to 26.0% and then to 131.3%. Share price surged by 454% between the end of FY2019 and FY2020, before falling back 54% between the end of FY2020 and the end of FY2021.

While Top Glove’s business was thriving, it came under considerable public scrutiny for its labour practices, such as poor living and working conditions of its migrant workers, forced labour practices which led to import bans of its products by the U.S., and questionable handling of a whistleblower complaint. The board was criticised by some influential institutional investors, who voted against the re-election of six independent non-executive directors (INEDs) – although they were nevertheless re-elected.

In response, the company revamped its remuneration policies for management in FY2021, seeking to link environmental, social and governance (ESG) to executive remuneration.

Changes in remuneration policy

In its Integrated Annual Report for the financial year ended 31 August 2021, Top Glove disclosed the following:

“Our management incentives or remuneration pay are linked to ESG metrics, ensuring management accountability for the achievement of the Company’s goals. In FY2021, the Group has set 40% of the FY2022 Key Performance Indicators (KPIs) tied to social and environmental pillars, which are aligned with the Company’s material ESG matters.To reflect the Company’s commitment in transitioning into a net zero carbon business, the Group introduced carbon emission reduction as new KPI for FY2022.”

In various parts of its Integrated Report, it mentioned this 40% linkage of ESG metrics to management pay for FY2021, and as one of the key achievements and highlights for the year. Therefore, it would appear that it has already linked ESG to executive remuneration in FY2021.

Governance over remuneration

The company has a Board Nomination and Remuneration Committee (BNRC) made up of four members who are all INEDs. In FY2021, the BNRC reviewed remuneration packages of the executive directors (EDs), non-executive directors (NEDs), key senior management and related employees. At its board meeting in June 2021, the board deliberated and approved the group’s remuneration pay link to ESG metrics.

The company also has an Employee Share Grant Plan (ESGP) and Employee Share Option Scheme (ESOS) which are administered by committees other than the BNRC. Rather surprisingly, these committees are chaired by the Executive Chairman (EC), and have two other members of management – an ED plus the son of the EC, who is Deputy General Manager of Marketing and a non-board member. The other four members are INEDs, three of whom are the Chair and members of the BNRC.

ESG KPIs and metrics

The following ESG KPIs and metrics, are used:

Customer complaint rate	Social ethical audit scoring	Employee turnover rate
Occupancy accident rate	Scope 1 & 2 emissions intensity reduction

In the company’s 2021 Integrated Report, the company disclosed its assessment of the materiality of ESG issues. The six ESG issues assessed to have the highest impact on stakeholders and greatest significance to the company’s business are: (a) product quality & safety; (b) occupancy health & safety; (c) labour management relations; (d) human rights; (e) customer experience; and (f) environmental compliance.

There is a strong alignment between the company’s materiality assessment and the ESG KPIs that the company has linked to management pay. While a company’s materiality assessment may not necessarily reflect the ESG factors that stakeholders consider to be most important, the ESG issues identified by Top Glove  through its materiality assessment do appear to be factors that would be important for the company.

For each KPI, the company has  also identified a metric which is measurable. This would address common concerns among investors about subjectivity of ESG KPIs.

Further, it disclosed short-term and mid-term targets for the various ESG metrics.

However, while the company disclosed an overall 40% weighting for the ESG KPIs, it did not disclose the individual weighting for the KPIs.

The company also did not clearly disclose whether it linked the ESG metrics to annual incentive pay or long-term incentives, which in its case comprise employee share grants and employee share options – or to both. Most companies currently link ESG metrics to annual incentive pay although they are being encouraged to also link them to long-term incentives.

Where’s the link?

The company discloses the name, exact remuneration and breakdown for each individual director. For EDs, it disclosed the following remuneration components: salary, fees, bonus, ESGP, ESOS, other emolument, and benefit-in-kind. For the next six key management personnel (KMP) who are not directors, the company disclosed the name, exact total remuneration and the following components: salary, bonus, benefit-in-kind and other emoluments. It would appear that “other emoluments” for these KMP include the fair value of share and share option grants.

Although the company mentioned the linkage of ESG metrics to executive remuneration for FY2021, it is unclear how the ESG metrics actually impacted remuneration.

Only two of the top 10 executives received a bonus in FY2021 – one of the EDs and another KMP who received a negligible bonus. Did most of the executives not achieve their ESG and other KPIs?

In FY2020, three of the four EDs received bonuses. That year, it disclosed the exact remuneration of three other KMP, with two receiving bonuses. In FY2019, only one of the four EDs – the EC – received a bonus. The three KMP who are not EDs did not receive bonuses.

Overall, there appears to be little short-term incentive pay for KMP, particularly those who are not EDs. For EDs and other KMP, it is unclear how ESG (and other) goals affected their bonuses. It is also unclear whether ESG metrics are also linked to long-term incentives, that is, to the award  or vesting of shares and share options.

The importance of good governance and transparency

While it is now common for companies in the U.K., EU and U.S. to link ESG metrics to executive remuneration, Top Glove is one of the first ASEAN  companies to do so. This is clearly spurred by the scrutiny it has faced, especially on social issues. It has also done well in linking its materiality assessment of ESG issues to the ESG KPIs.

Going forward, the company could consider providing more information on issues such as how the ESG metrics actually affect remuneration and weightings of different ESG metrics. It may also consider linking ESG to both short-term and long-term incentive pay, if it is not already doing so.

There are many issues to be considered in deciding whether and how to link ESG to executive remuneration. If companies choose to do so, they need to be able to demonstrate that it is not just a public relations statement, with ESG metrics having little or no impact on executive remuneration. There needs to be transparency on the issues highlighted in this article.

It is also important that there is an independent and competent remuneration committee to ensure that linking ESG metrics to executive remuneration does not result in “soft” targets that are relatively easy for executives to achieve.

A forthcoming report by the author, to be published in collaboration with Sustainable Finance Institute Asia and CPA Australia, will discuss in depth key issues and research on linking ESG to executive remuneration.

_____________________

The author is a shareholder of Top Glove.

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About The Author

Mak Yuen Teen

This is a personal website of Mak Yuen Teen intended to convey his personal views on current developments in corporate governance and to share thought leadership publications. He sees himself as a corporate governance advocate, taking an independent and objective view of corporate governance situations with the goal of improving corporate governance for the public interest. Yuen Teen has been involved in many key corporate governance developments in Singapore and the region. He was the founder of the first corporate governance centre in Singapore and developed the first corporate governance index in Singapore; has served on various corporate governance committees set up by the Singapore authorities; has served on boards and committees in various not-for-profit and international organisations; regularly conducts training for directors, regulators and other professionals; edits an annual collection of case studies published by CPA Australia; and has been recognised by both investor and director bodies with awards and citations for his contributions to corporate governance.

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