Factory Assessment Coverage

Assessment coverage indicates the percentage of factories we or our business partners are able to visit for the purposes of conducting a social compliance assessment. With approximately 23,000 factories active in the course of a single year, some for short periods of time, it is virtually impossible to assess every facility. Accordingly, our ILS program concentrates its resources in countries that we designate as high risk, which we describe under the "Targeted Assessments?discussion. Nonetheless, increasing assessment coverage is a critical goal we are currently evaluating.

The data below reflects on-site factory assessments conducted by Disney internal social compliance monitors and by the external monitoring firms that we retain directly, as well as assessments conducted by or contracted for by our licensees and vendors. During fiscal year 2008, approximately 3,500 factories were assessed by Disney or our licensees and vendors. These factory assessments add up to approximately 4,400 separate assessments.

To improve these factory assessment coverage ratios, we will begin implementing a requirement in 2009 for our licensees and vendors to submit factory assessment reports for their factory base prior to the start of production.

Findings of Compliance Assessments

The following data in Charts 29 and 30 reflect the percentage of assessments in our fiscal year 2008 in which we found noncompliance with elements of our Code of Conduct. As described earlier in this report, we attempt to target our factory assessments to areas we believe may be higher risk, or in other words, more likely to have a violation. Therefore, the data we are reporting for incidence are not representative of all factories related to Disney's chain of suppliers.

In aggregate, we have found that factories generally improve after the initial assessment, and it does appear that the act of monitoring and the identification of issues help facilitate some remediation. However, the degree of initial noncompliance, and the progress made after the first assessment, still fall short of our expectations.

We also categorize the data by priority (high, medium, low). We use these designations to prioritize our remediation strategy. Each violation identified during an assessment is expected to be corrected. High priority categories generally those consistent with ILO core conventions are deemed severe and need to be corrected immediately. Medium priority violations may require changes in payroll systems or other internal mechanisms which may take time to correct. Low-priority violations are important, but other issues should be prioritized first. Specific noncompliance findings within the categories of Health & Safety and Monitoring and Compliance are categorized as high, medium or low depending upon the particular issue.