Preserving Its Membership Certification Value Beware of Slanted Stories on Arbitration

Diamond Intelligence Briefing By Chaim Even-Zohar

Vol.33  No.886  N9 March 2017

Signet ChairmanIn sSidpeakse out Fiscal 2017 Sales by Stores (Page 12) (Page 13) THE RJC’s STERLING IMBROGLIO: Preserving Its Membership Certification Value Beware of Slanted Stories on Arbitration

or better or worse, journalists are not the most appreciated species today. We are under pressure, we are vilified, and epitaphs like “fake news”, “alternative facts” are becoming household words. I was deeply bewildered by the rapidly unfolding Washington Post revelations that “hundreds of former employees of Sterling Jewelers claim that its chief executive and other company leaders presided over a corporate culture that fostered rampant sexual harassment and discrimination.” Within hours the story was recycled in general Fand financial media, and the share price of Sterling’s parent company Signet Jewelers took a further plunge. Then yesterday, the New York Times (NYT) followed with a headline “Jeweler’s policies hid abuse, suit says”. Writes the New York Times: “In 2004, a female employee said in a claim that she had witnessed the rape of her roommate by a Sterling manager at an outing sponsored by Sterling in 2003. Sterling fired the man, who ultimately pleaded no contest to sexual battery. But the female employee, who went by Jane Doe in court papers, said ‘the company set out to investigate, intimidate and discredit her and the assault victim after the company got notice that the victim might sue the firm.’” A few things troubled me. First of all the timing. Today, Signet and Sterling are publishing their annual reports – generally a festive event, with press releases, presentations and press conferences. Was the press being manipulated? Virtually every paragraph in the NYT story sketches a quid pro quo harassment workplace - a situation where a manager or other authority figure allegedly offers or merely hints that he or she will give the employee something (a raise, a promotion, or a position in another store) in return for that employee’s fulfillment of a sexual demand. But that’s not what the suit is all about. The second thing that troubled me: the NYT addresses issues which were mentioned in affidavits that dealt with unequal pay issues. The arbitration, as we shall discuss later

Diamond Intelligence Briefing 1 RJC›s Sterling Imbroglio

more in depth, is solely about gender-discrimination in 249 signed affidavits counting a total of 1,309 pages. Nor wages. Men earn more than women in equal jobs. That’s was it difficult to find NYT’sJane Doe’s signed affidavit. She a nation-wide, highly disturbing, situation throughout the signed with her real name. The rape wasn’t actually in the United States. Gender discrimination is illegal. This is the outing, but in the bedroom of her roommate. The assailant issue to be addressed in the arbitration. was a drunk male colleague whom they had driven If there are no more “rape” stories, why cite something home [from a restaurant] to her roommate’s apartment that may have happened 15 years ago? It upset me. As “so he could get home from there, since he lived in the a journalist I feel that something isn’t right. next apartment complex. However, he wouldn’t leave, and we told him he could sleep it off on the couch. [The DIB Conducted its Own Fact-Checking colleague] would not go to sleep, and another friend What exactly did the Washington Post write? Citing that was with us, gave [the colleague] more drinks in an arbitration document it obtained, it reports that sworn an attempt to get him finally go to sleep. …… [Then her “declarations from roughly 250 women and men who friend told Jane Doe] that when she woke up, he was worked at Sterling, filed as part of a private class-action on top of her and she couldn’t push him off.” Let me arbitration case, allege that female employees at the spare you the rest. company throughout the late 1990s and 2000s were The colleague was fired [a few years after this event] routinely groped, demeaned and urged to sexually cater and the conduct of the female employee, and the to their bosses to stay employed.” The New York Times veracity of her story, was questioned. Sterling informed says its evidence came from “more than 1300 pages” an Ohio court that “the plaintiff had engaged in lewd documents. and lascivious behavior.” That court case had nothing As the Arbitrator had released a redacted version of to do with the “class action” which supposedly is the documents (with some names blacked out) the subject of the NYT story. it wasn’t difficult to get the I have read most of 1,309 pages, which is horrifying reading. But I found no “other” so called rape – and the NYT, if it had given more details on the story – would most likely have agreed with question marks on the relevant allegations. There is plenty of troubling behavior in these affidavits. But no rape.

Inflicting Public Relations Damage Signet Jewelers has worldwide an average of 29,000 employees, some 16,140 of which work in the Sterling Jewelers division. The affidavits which constitute the basis of the class action were signed by 0.8% of the total work force. Many of these affidavits seem like a template, where mostly dates, names and 2016 | annual report amounts may differ. Probably that’s Celebrate Life. the normal way that class actions

Express® are managed. I wouldn’t know. Love. My instincts tell me that the current publicity was artificially created to poison the atmosphere sufficiently to force Signet and Sterling to the negotiating table before the trial commences in the fall. It might even work.

Diamond Intelligence Briefing 2 RJC›s Sterling Imbroglio

The managers of the class action know full well that in America (and not only there), one must assume one’s innocence until proven guilty. They also know that the fate of Sterling will not only be decided in a court of law or in an arbitration behind closed doors. The fate of Sterling is in the hands of its customers. Consumers react to perceptions. Unquestionably, the adverse publicity - the bad situation - may damage consumer confidence.

RJC’s Auditing Practices Let me now turn to RJC and auditing standards – which is really the focus of this DIB. Signet Using the RJC to Be Signet Jewelers is not only the largest specialty jewelry a Global Preacher of Ethics? retailer in the US, UK and Canada, but with $6.4 billion The alleged gender-payment gap situation is in annual sales (2016), it is unquestionably the dominant exceptionally damaging because Signet has assumed global polished diamond buyer. In the last decade, it has the role of Global Preacher of Ethics. Undoubtedly, Signet’s used its purchasing power to convince, cajole, pressure flagship is the 2005 establishment of the Responsible (and in some instances threaten) the diamond value chain Jewellery Council (RJC) of which it is one of the 14 original into participating in a host of global initiatives to embrace founders and a certified member.The RJC is dedicated to and adopt auditable social, ethical and environmental the objective of reinforcing consumer confidence in the governance frameworks. diamond and gold supply chain. Signet takes considerable At the same time, however, it has jumped in the pride in its stewardship of the RJC – which has become an advertising vacuum created when De Beers ceased invisible part of the company’s “corporate business card.” its generic promotions. Sterling’s parent company It literally counts its “success” in recruiting RJC members. spends some $200 million or more on preserving and Says Signet’s website: “Since RJC’s founding, Signet has growing our key consumer markets. It is now facing a strongly encouraged its suppliers and other members publicity campaign against itself on a subject where it is, of the industry to join the RJC and eventually become indeed, vulnerable. Let there be no doubt: Sterling faces certified members which more than 300 have done.” some serious challenges in its retail stores Signet is almost synonymous with the RJC. That’s not management and staff just the way it is; that’s also the way the parties want it relations. to appear. Today, the RJC has over 900 From The New York Times March 8 2017 issue. members from mine to retail. Academic research has confirmed what every diamantaire knows: hardly anyone joined because he “was dying to do so,” or because he saw a tangible benefit in RJC membership. No, instead, RJC membership has become a precondition to becoming eligible to buy rough from certain suppliers or to sell polished to certain jewelers. Even today, Signet’s subsidiary Sterling will drop you off their list of vendors if you are not an RJC member. In terms of “ethics” – Signet can truly claim to be the “global preacher….” But RJC must deliver tangible “value” to its members.

Consumers to Decide Sterling’s Fate The Signet Group was not always called by that name. Before 1993 it was called Ratners. Its Chairman was Gerald Ratner, the British tycoon retailer, who headed the group, which then

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already had some 1,000 stores in the United States. Then Protection Act to promote the financial stability of the came the Chairman’s notorious speech at the Royal U.S. by improving accountability and transparency in Albert Hall in April 1991. Asked why some of Ratners’ the financial system, the“conflict minerals”section was wine glasses and silverware could be sold so cheaply, he attached to it in the “miscellaneous” section. Gold was responded, “because it’s total crap.” covered – but diamonds were left out. Here, the Kimberley He compounded this by going on to Process and the RJC were viewed as being sufficient. This remark that one of the company’s is still the case today. earring sets were “cheaper than an Except for Diarough and Rosy Blue, virtually all of the M&S prawn sandwich but probably RJC founders were either large retailers (Signet, Cartier, wouldn’t last as long.” Zale, Tiffany, etc.) or mining companies (De Beers, BHP In the uproar that ensued, Billiton, Newmont Mining, Rio Tinto, etc.). Midstream was customers exacted their revenge by thus not represented – and had to be “forced” into the staying away from Ratners’ shops. scheme. Nobody did that better than David Bouffard, The jewelry empire all but collapsed. though Rio Tinto was a powerful and effective recruiter A new chairman fired Gerald at the as well. David Bouffard, Signet Vice end of 1992 and rebranded the Undoubtedly, hardly any retailer had a greater President of Corporate Affairs company as Signet Group. Today, commercial interest in a strong and effective RJC than in any scenario, the publicity fallout Signet, which committed enormous financial and human of the gender arbitration trial might be more lethal than resources to the success of this endeavor. Objectively the possible financial penalty, in the case of a loss. One speaking – and with the benefit of hindsight – the RJC’s wonders whether the present CEO, Mark Light, will have establishment may have prevented more burdensome to vacate his offices. [See statement on page 12.] regulation schemes. However, the close association of Signet with RJC may now backfire on the entire jewelry The Other Side of the Coin: industry – an unintended consequence. It depends how Self-Imposed Standards long the bad news stories will dominate the news. Signet’s powerful Corporate Affairs Department is headed by Vice President David Bouffard, who had joined Sterling’s Imbroglio May Turn into the company straight out of university, some 36 years ago. an RJC Dilemma He “knows” Sterling, inside out. He is the “commander,” The timing of the sudden Washington Post and New tasked with fighting the public relations war at the front, York Times exposés couldn’t come at a worse moment for and also the fireman that extinguishes the fire that’s still the RJC. In a few days, on April 4, 2017, Signet’s current burning in the back. RJC certification period expires. The organization may Bouffard was one of the brains behind the RJC concept, have to make some difficult choices. and it’s not without reason that Signet has been forcefully The attention forced parent “imposing” the RJC on the industry’s midstream. In 2005, company Signet Jewelers to in the aftermath of the conflict diamonds era, just after issue immediately a strong denial the Kimberley Process had come into being, there were statement, which, along with the mounting pressures on mineral supply-chain regulations. negative headlines, nevertheless Some 14 organizations from a cross section of the diamond didn’t prevent its share price from and gold jewelry business came together to create a dropping by 13%. In the past 12 months, body that could self-impose responsible standards on the share price had dropped some the diamond-jewelry supply chain. “It was either self- 50% (from a $125 high to a $62 low.) regulation or facing the enactment of onerous compulsory “This could continue to get worse,” governmental rules,” recalls one participant. The concerns predicts a financial newsletter. (That’s Mark Light, Chief Executive were mostly with what Washington law makers might or what happened to Signet when it Officer of Signet Jewelers Limited not do. was still called Ratners 25 years ago. The worries were not unjustified. When, in the aftermath Do public relations disasters come by 25-year cycles?) of the 2008-2010 financial crisis, the U.S. enacted the DIB asked Andy Bone, the Executive Director of 848-page Dodd-Frank Wall Street Reform and Consumer RJC, if the facts alleged in the gender discrimination

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arbitration turn out to be all true, could Signet still remain sanctions are more serious. a certified accredited member of the RJC? Could they At the RJC, the “worst sanction” is loss of membership. remain a member in “good standing”? It was a kind One might dismiss that with a “big deal” – it doesn’t really of rhetorical question – the answer affect one’s business; it may actually save [auditing and was predictable. “It is a story we membership] costs. At De Beers, in contrast, in many are following with interest. As there situations in which sight privileges were withdrawn because are legal processes still ongoing, we of BPP infringements, the ex-sightholders have taken (or will get back to you in due course. have threatened) court action. Fondest regards, Andy.” Our follow up questions were politely replied “Innocent” until Proven Otherwise? to with references to the complaint Therefore, De Beers, over the years, has adopted the procedures within the RJC. dictum “as long as there is no (criminal) judgment against a client, the client remains fully BBP compliant.” This has The Application of created a situation in which most clients accused of Andy Bone, CEO of RJC Compliance Standards criminal charges (mostly tax evasion, money laundering, When RJC was initially founded, false invoicing, etc.), would settle in plea bargains or it envisioned that De Beers would accept its Auditing opt, when possible, for arbitration – in this way, even if Standards also as satisfying the DTC sightholders’ found guilty, they would remain BBP compliant. This has compliance requirements of the Best Practice Principles happened in some mega cases in Belgium. Those accused (BPP). The BPP consist of those standards to which in the Brenig or Monstrey cases who “settled” faced no sightholders, their contractors, as well as the De Beers loss of DTC supplies, whereas those who actually were Group itself, must adhere. Failure to comply with the convicted were not so lucky. In several instances, filing BPPs constitutes a breach of the Supplier of Choice an appeal could postpone final judgment for some years Documentation resulting in “appropriate action” – a – and supplies would continue until the final judgment. euphemism for losing sightholders privileges in the case RJC probably hasn’t had these kind of problems yet of clients. This means being struck from the client list. and, as the Washington Post article correctly pointed Acceptance of RJC standards by De Beers would out, it is most convenient “that many US and US-based save money for sightholders, as they wouldn’t have to companies require that an incoming employee sign a finance multiple auditing exercises of their business. De waiver for court actions against the employer, requiring Beers found too many holes in the RJC auditing standards them to pursue their grievances (for example, in those days a certification of a group’s through arbitration.” Unless Antwerp sales office could be sufficient to certify the entire you’re top management, group – a practice dubbed “cherry picking.”). employees do not have a Today, De Beers may consider itself lucky to have formal employment contract maintained its own auditing requirements. The Signet story as you would in Europe, but is also of great relevance to De Beers. In one BPP clause, such a waiver is almost it clearly states that “no worker should be discriminated always demanded by against on the basis of [a number of characteristics the employer. Thus, including] gender.” Sterling also actively sells the De sexual harassment Beers Forevermark. suits (and settlements) Consistent with BPP requirements, if the allegations would rarely reach turn out to be true on the rough diamond supplier level, a court room – and the DTC should automatically cease supplying rough to there as well, there Signet’s Botswana Company. Don’t worry. Most likely, this would be last-minute is not going to happen. Why not? Because DTC clients, settlements. In terms over the years, have learned how to circumvent BPPs, or of compliance more precisely, De Beers has adopted policies that allow systems like the it the flexibility to close its eyes. Nonetheless, BPP norms BPP and RJC, are far more stringent than those of RJC, but also their arbitration puts things in very

Diamond Intelligence Briefing 5 RJC›s Sterling Imbroglio grey territory. Does a “settlement” prove “innocence”? Said one analyst: “If each member of the class action Arbitration decisions and the resulting compensatory group collects an average award of $100,000 (including and punitive award are legally binding. They are generally legal fees), this would total around $6.9 billion – which is tied to strict confidentially clauses. If any RJC member more than one year of the entire gross turnover of the “loses” this type of arbitration (which is clearly evidenced Signet Jewelers.” It may not be without reason that lawyers by the huge financial consequences) they will likely be for Signet do everything to procrastinate and use every immune from legal and reputational consequences in conceivable legal challenge available to them. terms of RJC membership. This Story is Far From Over… Looking at the Case History More Suits Ahead of the Arbitration Investors are getting impatient. “It is highly unusual for Following are the facts – the way DIB understands them. a case to be in active arbitration for nine years. During the On March 24, 2008, on behalf of themselves and other arbitration process (which is being delayed by Signet’s current and former female employees of Sterling, claimants counsel), the judge allowed for the release of 200+ Laryssa Jock and twelve others, all current and former depositions that chronicle allegations of widespread female employees of Sterling, filed a lawsuit in arbitration, sexual harassment spanning decades and impacting now known as Jock et al. v. Sterling Jewelers Inc., alleging thousands of (mostly) female employees,” writes Duane they were paid less than similarly situated male employees Bair on the Seeking Alpha financial data website. and were denied promotional opportunities because of It is labelled “an absolute disaster for a retail company their gender. that makes its money marketing and interfacing with The case was filed in arbitration before theAmerican retail public.” Investors refuse to accept such a steep Arbitration Association, a private agency that manages plummeting of the share price. A specialty global investor arbitrations, rather than in court, because of Sterling’s rights law firm quickly seized the opportunity, announcing mandatory “RESOLVE Program,” a three-step process that “it is investigating potential securities claims on for resolving employment disputes between Sterling behalf of shareholders of Signet Jewelers Limited resulting and its employees. Employees are prohibited to air their from allegations that Signet may have issued materially grievances in court. The RESOLVE rules set specific and misleading business information to the investing public.” limited timetables for employees to file their complaints. Signet’s Corporate Vice President David Bouffard has a Investors started to worry in earnest about a year ago, when the Arbitrator ruled that in this class action, current and former female sales employees of Sterling together may pursue their claims under the Equal Pay Act [see table], in which they claim that Sterling paid them less than males performing the same work in the same establishment. Moreover, last year, the Arbitrator granted Claimants’ request for equitable tolling that allows these female employees to reach back 13 years to bring their claims if they worked as sales associates, department managers, assistant managers, or store managers for Sterling any time between October 16, 2003 and the present day. The class action that is arbitrated focuses on possible Title VII violations. [Table from AAUW Study.]

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Herculean task ahead of him. Bouffard informed DIB that We have no issue with Bouffard on this – but the truth “it’s critical to understand that the arbitration claim brought is that the judge didn’t enable these sexual issues to be against Sterling in 2008 alleged gender discrimination in included in this specific arbitration. They won’t be brought pay and promotion. None of the 69,000 class members up. [Is that why it became so urgent to alert the press?] have brought legal claims in this arbitration for sexual Two years ago, in a nearly 120-page ruling by harassment or sexual impropriety.” Arbitrator Kathleen A. Roberts, a retired U.S. magistrate judge, Roberts gave the green light to proceed as a class in Median Weekly Earnings by Level of Education and Gender, 2016 the arbitration proceeding solely over the allegations that Sterling instituted practices and policies that deliberately passed them over for promotions and paid them less than their male counterparts. The ruling defined the class period for the specific compensation claims according to a specific law. In that ruling, however, the arbitrator rejected the employees’ attempt to proceed as a class with allegations that Sterling intentionally discriminated against them (which bars them from seeking class wide monetary damages). In other words: the arbitration must consider faulty practices and policies, but it will not decide whether these were deliberate or intentional. Median Weekly Earnings by Gender and Age, 2015 The Arbitrator further specifically noted “that in addition to the pay policies and practices claims, the women have also presented evidence of improper sexual conduct and comments by numerous executives and upper-level managers, including the solicitation of sex as a quid pro quo for employment benefits.” However, as the class action is limited to pay policies and gender discrimination in employment practices, sexual misconduct could not become part of this class action either. That doesn’t mean that there are no other legal remedies

Diamond Intelligence Briefing 7 RJC›s Sterling Imbroglio outside this specific arbitration. Signet states that the Washington Post and other media reports “mischaracterize the arbitration.” We tend to agree. However, even Signet doesn’t deny that of Newcast Online Photo: Courtesy Ernest Jones store in the Brent Cross shopping centre, London, UK the sworn statements on sexual harassment exist. The Arbitrator herself confirmed this. TheNew York Times based its article on that information. Let’s be precise: there is ample (sworn) evidence that it happened; however, it hasn’t been shown that it was part of a “corporate culture.” Vive le difference. Whether it matters for RJC that “it happened” is not for us to say.

Sexual Harassment versus of Newcast Online Photo: Courtesy Gender Discrimination One must make a differentiation between structural/ The H. Samuel store Dublin, Ireland systemic corporate issues and occasional individual actions. Even if there are a few dozen or more men watching as female managers in varying stages of undress abusing their position in the hierarchy to exact sexual splashed in a hotel pool. He had a drink in one hand and favors, that doesn’t necessarily reflect a corporate culture. a cigar in the other, just taking it all in, like, ‘I am the king It can be viewed as a corporate culture issue only if it is and this is my harem,’ ” she told The Post. That is not a something that goes “right to the top,” if the discovered quote of the executive, just an opinion of a dissatisfied incidents are condoned rather than purged and punished. worker. If management approves of them. “The interviewee was prevented by her attorneys The Arbitrator had observed (2015) that “claimants from naming which executive was involved, because cannot provide the necessary ‘glue’ to establish that of the condition of the arbitration documents’ release.” the common reason for pay and promotion disparities It seemed that the Washington Post was [intentionally?] is intentional gender discrimination.” The Washington highlighting points which would show issues of corporate Post recounted at length the tale of a particular culture rather than personal misbehavior. The multi-day female manager who attended a corporate multi-day management meetings were annual events. There management meeting where she “saw are many affidavits referring to these meetings, a top executive probably in preparation of attempts to show it is part of the culture… A male employee notes in one affidavit that he wanted to take his spouse to the meeting. That was categorically refused, he says, and it might have resulted in dismissal. David Bouffard stresses to DIB that “it’s critical to understand that none of the 69,000 class members have brought claims in this arbitration for sexual harassment or sexual impropriety. Since the case was filed in 2008, it has never included legal claims of sexual harassment or hostile work environment discrimination. The only claims certified to proceed on a class- wide basis relate to alleged unintentional gender pay and promotions discrimination.”

Impact on the Diamond Industry The United States remains the global diamond industry’s largest diamond consumer market – and it is the driver of

Diamond Intelligence Briefing 8 THE SIMPLE RJC›s Sterling Imbroglio TRUTH

ABOUT THE Women’s Median Annual Earnings as a Percentage of Men’s Median GENDER PAY GAP Annual Earnings for Full-Time, Year-Round Workers, 1950-2015 SPRING 2017 EDITION

The American Association of University Women (AAUW) is the nation’s leading voice promoting equity and education for women and girls. In the U.S. men are paid more than women are paid over their lifetimes. But what does that mean? Are women paid less because they choose lower-paying jobs? Is it because more women work part time than men do? Or is it because women have more caregiving responsibilities? And what, exactly, does gender bias have to do with paychecks? AAUW’s The Simple Truth about the Gender Pay Gap succinctly explains the pay gap in the United States; how it affects women of all ages, races, and education levels; and what one can do to close it. The graphs in this issue of DIB were derived from this authoritative study. The figures lend themselves for a variety of interpretations and no two situations are alike. It’s not just a Sterling challenge – it’s an American challenge.

the current growth. From a diamond industry perspective, 2015, women working full time in the United States typically the Sterling story resembles President Donald Trump’s were paid just 80 percent of what men were paid, a gap Russian election intervention scandal, in which every of 20 percent. The gap has narrowed since 1960, due day new allegations come to light on contacts between largely to women’s progress in education and workforce campaign officials and Russian intelligence. The truth, participation and to men’s wages rising at a slower rate. whatever it be, has – sadly – become less relevant. At the rate of change between 1960 and 2015, women are Consumers, especially diamond jewelry buyers, act mostly expected to reach pay equity with men in 2059. But even on perceptions. that slow progress has stalled in recent years. If change This Signet story is going to impact the diamond pipeline. continues at the slower rate seen since 2001, women will A key question, which is the main focus of this DIB, is how not reach pay equity with men until 2152.” the industry should react. Closing ranks behind Signet would There are several other studies that draw similar be the industry’s traditional Pavlov-reflex; would that be conclusions. One could argue that their pay scales have the desired reaction? Distancing from Signet? How can followed the American norm – but that norm is against the industry associations mitigate the potential damage of law. And according to this authoritative AAUW research, the fallout? Timing is everything in life. the pay gap may not close anywhere in between 40 to Out of respect to David Bouffard, I want to leave the 140 years. last words to him: “Sterling has taken the allegations of pay and promotions discrimination raised in this case very The Issue isn’t just Sterling – it’s RJC too seriously. We have thoroughly investigated the allegations As we said, the issue isn’t Sterling. The issue – or rather and have concluded they are not substantiated by the the question – is how our diamond industry deals with this facts and certainly do not reflect our culture.” DIB doesn’t situation. If this storm leads to a significant fall in diamond think he could say otherwise, and we don’t want to engage sales in 2017, the ripple effect will come into play and then in conjecture. global diamond pipeline may be dramatically impacted The sad thing about all of this is that gender until the end of this decade. The RJC can, quite easily, discrimination is not just a Sterling matter. This week, take a number of steps which would return consumer the American Association of University Women (AAUW) confidence to the RJC certification scheme. released a study on the pay gap between genders. “In - Continues on page 13

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ADDRESSING THE RJC AUDIT FAILURE

ignet’s now-expiring certification period commenced in 2014. It had been audited byUL Responsible Sourcing, a firm that prides itself as “a global company with more than 120 years of expertise … S[that] brings clarity and empowers trust to support the responsible design, production, marketing and purchase of the goods, solutions, and innovations of today and tomorrow. We connect people to safer, more secure, more sustainable products, services, experiences and environments – enabling smarter choices and better lives.” As a matter of fact, UL Responsible Sourcing is a principal vehicle for the Responsible Jewellery Council (RJC); it is also instrumental in RJC’s ambitious harmonization-of-standards exercise. The now-expiring Signet certification was conducted by an eight-member team. The lead auditors were Sheer Garcia and Pascal Denoize. The certification scope included the head offices of Signet and Sterling in the U.S., offices in the U.K., and specifically Kay Jewellers, Jared the Galleria of Jewelry stores, and other various regional stores in the United States. In October 2015, Signet’s Diamond Sourcing and Manufacturing in Botswana were added to the certification scope, and audited by Christie Jaime and Davidzo Muchawaya. The auditors confirmed that “the findings are based on verified objective evidence relevant to the time period for the assessment, traceable and unambiguous.” At the end of February 2017, the RJC had 955 members of which 631 were certified. We don’t know how many companies were certified by UL Responsible Sourcing, but the company clearly has thorough RJC audit expertise.

Signet Awarded the Highest Approval Rating

Anyone “looking in from the outside” 4 April 2014 can only conclude that this may be a case Signet Jewelers Limited

ication Information – of a significant auditing failure. Someone RJC Certif close to these exercises explained that “it is a mistake to compare auditors to UL Responsible Sourcing

investigative journalists, or investigators Certification audit: : Sheer Garcia, Pascal Denoize at all. They have to fill out, complete, an Lead Auditor

Audit Team: Audit Workbook. That contains a series • Ambar Valles • Edward Baltazar of questions they need to ‘tick off’. Christie Jaime • “There is no cherry picking with • Cindy Beckler respect to audits. In a company like Accredited Auditor: • Ilker Sevindi ven • Sinan Do Signet you cannot possibly have all their entities audited in any period. Scope expansion audit: Christie Jaime Lead Auditor: Sampling, based on assessed risk

Audit Team: • Davidzo Muchawaya levels and previously audited sites (if any) is done.”

• Signet Head Office, Akron, USA Home Office, Akron, USA The RJC auditors consider • Sterling • Home Office UK, Borehamwood, UK certain entities to have higher Center (SJIM), Akron, USA • Sterling Repair he Galleria of risks than others. “The least risky • Service Centre, Birmingham, UK (Kay Jewellers, Jared T • Retail stores , group,” confides my source, Jewelry, other various regional stores), USA and Ireland “are retailers. Mining companies Certification Scope: • Retail stores (H.Samuel, Ernest Jones, Lesley Davis other various regional stores), UK added to are considered high risks, • Diamond sourcing and manufacturing (SDDS Botswana manufacturers and traders are (PTY) Ltd) Molapo Crossing, Botswana – scope in October 2015 medium risks, etc. As retail stores

www.responsiblejewellery.com s Ltd, The Council for Responsible Jewellery Practices Ltd, First

The Council for Responsible Jewellery Practices is registered in England and 2. - Continues on next page

Wales with company number 0544904 The Responsible Jewellery34- 38Council Southampton is the trading Street, name London, of the United Council Kingdom for Responsible WC2E 7HF. Jewellery Practice Floor, Dudley House Diamond Intelligence Briefing 10

RJC›s Sterling Imbroglio

- Continues from previous page

are considered low risk, they are not prioritized for sampling selection. This is a reasonable assumption. The same principle is applied to every retailer member,” adds my interlocutor.

RJC Employs Faulty Risk Assessment Gender, age and race discrimination are prohibited. Not only is such discrimination patently illegal in certain countries, such as the United States, these are also critical breaches of the RJC standard. The class action and legal action against Sterling focusing on gender discrimination was well known, or should have been well known, to UL Responsible Sourcing’s auditors. How could they, in 2014, have given the company its highest approval rating? DIB was told to remember “that auditors do their work based on the audit workbook. They don’t go on random fishing expeditions, asking people whether they have any dirt to share.” This may be so. But as auditors of jewelry and other companies, they should be far more familiar than anyone else with the kind of issues identified in the 249 affidavits in the Gender Discrimination arbitration, of the many court actions filed against Sterling by the EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, and of the actions filed by individuals. (The most recent race discrimination suit was filed in November 2016, in the Maryland District Court.)

Where was Sterling’s Management? One may also wonder why Headquarter Staff didn’t identify the retail sector as a high-risk area – asking UL Responsible Sourcing to amend its risk-assessment structure. One insider noted that employee turn-over rate in the retail stores is exceedingly high – isn’t that by itself a giveaway that there may be something systemically wrong? (In contrast: Headquarter Staff often serve the company for many decades, something that instills confidence among stakeholders.) Following regular media practices, we posed questions to UL Responsible Sourcing’s U.S.-based Public Relations Specialist Brooke Arrington, who promised to provide some answers. Ms. Arrington informed us that the colleague handling this is in Singapore and that she would try to come back to us before our deadline. She was not successful – but it is never too late.

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PRESS RELEASE SIGNET CHAIRMAN SPEAKS OUT Reaffirms Commitment to Equal Opportunity, Announces Additional Steps

HAMILTON, Bermuda, March 9, 2017 – In an earnings call held today, Signet Jewelers Limited (“Signet”) (NYSE:SIG), the world’s largest retailer of diamond jewelry, Signet Chairman Todd Stitzer stated that the company has consistently worked to improve policies and practices around equal employment opportunity and workplace culture, resulting in better than benchmark female representation in leadership positions. He also announced that the company will take additional steps in the spirit of continuous review and improvement.

In the past decade, the Signet has: • Adopted employment policies and practices to ensure equal career advancement via standardized processes for setting salaries and promotions based on objective, measurable metrics • Implemented training and performance measurement tools to cultivate leadership traits and prepare team members for promotion within the organization; and • Provided advanced, EEOC-approved training courses to help managers recognize and prevent workplace behaviors that do not respect all team members.

By numerous indicators, Signet outperforms national averages in the percentage of its store management staff who are female. In their 2016 Women In The Workplace report, McKinsey & Company found that the percentage representation of females in non-senior management of U.S. corporations across all industries was 37%. The Bureau of Labor Statistics reports that 44.1% of all first-line retail sales supervisors are female. In the jewelry, luggage and leather goods subsector of this same report, the percentage of female first-line supervisors is 61.5%. At Signet, 68% of the company’s store management staff are female. The Company’s ongoing efforts to promote women in the workplace is reflected at all levels of leadership. According to McKinsey, 29% of all C-Level executives in the retail sector are female. At Signet, 33% of all C-Level executives are female, and 4 of Signet’s 11 or 36% of independent members of its Board of Directors are female. The latter is almost double the average percentage of female directors at S&P 500 firms, which according to a 2015 Catalyst report, is less than 20 percent. “Signet’s Board, management team our valued team members are proud of these accomplishments which were built on a sound framework of policies and practices and a strong workplace culture dedicated to equal opportunity and respect,” said Stitzer. “We know that our commitment requires continuous review and improvement, so as we continue our quest to be an employer of choice, we are taking a number of additional steps to ensure our policies and practices are functioning as intended and to identify areas where we can further improve.” These include the following: • Formation of a new Board Committee focused on Respect in the Workforce that will focus on programs and policies to support the advancement and development of our female Team Members. The directors who will serve on the new committee include Virginia Drosos, CEO of Assurex Health and prior Group President of Procter and Gamble; Marianne Miller Parrs, formerly Executive Vice President and Chief Financial Officer of International Paper Company; Eugenia Ulasewicz, who served as President of Burberry plc America Division; and Helen McCluskey, formerly CEO of The Warnaco Group. These women comprise all of Signet’s female directors and all are very familiar with the company since they joined the Board between 2008 and 2014. • The new committee will appoint an independent consultant to conduct a thorough review, which will cover current and future company policies and practices regarding equal opportunity and workplace expectations, including those covering non-harassment, training and reporting, investigation and non-retaliation. • The committee will also establish an independent Ombudsperson office to act as an informal third-party avenue to provide confidential advice to employees to address concerns regarding issues in the workforce and to provide options and strategies to assist them in resolution of workplace concerns. The Ombudsperson is in addition to Signet’s currently available resources and will provide additional assurance to Team Members and management that fairness and respect will always be the touchstones of how we treat each other.

“We do not tolerate discrimination or harassment of any kind and we want to be sure that the framework we have in place for reporting, and responding to any such issues is robust and effective,” said Stitzer. “It is the intention of this Board and the senior management team to make certain that our culture and our Team Members are fully supported at every level, because culture and people have helped make Signet the leading company in our industry.”

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SIGNET GLOBAL 2016/ 2017 SALES That’s fair enough – but here Total sales the shame may fall on the Same Non-same Exchange at constant RJC itself, unless it publicizes store store exchange translation Total Total sales its action. 1 2 Fiscal 2017 sales sales, net rate impact sales (in mill. $) In any event, the RJC should ensure that Kay (1.4)% 1.8 % 0.4 % 0.4 % 2,539.7 Jared (4.1)% 2.1 % (2.0)% (2.0)% 1,227.5 these gender and sexual Regional brands (9.6)% (11.0)% (20.6)% (20.6)% 163.2 harassment issues are Sterling Jewelers division (2.6)% 1.1 % (1.5)% (1.5)% 3,930.4 Zales Jewelers (1.4)% 2.7 % 1.3 % 1.3 % 1,257.4 included in the next third Gordon’s Jewelers (12.2)% (14.3)% (26.5)% (26.5)% 57.7 party audit of Signet. That

Zale US Jewelry (2.0)% 1.7 % (0.3)% (0.3)% 1,315.1 would guarantee that when Peoples Jewellers (4.6)% 1.1 % (3.5)% (1.1)% (4.6)% 204.9 Mappins (4.2)% (6.9)% (11.1)% (1.3)% (12.4)% 29.7 Signet reruns to become a Zale Canada Jewelry (4.5)% — % (4.5)% (1.2)% (5.7)% 234.6 proud member of RJC, the Zale Jewelry (2.4)% 1.4 % (1.0)% (0.2)% (1.2)% 1,549.7 Piercing Pagoda 6.6 % 1.6 % 8.2 % — % 8.2 % 263.1 standard organization’s Zale division (1.2)% 1.4 % 0.2 % (0.1)% 0.1 % 1,812.8 “badge of compliance” H.Samuel (1.3)% 0.4 % (0.9)% (13.0)% (13.9)% 323.5 will remain as robust as Ernest Jones 1.6 % 1.2 % 2.8 % (13.4)% (10.6)% 323.6 UK Jewelry division 0.1 % 0.8 % 0.9 % (13.2)% (12.3)% 647.1 reasonably can be expected Other segment 44.8 % 18.1 in the eyes of the consumers Signet (1.9)% 1.2 % (0.7)% (1.5)% (2.2)% 6,408.4 and other stakeholders. This Adjusted Signet3 (2.4)% 6,421.7 way the RJC puts a plaster Notes: 1= For stores open for at least 12 months. 2= For stores not open in the last 12 months. 3=Includes $13.3 million deferred revenue adjustment related to acquisition accounting which resulted in a reset of deferred revenue associated with extended service plans sold by Zale on the wound. The healing Corporation prior to the acquisition on May 29, 2014. process, however, rests solely THE STERLING DIVISION CONTRIBUTED 61% OF TOTAL REVENUES in Signet’s own hands. Balance Sheet and Statement of Cash Flows: Cash and cash equivalents were $98.7 million compared to $137.7 million as of January 30, 2016. The lower cash position was primarily due to share repurchases partially offset by favorable cash provided by operating activities.

In Fiscal 2017, Signet deployed cash of $1.0 billion to repurchase outstanding common stock, or 11.2 million shares, at an average cost of $89.10 per share.DIAMONDOf the $1.0 INTbillion,ELLIG$625ENCmillionE BRIof repurchasesEFING (formerlywere executed Diamondto offsetIntelligence Briefs) is published on dilution from the October convertibleanpreferred occasionaloffering. basisAs (betweenof January 12-2028, 2017, issues there a year,was depending$510.6 million on remainingthe subjects) to provide significant news, under Signet’s share repurchase authorization.background information and research indispensable to executives in the diamond and diamond jewelry business. While the information herein is carefully compiled from sources believed reliable, no responsibility for its accuracy can be assumed and no representation of warranty expressed or implied is made as to their completeness or correctness. Diamond Intelligence Briefing may not be reproduced, distributed, published or used otherwise for any purpose but for the personal information of the subscriber without the prior written consent of the publisher. 1 year subscription - US$590 * Individual issues of DIB are available for purchase online at: www.diamondintelligence.com

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