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WDI survey results suggest that disclosure improves workforce practices

173 companies representing $13 trillion in market capitalisation, with 11 million directly employed staff, reported to the WDI this year, including half of the FTSE100.

(Tuesday 26 April, London) Today ShareAction’s Workforce Disclosure Initiative (WDI) publishes the results of its annual survey of employment practices. 173 companies representing $13 trillion in market capitalisation, with 11 million directly employed staff, reported to the WDI this year, including half of the FTSE100.

The WDI collects workforce data on behalf of its 66 investor signatories with $10.5tn in assets under management, enabling investors to drive improvements in corporate workforce practices in companies’ direct operations and supply chains, benefitting workers and leading to better outcomes for companies and investors.

The results of this year’s survey indicate that this model is working. Among other things, the WDI’s annual report finds that:

Companies that engage in workforce reporting for longer demonstrate better workforce practices

For example, the longer companies respond to the WDI survey, the more likely they are to conduct human rights due diligence. 75 per cent of first-time responders conduct human rights due diligence, compared to 96 per cent of fifth-time responders. Due diligence is essential for effectively identifying and responding to risk. For example, responding companies that conduct due diligence are significantly less likely to use prison labour. Over half (56 per cent) of companies that don't conduct due diligence use prison labour, compared to six per cent of companies that do.

There was also a link between taking part in the WDI for longer and having smaller gender and ethnicity pay gaps. First-time responders had an average gender pay gap of 20.4 per cent, compared with 14.3 per cent for fifth-time responders. First-time responders had an average ethnicity pay gap of 28%, compared with 18% for fifth-time responders.

Greater diversity is correlated with lower levels of discrimination and harassment

More diverse leadership was correlated with an increase in resolved incidents of discrimination and harassment. Companies with over 30 per cent female representation on boards had a higher percentage of discrimination and harassment incidents resolved (79 per cent on average) than those with below 30 per cent female representation on boards (55 per cent on average). Similarly, companies with internal hire rates for women of over 50 per cent had less than half the average number of reported incidents of discrimination and harassment (29.5 incidents on average) than those with rates below 50 per cent (61.4 incidents on average).

Despite these positive indications, the survey results reveal that progress on many issues is at a standstill. For example:

CEO to median pay ratios remain high

The average company CEO to median worker pay ratio disclosed to the WDI is 106:1. This is a slight decline from the average ratio last year of 122:1. US companies had by far the highest ratios, averaging 315:1 - almost five times greater than the average ratio of companies from other countries (69:1).

The WDI report notes that high CEO pay has been justified based on the link between executive performance and business success, but argues that in practice, this is not the case. CEO to median worker pay ratios are not closely related to performance or shareholder returns and are higher in countries that have weaker institutions protecting workers, while high pay ratios have an adverse impact on employee morale, company performance and consumer preferences.

Companies are making less data available to the public

The WDI survey asks companies a total of 135 questions. 54 of these must be answered publicly, with the data available through the WDI website. For the remaining questions, companies can choose whether to make the data public or share it with WDI investor signatories only.

Prior to the pandemic, company responses displayed a trend towards increased openness. Companies made 85% of their responses public in 2020, up from 76% in 2019 and 38% in 2018. However that trend has now reversed, with companies making just 65% of their answers public this year.

The disruption caused by the pandemic created significant challenges for workforce management. It seems that as a result, companies were less willing to publicly disclose data that may show negative outcomes for workers.

Councillor Gerald Cooney, Chair of the Northern LGPS, said:

“Successful sustainable companies know and value their staff, often their biggest asset. Investor engagement on workplace ESG risks, and the demand for information on how companies are managing them, is increasing rapidly. Many of the initial questions investors ask of companies about their workforce practices could be dealt with by enhanced reporting. That is why Northern LGPS backs the WDI and encourages companies to participate. The more information we have, the better job we can do in working with companies to create value for both investors and the workforce.”

Mary Beth Gallagher, Director of Engagement, Domini Impact Investments, said:

“The latest WDI report and dataset provides meaningful and useful information on companies across a range of workforce issues, including governance and oversight, workforce composition, and how companies address their most salient issues related to the workforce, such as worker voice and representation, health and safety, racial justice, pay equity and benefits. Disclosure on workforce topics generally lags and lacks specificity, and this benchmark helps facilitate the engagement between companies and investors. We continue to encourage companies to increase the quantity and quality of information that is disclosed publicly and welcome this latest report.”

Notes to editors

The WDI report and the full dataset of publicly-disclosed data are available on request.

About the Workforce Disclosure Initiative

By improving the volume and quality of data on workforce governance structures, risk management, health and safety, remuneration and diversity & inclusion practices, the WDI enables investors to push companies to improve their treatment of workers.

The WDI is run by ShareAction and supported by 66 investors with over $10tn in assets under management, from Amundi to USS. A full list of signatories can be found here.

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