- Finding 17: Resolutions on civil and social rights were the most popular, with seven of 34 receiving majority support.
- Finding 18: Rationales for opposing action-oriented social resolutions are inconsistent with international human and labour rights standards.
- Finding 19: US asset managers are failing to support resolutions on US workers’ rights.
- Finding 20: Three resolutions requesting racial equity audits received majority support, despite US asset managers predominantly voting against them.
- Finding 21: Asset managers are slowing progress on diversity within their own sector.
- Finding 22: There are pioneering asset managers supporting the passage of progressive health-related resolutions.
Finding 17: Resolutions on civil and social rights were the most popular, with seven of 34 receiving majority support.
There were 117 resolutions on social issues on our list in 2022, compared with 89 in 2021. This reflects the large year-on-year increases in the number of social resolutions being filed[1]. This strong interest in social issues from filers has not yet, however, been matched with investor support. Just 14% received majority support, compared to 18% of environmental resolutions.
The largest category of social resolutions was civil and social rights, with 34 resolutions on our list. These resolutions on civil and social rights were also the most popular among investors, with eight receiving majority support and an average of 35% overall support (Figure 16). These resolutions touched on racial equity, gender equity, privacy, and reproductive rights.
Figure 16 – Resolutions on civil and social rights were the most popular among investors compared to other types of social resolutions
We saw some unusual and interesting social resolutions included in our analysis for the first time in 2022.
- Requesting a report on the external costs of misinformation at social media company Meta (3% support)
- Requesting a report on the human rights impacts of migrant workers in the agri-food sector at supermarket chain Loblaw (12%)
- Requesting a report on risks and costs caused by state policies restricting reproductive healthcare at consumer goods companies Lowe’s, TJX and Walmart (32%, 30% and 13% respectively)
Finding 18: Rationales for opposing action-oriented social resolutions are inconsistent with international human and labour rights standards.
The 24 social resolutions that received majority support were all disclosure-oriented. Overall support for the nine action-oriented social resolutions ranged from 1.5% to 33.8%.
The three action-oriented social resolutions with the highest support were:
- Adopt paid sick leave policy for employees at TJX department stores (33.8% support)
- Adopt freedom of association policy for employees at electric car manufacturer Tesla (33.4%)
- Adopt paid sick leave policy for employees of healthcare company CVS Health (26.2%)
Two asset managers – Dimensional Fund Advisors and Vanguard – voted against all three of these resolutions. Sixteen further asset managers voted against two of these resolutions. The rationales given to justify votes against fall into four categories.
- The company’s policies are already good enough.
- The board, not shareholders, should have oversight of these issues.
- These issues should be dealt with by regulation.
- These resolutions are too prescriptive.
We find these rationales to be inconsistent with international standards. The International Labour Organization’s Declaration on Fundamental Principles and Rights at Work specifies ‘freedom of association and the effective recognition of the right to collective bargaining’ as a fundamental right[2]. The Principles for Responsible Investment – to which all of the asset managers we assessed are signatories – also describe the right to freedom of association as a pillar of decent work[3]. Paid sick leave forms part of the right to social security under Article 22 of the Universal Declaration of Human Rights[4].
Beyond this, paid sick leave and freedom of association are linked to higher productivity and lower turnover[5]. Voting in favour of these resolutions help achieve necessary standards in the target companies and signals expectations to policy makers to create supportive legislation.
Finding 19: US asset managers are failing to support resolutions on US workers’ rights.
We analysed sixteen resolutions covering labour rights issues such as concealment clauses (employment agreements limiting employees’ ability to discuss unlawful acts in the workplace[6]), freedom of association and low wages. All sixteen resolutions on labour rights were filed in the US and Canada.
On average, US asset managers voted for 44% of these resolutions while European asset managers voted for 75% (Figure 17). The US capitalist system, with less regulation and more competition, is associated with worse protection for workers[7]. In particular, US labour regulation is considered to favour employers over employees, in contrast to European labour regulation[8]. These regional differences could result in different perceptions of how material labour rights risks are, and therefore explain the observed difference in voting on labour rights resolutions.
Figure 17 – On average, European asset managers assessed backed more resolutions on labour rights than US peers.
Case study: Sainsbury’s
Ask: Become an accredited Living Wage Employer
Resolution number: 21
AGM date: 7 July 2022
Result: 16.7% For / 83.3% Against
ShareAction coordinated the filing of a resolution at supermarket chain Sainsbury’s, requesting it to become an accredited living wage employer. We campaigned for this because Sainsbury’s January 2022 pay uplift did not apply to third party contractors, and because living wage accreditation is linked to improved recruitment, retention, and productivity[9].
Sainsbury’s management recommended voting against. They said that their base rate of pay already matched the Living Wage Foundation’s (although it did not include third party contractors). They also did not want an external organisation to set Sainsbury’s base pay rate. This means that Sainbury’s has not committed to increase its base rate in line with the cost of living and that third party contractors could be paid less. Almost 10,000 businesses, including retail giant IKEA and half of the FTSE 100, are already accredited Living Wage Employers[10].
Of the asset managers we assessed, there was a striking regional split in support for this proposal. Just one North American asset manager supported it, seeing the resolution as a “move towards best practice”. The rest of the North American asset managers that had holdings in Sainsbury’s opposed the resolution, agreeing with the reasoning given by management.
The large European asset managers that supported this resolution – Amundi Asset Management, DWS Group, Legal & General Investment Management, and UBS Asset Management – have demonstrated a genuine commitment to responsible investing[11]. They have shown support for a social issue that many investors are not yet willing to support, and done so despite rising inflation[12].
We hope to see investors becoming increasingly coordinated in their support for resolutions on decent working conditions over the coming years.
Finding 20: Three resolutions requesting racial equity audits received majority support, despite North American asset managers predominantly voting against them.
The rise of racial equity audits is one of the big stories of the 2022 proxy voting season, with resolutions filed at more than 40 companies[13]. The interest in these resolutions reflects a broader shift from talking about diversity and inclusion to racial justice and worker voice. This is important for dignity, worker engagement and, ultimately, the success of a company.
Seventeen resolutions on our list requested companies to carry out racial equity audits. Three received majority support: at Home Depot, Johnson & Johnson, and Maximus. A further eight resolutions would have received majority support with the support of the Big Three.
It was predominantly large US asset managers that opposed the three resolutions that received majority support. Several justified their vote by stating that there is “no evidence of systematic bias” at the company concerned. This rationale contradicts the goal of the resolution, which is to assess the extent of systematic racial bias within a company. The rationale also conflicts with the US Treasury’s recognition of widespread racial inequality in the US[14] and the evidence mentioned in the shareholders’ supporting statement. For instance, resolution number 10 at home improvement firm Home Depot reads[15]:
“In a widely-publicized 2021 incident, a Minneapolis Home Depot store suspended an employee who refused to remove a Black Lives Matter (“BLM”) logo from his apron, then told him to stop wearing the logo or quit, which he did.”
Finding 21: Asset managers are slowing progress on diversity within their own sector.
None of the eight resolutions on racial equity audits, diversity and discrimination filed at finance companies received majority support (Figure 18). This suggests asset managers are not seeing diversity issues as material risks despite the asset management industry, and the finance sector more broadly, having a long-running issue with diversity[16].
Five asset managers voted against more than half of these resolutions: Dimensional Fund Advisors, Fidelity Investments, JP Morgan Asset Management, T. Rowe Price and Vanguard. Their rationales for votes against these resolutions demonstrate that a lack of controversies at a company is sufficient justification for voting against resolutions requiring audits or improvements. This suggests asset managers may wait until issues have been reported before voting in favour of these resolutions, risking workers’ wellbeing, reputational damage, and company value.
Figure 18 – None of the resolutions on racial equity audits or diversity and discrimination at Finance companies received majority support
Finding 22: There are pioneering asset managers supporting the passage of progressive health-related resolutions.
None of the resolutions on public health received majority support (Figure 16), with support ranging from 2% to 26%. Public health issues, such as vaccine sharing, antimicrobial resistance and mental health, are still struggling to gain traction among investors. Better health could add $12 trillion to global GDP in 2040, and see 120 million more full-time workers joining the global workforce[17]. This is why health should be a high priority for investors and why we have launched our Long-term Investors in People’s Health programme[18] (Box 2[19]).
There were two action-oriented resolutions on health on our list. One was filed at pharmaceutical company Johnson & Johnson and requested the company to discontinue sales of baby powder containing talc due to the risk of asbestos contamination. The other was filed at tobacco company Philip Morris International asking it to phase out the production of hazardous and addictive products. We marked this as a Resolution to Watch – one we believe to be a voting priority for investors[20].
A Framework for Health
Workforce health: Healthy workplaces are a key determinant of health. They can influence employees’ physical and mental wellbeing through the health-related benefits and practices available, and the way that jobs are designed. Good worker health means reduced turnover and absenteeism, increased motivation, and lower reputational risks.
Consumer health: As much as a third of all deaths worldwide are attributable to overconsumption of certain products – including alcohol, tobacco, and food and drinks products. We’re working with investors to drive change in the food and drinks industry.
Community health: Companies have a role in shaping the environment through real estate and infrastructure developments, and can have a negative impact on human health. Air pollution and antimicrobial resistance pose serious threats to society and the global economy.
Three asset managers backed both of these resolutions: Deka Investment GmbH, Man Group and Robeco. That these are all European asset managers reflects the striking regional differences in the way asset managers vote. Their rationales indicate that they voted to proactively avoid emerging legal and reputational risks, rather than waiting for them to materialise.
Case study: Philip Morris International
Ask: Phase out production of health-hazardous and addictive products by 2025
Resolution number: 5
AGM date: 4 May 22
Result: 1.5% For / 98.5% Against
The resolution at Philip Morris requested a phase out of health-hazardous and addictive products by 2025. It was filed by faith-based healthcare organisation Trinity Health. Garnering just 1.5% support overall, it was not popular among investors.
Philip Morris’ website claims to be ‘Delivering a Smoke-Free Future’. Its recent acquisition of Vectura Group, a manufacturer of respiratory devices, has been marketed as part of their transition towards wellness products. There is, however, evidence that Philip Morris is using Vectura’s technologies to expand their range of non-tobacco addictive products, while also making their tobacco products more addictive[21]. In doing so, Philip Morris can retain existing smokers as customers while attracting new customers.
The four asset managers in our dataset that supported this resolution appear to recognise the material ESG risks involved in continuing to sell hazardous products over the long term. The rationales of the 37 asset managers who opposed this resolution, on the other hand, justify continued investment in Philip Morris with the company’s transition to ‘reduced-risk products’.
If investors choose to continue investing in companies that are currently environmentally and socially unsustainable, we encourage them to support shareholder resolutions that would make these companies genuinely shift to more sustainable practices.
References
[1] Interfaith Center on Corporate Responsibility (2022) ICCR’s 2022 Proxy Resolutions & Voting Guide.
[2] International Labour Organization (2022) ILO Declaration on Fundamental Principles and Rights at Work (DECLARATION). https://www.ilo.org/declaratio.... Accessed 18 November 2022.
[3] PRI (2022) How investors can advance decent work. In: PRI. https://www.unpri.org/human-ri.... Accessed 18 November 2022.
[4] James (undated); UN (2015) Universal Declaration of Human Rights.
[5] Trillium Asset Management (2022) The Investor Case for Supporting Worker Organizing Rights | Trillium Asset Management. https://www.trilliuminvest.com.... Accessed 4 November 2022.
[6] PRI (2022) Google Inc. (Alphabet Inc.) | Report on Concealment Clauses. https://collaborate.unpri.org/.... Accessed 18 November 2022.
[7] Pethokoukis J (2016) America’s Competitive Capitalism Vs. Europe’s Cuddly Capitalism: Which Is Better? In: American Enterprise Institute. https://www.aei.org/economics/.... Accessed 18 November 2022.
[8] Fisher and Putman (2022) European Union labor law- a comparison between the labor laws of the United States and the European Union. The Business and Management Review 7(5):43-50
[9] Chapman K (2022) Decent pay gives us healthy, productive workers. Financial Times.
[10] Kroeger J (2022) Living wage resolution at Sainsbury’s gathers momentum. In: ShareAction. https://shareaction.org/news/l....
[11] Howarth C (2022) Living Wage vote at Sainsbury’s ‘will show who is for real in responsible investment’. Responsible Investor.
[12] Romei V, Smith A (2022) Global inflation tracker: see how your country compares on rising prices. Financial Times.
[13] Insightia (2022) The Racial Audit Revolution. Insightia Monthly 1(3):1-5. https://www.diligent.com/-/media/project/diligent/master/insights/white-papers/pdf-media-files/diligent_insightiamonthly_racial-audit-revolution.pdf?rev=5cedc07b-7512-4cfd-9d35-fba69d8eecda&hash=C12C3A7D369AB949B4FBD7189FCCE968)%27
[14] Bowdler J, Harris B (2022) Racial Inequality in the United States. In: U.S. Department of the Treasury. https://home.treasury.gov/news....
[15] Home Depot (2022) Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 - Home Depot.
[16] FCA (2021) Review of research literature that provides evidence of the impact of diversity and inclusion in the workplace; Thomas H (2022) Where are all the women in asset management? Financial Times; Venkataramakrishnan S (2022) European banks make slow progress on gender diversity at the top. Financial Times.
[17] Remes J et al. (2020) Prioritizing health: A prescription for prosperity | McKinsey. https://www.mckinsey.com/indus....
[18] ShareAction (2022) Improving people’s health. https://shareaction.org/global....
[19] Madureira Lima and Galea (2018).
[20] ShareAction (2022) ShareAction’s resolutions to watch 2022. https://shareaction.org/shareh....
[21] Expose Tobacco (2022) Addiction at Any Cost - Philip Morris International Uncovered.
All links accessed November 2022.
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