Active ownership: social issues in the 2023 voting season

Sustainable Development Goals and Shareholder Resolutions

Introduction

Voting on shareholder resolutions is a core pillar of our engagement strategy, as it can provide us with a forum to use our voice to express our positions on key issues to companies’ management teams.

From January to May of this year, environmental, social, and governance (ESG)-related resolutions have played a prominent role at companies’ annual general meetings, increasing by 3% compared to 2022 in Russell 3000 companies. We explained how we reached some of our voting decisions in our voting season spotlight blog.

Shareholder resolutions on social topics, ranging from workplace diversity and inclusion to human rights, continue to grow in their popularity and this year represented 35% of shareholder proposals at Russell 3000 companies. Below we discuss some trends and reflections on proxy voting on social issues globally.

Diversity and Inclusion Proposals

We continue to exercise our voting rights where we identify a lack of gender or ethnic diversity on the board. At a global level in the year to date, we voted against directors at over 400 companies due to concerns over gender diversity.

In the first half of this year, we voted against directors at more than 50 companies because of a lack of ethnic diversity in the UK, US, Canada, and Australia. In the UK, we voted against directors at five companies because of a lack of gender diversity on the executive committee.

Shareholder resolutions asking companies to disclose the diversity of their management and workforces, and report on the efficacy of their initiatives, were tabled at numerous companies this year. We explained our rationale for supporting a resolution asking Las Vegas Sands to provide a matrix which reports each director or nominees’ self-identified gender and race/ethnicity in our blog, as this allows investors to more accurately assess diversity among board members. The resolution earned about 18% support.

In addition to providing greater disclosure, a growing trend in shareholder resolutions this year was a focus on the effectiveness of diversity and inclusion initiatives. A resolution tabled at Berkshire Hathaway, for example, asked the company to report on the effectiveness of their diversity and inclusion efforts, including the hiring, retention, and promotion of diverse talent. We explained our decision to vote for this resolution, which earned about 21% support, too.

Building diverse and inclusive workplaces remains a priority for many shareholders. This is particularly true where a company has faced serious allegations related to its corporate culture, which in some cases helped resolutions to earn majority support. A resolution asking Wells Fargo to report on workplace harassment and discrimination, for example, earned about 52% support.

Cost-of-Living Proposals

In the UK, high levels of inflation and its impact on low-wage employees and consumers were top of mind. Given these current pressures, our desire is that any salary increases given to executives should be equal to or at a lower rate than those of the wider workforce this proxy season.

We also expect boards to be mindful of the potential pressures faced by the wider workforce and other stakeholders when considering the total quantum of compensation packages for executive directors. We encourage companies to be as transparent as possible and explain how they are supporting their workforce and considering both salaries and additional benefits as part of their human capital management strategies.

Company performance on cost-of-living informed our voting decisions on the executive remuneration packages at two UK companies. For example, we voted against the remuneration report at Hilton Food Group due to concerns that executive remuneration exceeded that of the wider workforce. At Tesco, we also voted against the remuneration report because the CEO received a significant commuting allowance which we did not believe was appropriate given the challenges faced by the company’s workforce.

The tight labor market in the UK, US, and elsewhere makes it especially prudent to understand companies’ plans to invest in their workforce to promote competitiveness and productivity over the long-term. Although many companies pointed to increased wages in their responses to shareholder resolutions, this is a dynamic topic that requires thoughtful engagement to understand how a company measures a living wage and whether their total reward packages and working conditions are conducive to providing a secure standard of living.

Human Capital Management Proposals

Human capital management-related topics were a key focus of many shareholder resolutions in the US this year, as companies faced scrutiny over workplace safety, respect for employees’ rights to unionize, and provision of benefits such as paid sick leave.

We explained our voting decisions to support resolutions related to respecting freedom of association at Starbucks, warehouse working conditions at Amazon, and paid sick leave at CVS Health, on our blog. These resolutions received about 52%, 35%, and 26% support from shareholders, respectively.

Shareholder resolutions that responded to specific legal risks that companies are facing related to employee rights and safety tended to garner the most support among shareholders.

This was the case at Starbucks, where the proponent cited complaints filed by the National Labor Relations Board for the company’s response to unionizing activities, and at Dollar General, where the proponent cited the over $12 million penalty the company received for repeated workplace safety violations (this resolution received about 68% support).

Both resolutions called for an independent audit of company policies on unionization and worker safety in an effort to provide shareholders with a more objective view of how the company is handling the potential associated risks. Given the serious nature of the issues raised and legal and financial risk they pose for the companies, we look forward to reviewing the results of the audits and will continue to engage with the companies as required.

Escalating Our Engagements

This year we co-filed a shareholder resolution at CVS Health, the US pharmacy retailer, asking the company to adopt and disclose a paid sick leave policy for all of its employees, including part-time employees and contractors. This followed discussions with the company where we communicated that the absence of a paid

SDGs, Targets, and Indicators

SDGs Addressed:

1. SDG 5: Gender Equality
2. SDG 8: Decent Work and Economic Growth
3. SDG 10: Reduced Inequalities
4. SDG 16: Peace, Justice, and Strong Institutions

Targets Identified:

• Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life
• Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value
• Target 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status
• Target 16.5: Substantially reduce corruption and bribery in all their forms

Indicators:

• Indicator 5.5.1: Proportion of seats held by women in national parliaments and local governments
• Indicator 8.5.1: Average hourly earnings of female and male employees, by occupation, age group, and persons with disabilities
• Indicator 10.2.1: Proportion of people living below 50 percent of median income, by age, sex, and persons with disabilities
• Indicator 16.5.1: Proportion of persons who had at least one contact with a public official and who paid a bribe to a public official, or were asked for a bribe by those public officials, during the previous 12 months

Analysis:

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The issues highlighted in the article are connected to the following SDGs:

• SDG 5: Gender Equality
• SDG 8: Decent Work and Economic Growth
• SDG 10: Reduced Inequalities
• SDG 16: Peace, Justice, and Strong Institutions

The article discusses topics related to gender diversity, workplace inclusion, equal pay, cost-of-living concerns, human capital management, and human rights. These topics align with the goals of promoting gender equality, decent work, reduced inequalities, and strong institutions.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s content, the following targets can be identified:

• Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life
• Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value
• Target 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status
• Target 16.5: Substantially reduce corruption and bribery in all their forms

The article addresses the need for gender diversity on boards, equal opportunities for women in decision-making positions, equal pay for work of equal value, social and economic inclusion, and the importance of reducing corruption and bribery.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, there are indicators mentioned or implied in the article that can be used to measure progress towards the identified targets:

• Indicator 5.5.1: Proportion of seats held by women in national parliaments and local governments
• Indicator 8.5.1: Average hourly earnings of female and male employees, by occupation, age group, and persons with disabilities
• Indicator 10.2.1: Proportion of people living below 50 percent of median income, by age, sex, and persons with disabilities
• Indicator 16.5.1: Proportion of persons who had at least one contact with a public official and who paid a bribe to a public official, or were asked for a bribe by those public officials, during the previous 12 months

These indicators can be used to measure the representation of women in decision-making positions, the gender pay gap, income inequality, and the prevalence of corruption and bribery.

Table: SDGs, Targets, and Indicators