Voting on shareholder resolutions is a core pillar of our engagement strategy, as it allows us to use our voices to provide a forum to express our positions on important issues to company management. It becomes.
From January to May of this year, environmental, social, and governance (ESG)-related resolutions played a prominent role at companies’ annual meetings, increasing by 3% for Russell 3000 companies compared to 2022. In our Voting Season Spotlight blog, we explained how we arrived at some of our voting decisions.
From workplace diversity and inclusion to human rights, shareholder resolutions on social topics continue to grow in popularity, accounting for 35% of shareholder proposals in Russell 3000 companies this year. Below, we discuss some trends and considerations regarding proxy voting on social issues around the world.
Diversity and inclusion proposals
We will continue to vote when we believe that a board lacks gender or ethnic diversity. At a global level so far this year, we have voted against his board of directors in over 400 companies over concerns about gender diversity.
In the first half of this year, we voted against the boards of more than 50 companies in the UK, US, Canada and Australia due to a lack of ethnic diversity. In the UK, we voted against the directors of five companies due to a lack of gender diversity on their executive committees.
A number of companies have filed shareholder resolutions this year requiring companies to disclose the diversity of their management teams and employees and report on the effectiveness of their efforts. We provided Las Vegas Sands with a matrix reporting the self-identified gender and race/ethnicity of each director or nominee to help investors more accurately assess the diversity of board members. In my blog, I explained the rationale behind the resolution calling for this. The resolution received approximately 18% support.
In addition to increased disclosure, shareholder resolutions this year are increasingly focused on the effectiveness of diversity and inclusion efforts. For example, a resolution submitted to Berkshire Hathaway requires the company to report on the effectiveness of its diversity and inclusion efforts, including recruiting, retaining, and promoting diverse talent. We explained our decision to vote yes on this resolution, which also received approximately 21% support.
Building a diverse and inclusive workplace remains a priority for many shareholders. This is especially true when a company faces serious allegations related to its corporate culture. In some cases, it has helped get majority support for resolutions. For example, a resolution requiring Wells Fargo to report on workplace harassment and discrimination received approximately 52% support.
Living expenses proposal
In the UK, high levels of inflation and its impact on low-paid workers and consumers became a major concern. Given these current pressures, our hope is that the raises given to executives this appointment election season should be at the same rate as, or at a lower rate than, raises for other employees.
We also expect boards to be mindful of the potential pressures faced by the wider workforce and other stakeholders when considering the total remuneration of executive directors. We encourage companies to be as transparent as possible and explain how they support their employees as part of their human capital management strategy, taking into account both pay and additional benefits. To do.
Company performance in terms of cost of living influenced voting decisions on executive remuneration packages at two UK companies. For example, we voted against the Executive Compensation Report at Hilton Food Group because we were concerned that executive compensation exceeded the overall compensation of the company’s employees. At Tesco, the CEO received a significant commuting allowance, but we also voted against the remuneration report because we didn’t think this was appropriate given the challenges facing the company’s employees .
With labor markets in the UK, US and elsewhere tightening, it is especially wise to understand companies’ plans to invest in their employees to drive long-term competitiveness and productivity. Many companies pointed to wage increases in their responses to shareholder resolutions, but this depends on how companies measure the living wage and whether the total remuneration package and working conditions during the round are satisfactory. It is a dynamic subject that requires careful engagement to understand whether it will help provide wages. stable standard of living.
Human capital management proposals
Human capital management has been the focus of many shareholder resolutions in the U.S. this year, as companies face increased scrutiny over workplace safety, respect for employees’ right to unionize, and benefits such as paid sick leave. was the main focus of
We blogged about our decision to vote in support of resolutions related to Starbucks’ respect for freedom of association, Amazon’s warehouse working conditions, and CVS Health’s respect for paid sick leave. These resolutions received approximately 52%, approximately 35%, and approximately 26% support from shareholders, respectively.
Shareholder resolutions that address specific legal risks facing companies related to employee rights and safety tended to garner the most support among shareholders.
This was the case at Starbucks, where supporters cited complaints filed by the National Labor Relations Board about the company’s handling of union activity, and at Dollar General, where supporters cited repeated workplace safety violations. (This resolution received approximately 68% support).
Both resolutions make the company’s policies on unionization and worker safety independent in order to provide shareholders with a more objective view of how the company is addressing potential related risks. The company requested that the company be audited. Given the serious nature of the issues raised and the legal and financial risks it poses to the company, we look forward to reviewing the audit findings and will continue our dialogue with the company as appropriate. I’ll go.
Expand your efforts
This year, we co-filed a shareholder resolution with CVS Health, a U.S. pharmacy retailer, to require it to adopt and disclose a paid sick leave policy for all employees, including part-time employees and contractors. I asked the company. This is the result of discussions with the company, and the lack of a paid sick leave policy, including for part-time workers, is important in terms of recruiting and retaining employees, promoting employee productivity, and improving employee productivity. I told them that it posed an immediate risk to the company. The company’s external reputation. As described in our engagement blueprint, filing shareholder resolutions is one of the methods we use to scale engagement and use our influence to drive change.
Human rights proposals
Human rights-related proposals also featured prominently in many mandates this year. These resolutions address corporate policies regarding human rights issues in business operations and supply chains, as well as due diligence processes that focus on the human impact of products and services on consumers. How the Proxy Season Blog arrived at its decisions to support Meta’s targeted advertising (about 17% support), Alphabet’s online safety (about 18% support), and TJX and Caterpillar’s due diligence resolutions I explained about it. (received support of approximately 26% and 14%, respectively). We also explained our decision to vote against the resolution on human rights reporting at Carlsberg (about 96% opposed).
These topics continue to be important to investors, especially when it comes to holdings in the technology sector. Earlier this year, Meta was fined €390 million by EU regulators for collecting personal data used for targeted advertising. As financial penalties become a reality, we expect we will continue to hold companies accountable for their responses to human rights-related issues.
What’s next?
Shareholder resolutions can be an effective way to put ESG-related issues on the agenda of corporate boards and management, especially as a form of escalation. However, the work does not end here and it is important that we continue our engagement after the Annual General Meeting.
We believe that engagement is not a seasonal activity, and that consistently evolving discussions are essential to achieving results. Throughout the year, we will continue to engage in dialogue with our portfolio companies on the ESG-related issues we believe are most important. And we will continue to influence change as needed. These efforts will inform how we understand company risk, how companies are addressing risk, and will influence our voting decisions in the year ahead.