Shareholder pressure has unquestionably made climate change, social justice and other topics board issues. This season’s proxy proposals suggest the same may soon be true for workers’ right to organize.
Take Tesla annual general meeting held last week. The biggest news to come out was that shareholders had approved a 3-for-1 split of the company’s common stock. But for the board, there was a lot more to unpack.
This year, activist shareholders submitted several proposals targeting Tesla’s environmental and social obligations, including a few aimed at supporting workers’ rights. Although the proposals did not win enough votes to be adopted, they have attracted the support of influential investors and proxy advisors who have historically focused more narrowly on a company’s finances.
- At Tesla, the Washington, D.C.-based investment group SOC and the Shareholder Association for Research and Education (SHARE), a Canadian nonprofit, submitted a proposal asking the company, which was charged with union busting in the United States, to commit not to interfere with employees’ freedom of association. Shareholder proposals are generally non-binding, but investors expect a company to act if a proposal receives a majority, or even 30% or more, of the votes. In this case, 32% of shareholders supported SHARE’s proposal.
Admittedly, the resolution was unlikely to win a majority vote, given that CEO Elon Musk and the board had urged shareholders to vote against it — and Musk has called ESG a scam. But the pressure could mount for Musk and Tesla, especially as investors demand more say who is elected to the council.
Notably, proxy advisors Glass Lewis and Institutional Shareholder Services (ISS) both recommended voting in favor of the resolution; asset managers Norges Bank, CalSTRS and the New York City Comptroller’s Office also expressed support.
- At Amazon’s Spring Meeting, SHARE AS WELL pushed for reporting on the company’s response to unionization in its warehouses. In the case of Amazon, the company had previously said it would not prevent employees from organizing, but faces multiple allegations that it used illegal strategies to thwart union campaigns. This proposal was also backed by proxy advisors Glass Lewis and ISS, as well as major institutional investors, including three with $1 trillion or more in assets under management: Legal & General Investment Management ($1.8 trillion) , Norges Bank ($1.2 trillion) and Schroders ($1 trillion). The proposal was also rejectedeven if it was supported by 47% of independent shareholders.
- Earlier this year, Trillium Asset Management’s Director of Advocacy write an open letter to Starbucks’ board and CEO, calling on the company to take a neutral stance toward union organizers, commit to good faith bargaining with employee unions, and “immediately cease all communication anti-union with the employees”. Dozens of investors, representing $3.4 trillion in assets, were signatories.
So what is behind these actions?
Until recently, “there wasn’t a lot of history of shareholder proposals that directly addressed the issue of things like union rights,” said Kevin Thomas, CEO of SHARE. Fortune. That’s because investors used to think that the CEO and executive suite were the only employees that boards should pay attention to, he adds. ” This has changed. Now, I think it’s commonly accepted that boards that don’t pay attention to the workforce as a whole are just not doing their job,” says Thomas. As with many issues, he says, the pandemic has accelerated growing awareness of the responsibility of boards of directors to maintain fair workplaces and the understanding that shareholder value “depends first and foremost on creating this value by the workers”.
Proxy advisors also see that workers’ experiences are not divorced from financial risks, he said. “From a shareholder value perspective alone,” he argues, “decent work practices lead to a lower risk of health and safety issues, higher productivity and lower turnover.” Unionization can also improve diversity and equity, he adds, as well as a company’s protocols for handling discrimination and harassment.
Microsoft June Statement that he would respect and work with employees who unionized in ActivisionBlizzard, a video game maker the tech giant is in the process of acquiring, has set the standard for other companies to follow, and boards should take notice, says Thomas. “If you’re a good manager, you’re not afraid of unions,” he says. “You work with them to create a better workplace. It’s pretty simple.
Lila MacLellan
lila.maclellan
@lilamaclellan
Noted
“I think Apple is doing the right thing with a lot of the environmental work, but ultimately their scorecard is ‘How many products have you sold? “”
—Malak Abu Sharkh, a former Apple supply chain manager who now works for a carbon removal startup, on why star talent leaves Big Tech for climate technology.
On today’s agenda
👓 Lily: A recent Twitter feed tracing the idea that “no one wants to work anymore” back to 1894 has gone viral. Bloomberg interviewed the history professor behind the tweet explaining why this misconception keeps resurfacing.
📻Listen: “Red Flags You Won’t See on a CEO Resume” is a must episode of HBR’s IdeaCast. Aiyesha Deyassociate professor at Harvard Business School, explains his research linking materialism (luxury homes, flashy cars) and rule-breaking in a CEO’s personal life with potentially illegal business activities and risky bets at work.
📖Bookmark: The corporate governance issues that plague cannabis companies, according to cannabis advocates, are likely the same issues that thwart other fast-growing startups in more mundane industries.
Board diversity declines when companies underperform
HeeJung Jung, an assistant professor at Imperial College Business School in London, says she has empathy for administrators, the “very human” decision-makers at the highest echelon of American companies. When under pressure, they make a predictable and universal mistake: they seek security in familiarity.
Boards of directors spring into action quickly when a company’s performance drops, says Jung. But who do America’s corporate executives, who are still predominantly white and male, feel most comfortable with? “White men,” she said. As a result, the skill mix on boards improves, but diversity decreases when companies go through a crisis.
Jung led a team that discovered this hidden barrier to diversity after analyzing 15 years of data and board changes at 733 major US manufacturing companies. The researchers found a positive correlation between changes in board personnel that led to lower levels of diversity and periods in which boards struggled to reverse negative performance.
Fortunately, councils can avoid this pitfall. Read Jung’s suggestions for how to do this here.
on board/on board
Board duties can’t compete with Lollapalloza: Brazilian singer Anita cited scheduling conflicts as the reason she is leaving her board position at Nubank, a Berkshire Hathaway-backed finance startup, after 14 months on the job. Anitta (whose off-stage name is Larissa by Macedo Machado) will remain a brand ambassador; Fedex has named two nominees to its board of directors before its annual general meeting in September: retired vice-admiral of the navy Nancy Nortona cybersecurity expert, and Stephen Gormanformer CEO of Air Methods Corporation; Eric Butlerformer executive director of Union Pacific Corporation, was elected to council of Eastman Chemical Company; The Workplace E-Learning Company OpenSesame named CHRO veteran Tamar Elkeles and former executive of Deloitte Emilie Rollins to its Board of Directors; At-home fitness company Nautilus’ board elected Anne Saunderscurrent administrator, as its chair. Saunders, a former retail industry leader who served on the board for 10 years, will replace Mr. Carl Johnson, IIIwho has led the board since 2011 and is now retiring.
In short
– Kewsong Lee, who abruptly quit as CEO of Carlyle Group earlier this week, would never have heard from from the company’s board after proposing performance-related pay for his renewed contract.
– Women start earning less than men long before the maternity penalty became a threat.
– Are you an adventurer? A thinker? A learner? A decision science expert identified five types problem-solving profiles.
– Restaurant mogul Danny Meyer says inflation is ending the big quit in the restaurant industry.
Editor’s Choice
Silicon Valley’s “boy bosses” have had enough, writes the New York Times‘s Erin Griffith, in a report on departures at Instacart, Pinterest and Airbnb. “It’s definitely less fun to be a CEO when the markets are down, the economy is trending negative, and regulation is increasing,” says Kevin Werbach, professor of business at the Wharton School at the University of Pennsylvania. .
The story begins:
“The young kings of Silicon Valley take apart their unicorns.
They write sentimental blog posts that describe their heritage. They express hope for the prospects of their businesses. They leave their jobs at the head of the start-ups they founded.
keep reading hereand have a great weekend.
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