ICCR Investors Take a Stand on Social Issues

A review of investor behaviours this AGM season highlights recurring themes alongside emerging concerns. 

Investor members of the Interfaith Center on Corporate Responsibility (ICCR) expanded and deepened their focus on social-related themes at US companies during the 2023 proxy season.

According to a review of the ICCR’s ‘Catalyzing Corporate Change’, its members filed 454 shareholder proposals across a range of environmental and social themes, including worker rights, health equity and the climate crisis, with 56% of resolutions filed going to a vote and 27% withdrawn following corporate commitments.  

Ninety-nine proposals were related to diversity, equity and inclusion (DEI) and racial justice, down from 112 the year before – a decrease an ICCR spokesperson confirmed is likely down to investors giving companies targeted by proposals in 2022 “time to implement” corporate actions, rather than a slowdown in investor momentum. 

Social issues affect and are impacted by corporate actors around the globe,” Mari Schwartzer, Director of Shareholder Activism and Engagement at Northstar Asset Management, told ESG Investor 

“In our opinion, it’s about time investors realised that they have a responsibility for issues in the ‘S’ category as well.” 

Growing momentum 

One of the most notable outcomes was a shareholder resolution filed at US retail chain Dollar General, which called for a third-party audit on worker health and safety.  

It was filed by ICCR member Domini Impact Investors following repeated health and safety violations reported at Dollar General stores across the US – an issue the asset manager has identified as a systemic problem stemming from a business model dependent on keeping labour costs low.  

“We have concerns that this low-cost model operates at the expense of its workforce, may inhibit its ability to attract and retain workers in a tight labour market, exposes it to legal, financial, and regulatory risk, and may hinder its ability to expand to more communities if its reputation is poor,” said Mary Beth Gallagher, Director of Engagement at Domini. 

Dollar General has received over US$21 million in proposed fines from the Occupational Safety and Health Administration (OSHA) since 2017 and is labelled a “severe violator” of safety rules by the US Labor Department.  

Domini filed the proposal after initial attempts to engage the company (via a letter and dialogue) on workplace health and safety. 

Dollar General challenged the proposal and submitted a request for ‘no action’, which the US Securities and Exchange Commission (SEC) rejected. 

On 31 May, Domini’s resolution passed with support from 67.7% of shareholders.  

“We recognise from the majority vote that this is a high priority area for other investors, and they recognise that a company has a responsibility to keep its workers safe, provide a living wage, and respect other fundamental principles related to rights at work, such as freedom of association and collective bargaining,” said Gallagher. 

The US SEC is expected to propose rules on human capital management in the near term, which Gallagher said will help to standardise disclosure expectations and provide investors and stakeholders with relevant information about how a company invests in and supports its workforce. 

The SEC’s Human Capital Disclosure Rule came into effect in November 2021, which requires public companies to disclose information about their workforce. Currently, the reporting requirements are narrative in nature, but investors are expecting the regulator to propose more prescriptive and standardised disclosure requirements later this year. 

Following the AGM, Gallagher said Domini sent a letter to Dollar General’s board to request a meeting to discuss the company’s plans to complete the worker health and safety audit, as well as its timeline for completion, how the company will ensure adequate engagement of workers and relevant stakeholders, and which board members will have oversight of the process.  

“Our expectation is that Dollar General will respond to the majority vote from its shareholders and conduct the independent audit,” said Gallagher, adding that Domini will continue to try to engage with the company to support a “robust and accountable process”.  

ICCR members filed 37 worker rights proposals this year at companies including Amazon, Starbucks, Uber and Walmart.  

New frontier 

ICCR members also tabled resolutions centring on new social-related concerns this year.  

Northstar Asset Management filed a shareholder proposal at manufacturing company Xylem, calling for a commitment to establish a fair chance employment programme to allow applicants with prior arrest or incarceration records to be fairly considered for employment without criminal history bias. 

The US-based asset manager’s research has indicated that manufacturing is a “particularly good career path” for people with criminal records, due to its union protections and career growth opportunities, said Schwartzer.  

The issue of hiring bias against people with criminal records intersects with many other critical areas of interest, she added.  

“Financial concerns about the oncoming labour shortage, the systemic effects of racism that results in people of colour ending up incarcerated more often and for longer sentences than their white counterparts, and the fact that having a criminal record makes it so much harder to find employment after release from prison,” Schwartzer said.  

“We seek to help improve economic mobility and pursue economic equality because we believe it benefits all stakeholders involved, including the marketplace and our portfolio companies.” 

Northstar AM withdrew its shareholder proposal after a successful negotiation with Xylem. The company is planning to pilot a fair chance employment programme this year at two of its locations, recruiting formerly incarcerated individuals into its talent pool, and will expand to other locations in 2024. 

The ICCR review report noted that its investor members withdrew 122 (27%) of filed proposals this year due to successful negotiations. Forty of these withdrawals were DEI and racial justice proposals. 

These included a proposal filed at Disney by the Nathan Cummings Foundation, which asked the entertainment conglomerate for greater disclosure of material corporate DEI data.  

Schwartzer said Northstar AM will be meeting with Xylem in mid-September to get updates about its progress implementing the programme, noting that increasing attention from investors on criminal justice reform will likely mean this work “will continue to gain traction”.  

Last year, shareholder advocacy non-profit As You Sow noted that US companies are responding more positively to calls for workplace equity and racial justice policies and practices, with 88% of shareholder resolutions filed during the 2022 AGM season leading to improved practices.  

The ICCR is a membership organisation including faith communities, asset managers, pension funds, and NGOs. 

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