Committee on Workers’ Capital assessment of voting patterns on fundamental labour rights highlights transatlantic split between largest asset managers.
The world’s top five asset managers, all headquartered in the US, showed low support for proxy votes related to fundamental labour rights last year, new research from the Committee on Workers’ Capital (CWC) has revealed.
CWC is a network of more than 700 labour activists and asset owner board members advocating for responsible stewardship of workers’ capital. In a new analysis, CWC reviewed how ten of the world’s largest asset managers voted on 13 resolutions that related to upholding fundamental labour rights during annual general meetings (AGMs) in 2023.
It found that the world’s top five asset managers failed to back proxy votes on employee rights, voting in line with CWC recommendations in less than 40% of cases. Conversely, their non-US counterparts voted in support of the proxy votes the majority of the time.
CWC also found “uneven” shareholder engagement escalation pathways at two asset managers – BlackRock and JP Morgan Asset Management – which had been engaging with US e-commerce giant Amazon on social issues since January 2022 but did not vote for a freedom of association resolution at the firm in 2023. CWC said, “this can send mixed messages to companies on fundamental labour rights”.
Some stewardship experts have argued the importance of shareholder voting can overstated as a marker of effective stewardship. Paul Lee, Head of Stewardship and Sustainability at investment consultancy Redington, told ESG Investor last year that shareholder voting can be given too much attention, as it is highly visible. Kimberley Lewis, Head of Active Ownership at Schroders, questioned the level of scrutiny on how investors voted at AGMs last year. “We really believe that this only tells a very small percentage of the overall story amongst all the sorts of different indicators to see if we’re being effective in stewardship,” she said.
In contrast, Alyssa Stankiewicz, Associate Director of Sustainability Research at Morningstar has said proxy voting is an important and quantifiable part of the stewardship process, alongside other stewardship tools such as collaborative engagement. Morningstar incorporate proxy voting records into its reports rating managers on their determination to incorporate ESG factors into their investment processes and deliver sustainability outcomes.
O% support from US
Other key findings in the CWC analysis were that only three of the ten managers analysed – BlackRock, Amundi, and UBS Asset Management – publicly disclosed their proxy voting rationale. CWC said that this was “an important data point for clients to understand the signals being sent to companies by firms that manager their capital, and for companies to process shareholder expectations”.
Some US asset managers offered minimal backing to labour rights resolutions, with Vanguard and JP Morgan Asset Management supporting none in 2023. In sharp contrast, European counterparts Germany-based DWS supported 87% and France-based Amundi supported 77%.
The 13 resolutions analysed by CWC focused on five director votes and eight shareholder resolutions at Amazon, Starbucks, Rivian Automotive, Wells Fargo, CVS Health, Netflix, Delta Airlines, Activision Blizzard, POSCO and Kingspan Group.
They focused on promoting respect for the fundamental rights to freedom of association and collective bargaining, by either asking the company to adopt a policy around freedom of association and collective bargaining or asking the company to conduct an independent assessment of its workforce practices to examine the level of compliance with its freedom of association and collective bargaining policy. The five director votes touched on three companies where CWC participant unions suggested that companies had failed to address the ongoing adverse labour rights impacts.
The report also identified that the availability of proxy voting choice had made little impact on voting outcomes, compared with the influence of voting recommendations from asset managers’ ESG stewardship teams. Proxy choice options, which allow end-investors in pooled investment products to vote, were offered by four of the asset managers surveyed. But CWC said their impact on the resolutions studied was “relatively minor”, in part due to their recent introduction.
CWC did find some differences between the votes cast by portfolio managers at ‘mainstream’ versus sustainable funds, notably at JP Morgan Asset Management. Overall, it found that ESG stewardship teams played “a central role” in proxy voting at eight of the ten managers analysed. “The role of ESG stewardship analysts is even more important when it comes to voting on shareholder resolutions related to fundamental labour rights,” it added.