Although support for proposals about fair pay and working conditions rose annually for ten years until 2022, the volume of filings has dropped significantly since. This year, 23 proposals ask about fair pay, 14 address working conditions and just two are about benefits. Just one has been withdrawn as of mid-February and one has gone to a vote, a new “living wage” resolution at Walgreens Boots Alliance that received 9.7 percent in January. Thirty-nine are pending. The big new thing for decent work is an initiative on living wages which includes seven new resolutions.

(Diversity at Work below, p. 49, includes 40 more proposals about fair representation, while repeat proposals invoking international labor rights standards are discussed on p. 55 under Human Rights.)

Context: Since late 2020, the SEC has required companies to report on how they manage and set human capital management goals if they are materially important. But a push continues for a more detailed approach, to yield information shareholder proposals have been requesting for years. The SEC has announced it will issue a new rule this year, but nothing has emerged yet amidst the agency’s busy rulemaking activities.

Fair Pay

While last year saw several variations on fair pay proposals, in 2024 they are mostly the same and about gender and race-based pay differentials.

Gender/racial pay gap: Companies have faced dozens of resolutions asking them to report on differential pay rates for women and people of color, compared to white men. Proposals are seeking data on the median pay gap that shows the extent to which higher-level employees are disproportionately white and male (and have higher pay). Unadjusted gender and racial median pay gaps are used by the United States Census Bureau, Department of Labor, and International Labor Organization as a means to measure pay inequity. Since 2017 the United Kingdom has mandated disclosure of median gender pay gaps and many EU countries have gender pay reporting requirements.

More than half the proposals also ask for “adjusted” pay data as well (taking into account the type of job and other factors). Two also ask for country-by-country reporting. They all note the OECD definition of racial/gender pay gaps as being “difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings.” The annual Racial and Gender Pay Scorecard ranks the largest 100 U.S. companies (including those engaged by investors) on pay gap disclosure and performance.

In all, there are 14 resolutions filed this year and eight are resubmissions:

• Repeat proposals are at Amazon.com (for the sixth time), Apple (third year) Charles Schwab (second year), Kellanova (second year) and Marriott International (second time), and for the first time at Chubb. The resolution asks for a report on “median pay gaps across race and gender, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent.”

• Five more proposals are at first-time recipients seeking data on “both quantitative median and adjusted pay gaps,” at American Tower, Amgen, Applied Materials, ExxonMobil and Vertex Pharmaceuticals.

• Three other resubmissions are at Boeing (47.4 percent last year), Goldman Sachs (41.4 percent) and Intuitive Surgical (34.3 percent) and ask for reporting annually “on unadjusted median and adjusted pay gaps across race and gender globally” (and by country for Boeing and Intuitive).

A LIVING WAGE IS A HUMAN RIGHT

MARCELA PINILLA
Director of Sustainable Investing, Zevin Asset Management

Income disparity is one of the starkest indicators of our societal failures to foster a more equitable society and as a result, a more dynamic economy. In the United States 95 million workers have limited workplace flexibility and mobility, low collective bargaining ability, and minimal (if any) health and financial benefits. They also experience the highest exposure to workplace health and safety hazards, job stress, employment volatility, and exploitation. Even full-time employees earning $15 per hour—about $32,000 USD per year—do not earn the income needed to cover basic needs.

Votes—Early proposal votes include Apple (31 percent) and Applied Materials (21.4 percent).

SEC action—Exxon is arguing the proposal can be omitted because it claims Proxy Impact and As You Sow are the same proponent thus violating the requirement of only one proposal per representative. Both proponents contest this conclusion. (As You Sow filed a climate change proposal described on p. 23.)

Living wage: Proponents are pursuing a new angle this year on fair pay, working with ICCR and asking five companies to adopt principles on the subject and three more to report on specific metrics. Four face SEC challenges, one has been withdrawn (at Walt Disney) and investors gave 9.7 percent support to a resolution at Walgreens Boots Alliance in January. The two variants are:

• Principles: In addition to the resolution at Walgreens, proponents want Target and Walmart to

  exercise their discretion to establish Company wage policies that are consistent with fiduciary duties and reasonably designed to provide workers with the minimum earnings necessary to meet a family’s basic needs, because Company compensation practices that fail to provide a living wage are harmful to the economy and therefore to the returns of diversified shareholders.

• Metrics: Quite specific proposals ask Amazon.com, Home Depot and Kohl’s for annual reports,

  with information needed to assess the extent to which the Company is complying with international human rights standards and assessing systemic risks stemming from growing income inequality. The Report should be updated and published annually and include:

  - Number of [company] workers paid less than a living wage, broken down by full-time employees, part-time employees, and contingent workers;

  - By how much aggregate compensation paid to workers in each category falls short of the aggregate amount they would be paid if they received a living wage; and

  - The living wage benchmark/methodology used for these disclosures [the company] is not required to use a particular living wage calculator or methodology.

At Kohl’s, the resolved clause adds:

A living wage is defined as a level of compensation that is “sufficient to afford a decent standard of living for the worker and her or his family” in their location, including “food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events.” Contingent workers are workers employed by staffing entities with which Kohl’s contracts as well as seasonal workers employed directly by Kohl’s.

SEC action: Walmart is arguing at the SEC that the proposal raises ordinary business concerns since it is about general employee compensation. Disney made the same argument but the proponent withdrew noting “useful disclosures” in the company’s challenge. Amazon and Target say the proposal concerns ordinary business since it is about employee compensation while Home Depot says it would micromanage; Kohl’s makes both arguments. The SEC has yet to respond.

CEOs and senior executives: One proposal from Jing Zhao asking Applied Materials to “improve the executive compensation program and policy, such as to include the CEO pay ratio factor and voices from employees” was omitted because it earned 9.6 last year, not the 25 percent needed to qualify for resubmission in the third year.

Working Conditions

Nineteen proposals raise questions about fair treatment and working conditions this year. Eleven continue a recent push for more information on worker health and safety, while the other five tread familiar ground about workplace bias policies and disclosure.

Health and safety audits: Proposals call out problems in specific industries, but five of the nine recipients are contesting the proposals at the SEC. Three went to votes last year. They include:

• Amazon.com—The proposal this year again focuses on warehouse workers and how they are affected by “performance metrics and targets.” The proposal is in its third year and earned 35.4 percent in 2023 and 44 percent in 2022.

• Airlines—American Airlines is being asked for an audit of its implementation of “various environmental and social commitments, including its commitment to reduce greenhouse gas (“GHG”) emissions, and American’s Safety Policy and Human Rights Statement.” It says a report should explain “areas of misalignment” between its commitments and actions and explain how these will be addressed. The proposal at Southwest Airlines seeks an assessment of its “policies and practices on the safety and well-being of workers and contractors.”

• Telecoms—Proponents are focused on wireless communications workers in the supply chains of AT&T, T-Mobile US, American Tower (which builds and maintains wireless communication towers) and Verizon Telecommunications asking about each firm’s “due diligence process for preventing health and safety violations” (AT&T and T-Mobile, Verizon) and “policies and practices on the safety and well-being of Company’s workers, including contractors, that provide tower technician services” (American Tower).

• Drivers and employees—At Uber, where a similar proposal earned 8.9 percent last year, the request pertains to “driver health and safety, evaluating the effects of Uber’s performance metrics and ratings and its policies and procedures on driver health and safety.” Similarly, at Welltower (a healthcare facility operator), the proposal specifies it is about “the health of safety of workers on Company properties.”

Gun violence and staffing—A resubmission at Walmart (23.9 percent last year) reiterates concern about “workplace safety and violence, including gun violence,” and says the requested “audit and report [could] include: (1) Evaluation of management and business practices that contribute to an unsafe or violent work environment, including staffing capacity and the introduction of new technologies; and (2) Recommendations that will help Walmart create safer work environments and prevent workplace violence.” The proposal notes dozens of incidents of gun violence at the company’s premises.

Another proposal at Chipotle Mexican Grill echoes concerns about armed holdups but also adds those on employees’ safety, harassment complaints and unsanitary working conditions. It wants:

- Evaluation of management and business practices that contribute to an unsafe or violent environment, including staffing capacity;
- Meaningful consultation with workers and customers to inform appropriate solutions; and
- Recommendations for actions and regular reporting with progress on identified actions.

Withdrawal and SEC action—The NYC pension funds have withdrawn at American Tower after a substantive agreement. The company agreed to provide more information about its health and safety policies and their application to its contractors and subcontractors, report on health and safety performance and to tell all types of employees about its accident reporting mechanisms. American Tower had lodged a challenge at the SEC, arguing it was moot and ordinary business.

The other three telecom firms all are arguing this is an ordinary business issue since it is about workplace safety and contractors, with Verizon adding it is also moot given current reporting and auditing. Uber says the proposal is moot given a civil rights audit it published last year, but also that it is ordinary business and too vague. Welltower argues it is ordinary business since it is about safety and also concerns vendor relationships.

Workplace bias: Four proposals from New York pension funds and the Nathan Cummings Foundation address bias problems at work; two earned substantial support in the past. The detailed resolved clause at a diverse group of companies—Chipotle Mexican Grill, Goldman Sachs, Tesla and one more undisclosed company—spells out metrics the proponents think are needed to assess company performance on preventing harassment and discrimination against protected classes of employees. The proposal suggests annual reports should excise any names of the accusers and settlement details, but include:

- total number and aggregate dollar amount of disputes settled by the company related to abuse, harassment, or discrimination in the previous three years;
- total number of pending harassment or discrimination complaints the company is seeking to resolve through internal processes, arbitration, or litigation;
- retention rates of employees who raise harassment or discrimination concerns, relative to total workforce retention;
- aggregate dollar amount associated with the enforcement of arbitration clauses;
- number of enforceable contracts for current or past employees which include concealment clauses, such as non-disclosure agreements or arbitration requirements, that restrict discussions of harassment or discrimination; and
- aggregate dollar amount associated with such agreements containing concealment clauses.

All mention previous cases of misconduct:

• At Chipotle Mexican Grill, it notes recent allegations of sexual harassment at the company and a $400,000 EEOC settlement, plus a pending case about workplace discrimination filed by the EEOC. Earlier proposals at the company about fair play earned significant support, including 33.2 percent for an ILO labor standards proposal last year, a diversity disclosure proposal in 2022 (21.5 percent) and a mandatory arbitration disclosure proposal in 2020 (51 percent).

• At Goldman Sachs, it notes the small proportion of Black and ethnic minority employees in upper management and expresses concern about their treatment overall. A mandatory arbitration proposal there in 2023 earned 52.2 percent support.

• NYSCRF’s proposal at Tesla is a resubmission from 2022 that recaps a litany of problems; the earlier resolution earned 46.9 percent support. This year the pension fund notes “numerous serious allegations of racial or sexual harassment and discrimination,” including lawsuits about racial abuse in California.

Benefits

Shareholder proponents started asking companies about paid sick leave in the middle of the pandemic but were initially stymied by SEC challenges. With the loosening of SEC staff interpretations about ordinary business in the Biden administration, proposals have gone to votes and three of six votes last year were above 20 percent. The total submitted has fallen to just two this year, however.

Trillium Asset Management has a proposal at Union Pacific similar to one that earned 11.7 percent support last year, but it has a new focus on disciplinary policy. The company has adopted a paid sick leave for the first time after widespread concerns about safety and paid leave, but the proposal now says workers also should “be able to utilize paid sick leave benefits without being subject to discipline under…employee attendance policies,” and specifies the policy “should not expire after a set time or depend upon the existence of a global pandemic.”

At TJX, another resubmission from Figure 8 Investments that earned 22.3 percent last year asks for information on the company’s “permanent paid sick leave policies, and where these go above legal requirements, including eligibility requirements.” It also says the policy should not be conditional or expire after a global pandemic.