proposals on employee representation
FEB 1, 2021
and Disney among those that have received requests
At least six US companies have received investor requests to put
proposals to a vote at their AGMs this year on the topic of employee
proxy statement, for example,
includes a proposal from James McRitchie – the investor behind the
flurry of filings on the topic – that if passed would call on the
coffee company’s board to adopt a policy of ‘promoting significant
representation of employee perspectives among corporate
decision-makers by requiring the initial list of candidates from which
new director nominees are chosen by the nominations and governance
committee to include (but need not be limited to) non-management
The measure will be put to a vote at Starbucks’ March 17 virtual AGM.
The supporting statement points to what it calls a growing consensus
that including employees on boards can contribute to long-term
corporate sustainability. It cites the National Bureau of Economic
Research as saying that such representation increases female board
representation and raises capital formation.
It notes that employees are also often more diverse than boards in
terms of race, gender and wealth, and argues that the German
‘co-determination’ model of shared governance ‘is lauded as an
excellent check against short-term capital allocation practices.’
Starbucks’ board is recommending that shareholders vote against the
proposal. It states in part: ‘Embracing diversity encourages
innovation and allows us to succeed and grow. Accordingly, we seek
diversity in all forms in all areas of our business, from our partners
to our board of directors. The board has considered this proposal and
concluded that its adoption is unnecessary and not in the best
interest of our shareholders, our company or our partners.’
The board argues that its nominating/governance committee is best
placed to assess the particular qualifications of, and make
recommendations regarding, potential director nominees. It adds that
the proposed change is not necessary in light of a ‘robust director
nominating process, the diversity of our board, our commitment to
strong corporate governance practices, our existing, varied open
channels of communication with our partners and our continued
dedication to investing in our partners and their experiences.’
A request for comment from Starbucks was not returned.
The Walt Disney Company will
vote on the same
proposal, also filed by
McRitchie, at the company’s virtual AGM on March 9. Disney’s board
recommends that shareholders vote against the proposal, stating in
part that ‘the governance and nominating committee’s thorough process
of evaluating potential director candidates already ensures a
diversity of perspectives and the addition of non-management employees
would decrease the level of independence on the board.’
It adds that, in developing criteria for open board positions, the
committee takes into account factors that may include: the existing
composition of the board and expected retirements; the range of
talents, experiences and skills that would best complement those
already on the board; the balance of management and independent
directors; and the need for financial or other specialized expertise.
The company had requested that the SEC grant no-action relief for
excluding the proposal, in part under Rule 14a-8(i)(7), which it
stated permits a company to do so if a proposal ‘deals with a matter
relating to the company’s ordinary business operations.’ The SEC did
not agree with this argument.
A request for comment from Disney was not returned.
According to McRitchie, he has also filed proposals on the topic with
Citigroup, Edwards Lifesciences Corporation, WD-40 Company and
Woodward. Those companies have yet to publish their proxy statements
so it is unknown whether the measure will end up being withdrawn
following engagement, put to a vote or excluded under SEC relief.
A Citigroup spokesperson declined to comment.
An emailed company comment from Edwards Lifesciences reads: ‘We have
received the shareholder proposal and Edwards Lifesciences’ board
recommendation will be included in the proxy statement when it is
filed at the end of March.’
Requests for comment from WD-40 Company and Woodward were not
This year’s proposals are not the first on employee board
representation but they are uncommon and have not always attracted
significant support. Alphabet in 2019 faced a proposal on the topic.
In its proxy statement, the company explained its process for
selecting board directors, including a requirement for directors to
have served as a public company CEO or CFO. The measure received
1.8 percent support among
votes cast and was not on the company’s 2020 proxy statement.
At Walmart’s 2019 annual shareholder meeting, Senator Bernie Sanders,
I-Vermont, in a largely symbolic gesture presented from the floor a
shareholder proposal requesting employee representation. It received
3,916 votes for and 2,379,343,435 against.
Despite these results, worker representation has some support in
Congress in addition to Sanders. Elizabeth Warren, D-Massachusetts,
has introduced legislation that would enable employees to elect at
least 40 percent of board members. In 2018 a group of US senators
asked the SEC to consider implementing reforms that would ‘promote
worker engagement, drive long-term growth and investment and give
workers a greater voice in public companies by allowing [them] to be
elected as company board members.’
With the Democratic Party now holding narrow majorities in Congress,
as well as holding the White House, such sentiment carries greater
The proposals are also being filed in a broader context in which the
value of employees, human capital management in general and diversity
and inclusion have taken on greater significance amid the Covid-19
pandemic and the Black Lives Matter movement.
Timothy Smith, director of ESG shareowner engagement at Boston Trust
Walden, tells Corporate Secretary that in this environment
expectations of companies taking their employees seriously and
protecting them have ‘grown considerably.’ He says investors are
studying and considering whether direct board participation by
employees is a good approach or whether ideas such as employee
councils might work as a way to take employees seriously.
In the meantime, Smith says proposals being filed on employee
representation help open the door to discussion on the issue within
the companies facing them and stimulate discussion at other companies.
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