Kroger Investors Reject Bid Raising Living Wage Concerns (1)

The Kroger Co. investors on Thursday voted against a shareholder activist proposal pushing the grocery store chain to provide a living wage for employees, one year after a successful shareholder bid asked for workforce-wide pay equity data.

Just 17% of shareholders voted in favor of Thursday’s proposal from nonprofit the Shareholder Commons, which had asked the company to establish wage policies that are “reasonably designed to provide workers with the minimum earnings necessary to meet a family’s basic needs.” Failure to pay employees a living wage is harmful to the economy and therefore doesn’t benefit diversified shareholders, said the proposal, offered at Kroger’s annual meeting.

The investor effort follows a bid on pay equity last year that succeeded with 51% investor support, a rare win for any shareholder proposal. Last summer’s bid may have notched a win in part because of publicity that many Kroger workers have been homeless or on food stamps. It asked for the company to report discrepancies in how it pays women and minorities to help shareholders analyze whether all employees have access to the highest-paying jobs.

Kroger disclosed adjusted pay gaps in March in response, and said that its review “confirms there are no meaningful differences in pay on an adjusted basis for associates who self-identify as male, female or a person of color.”

The company has also committed to disclosing an unadjusted pay gap ratio in 2025, said Julia Cedarholm, a senior associate with Arjuna Capital, the group that introduced last year’s passing proposal.

“One thing that we would like to see Kroger do is not adjust for collective bargaining,” Cedarholm said. “There’s been significant reporting that different union stores receive different pay rates. We would like to see their adjusted pay gap disclosures not factor in this component so that we have transparency into whether there is a pay discrepancy issue.”

The new proposal offered a logical next step after last year’s passing measure, said Sara Murphy, chief strategy officer at the Shareholder Commons.

“This was a decent outcome, especially in light of investors’ historical reluctance to support proposals that call for actual behavior change at companies (as opposed to increased disclosure),” Murphy said in an emailed response to Thursday’s shareholder vote. “That said, not enough fiduciaries are recognizing that poverty wages and income inequality create tremendous economic damage.”

Wage Debates

The new bid focused on boosting pay for the lowest-earning workers, noting that the grocery giant increased associates’ average hourly wage to $18 in 2023, but research from the Massachusetts Institute of Technology puts the living wage for two working adults in a family of four in 2022 at over $25 an hour each. A living wage is defined as the minimum pay needed to secure basic necessities such as food and housing.

Miesha Smith, a cashier at a supermarket chain in Los Angeles owned by Kroger, has worked at her store for 29 years. She sees her co-workers at Ralphs struggle to afford basic necessities like rent and diapers every day, she said.

“We work hard every day for these stores,” Smith said. “It’s not fair. You don’t have any sense of security to take care of yourself and your loved ones. If you are struggling to make it day by day, that’s not anywhere close to a living wage.”

Kroger did not immediately respond to a request for comment after the vote, but pushed back against the Shareholder Commons bid in its proxy statement.

Kroger said that its national average hourly rate is almost $19 per hour and its average hourly rate, inclusive of benefits like health care and retirement, is nearly $25 per hour.

The company said it “will further raise average hourly rates, continue improving healthcare options, establish new training and development opportunities, and more.” Kroger also noted that most of its workforce is covered under collective bargaining agreements that “facilitate pay equity for frontline associates.”

The argument is similar to that made by Target and other companies that faced shareholder proposals on hourly pay this proxy season.

Target overcame a proposal asking the big box store to consider paying its workers higher hourly wages. The retailer had said the bid wasn’t necessary because it had already heard positive feedback from shareholders on recent increases to its minimum wages. That proposal received 13% of investor votes in favor.

A similar proposal at Walgreens that received 9.7% support asked the pharmacy chain to establish wage policies that are “reasonably designed” to meet a family’s basic needs. Walgreens said it has “robust policies and practices” on worker compensation, benefits, and development.

“Most investors are broadly diversified, so underpaying workers damages their portfolio returns,” Murphy said. “It creates damage that rebounds to the company’s own clients and beneficiaries.”

Tobacco Sales

Another proposal that did not pass with only 12% of shareholders voting in favor asked the grocery chain for a report on the public health costs of tobacco sales. That bid, brought by The Sisters of St. Francis of Philadelphia, said Kroger does not “disclose any methodology to address the public health costs of its tobacco sales.”

“Kroger undermines its commitments to promoting good health and ultimately the interests of its diversified shareholders by not disclosing the social and environmental costs and risks imposed on stakeholders, even when these costs and risks threaten society, the economy and the performance of other companies” the proposal said.

Public health-related shareholder bids are growing in popularity this season amid heightened investor interest in protecting workers and a broader societal focus on health and well-being. Proposals have ranged from asking casinos to ban indoor smoking to seeking studies on non-sugar sweeteners in soft drinks. None have passed so far this proxy season.

The failed proposal at Kroger highlighted that the grocery chain in 2019 stopped selling e-cigarettes in response to news about the health impact of vaping.

Kroger said in its proxy statement that it “supports our customers’ freedom of choice and offers a variety of ways to improve health, including tobacco cessation.”

“Assessing the external public health costs related to the company’s sale of a single category of products is not reasonable or practicable given the resources and expertise required to consider all externalities and related topics outside of our control,” it said.