Shareholder Focus on Workers’ Rights Ties Into Hollywood Strike

Shareholder proposals on workers’ rights gained momentum this proxy season as public scrutiny mounted over alleged union-busting and strikes escalated in the entertainment industry and elsewhere in the US.

Investors at companies including Chipotle Mexican Grill Inc., Delta Air Lines Inc and Activision Blizzard Inc rejected shareholder proposals over concerns about the companies’ commitments to workers’ right to organize. But most of the half dozen union-related shareholder proposals that went to a vote this year secured more than 30% of investor support, an impressive showing for almost entirely first-time proposals.

Highly publicized allegations of labor violations at companies including Starbucks Corp galvanized their concerns, activist investors said. And some said that the ongoing Hollywood writer and actor strikes could further draw momentum for future proposals.

While it’s too early to tell which companies will face labor proposals next proxy season, it’s likely that a broad range of sectors grappling with labor controversies will be targeted, including the entertainment industry, according to Kyle Seeley, head of stewardship at the New York State Common Retirement Fund.

“That’s where the concerns will be for shareholders,” he said.

When responding to the proposals in statements to investors, companies highlight their employee benefits and say that they’re already committed to complying with freedom of association and collective bargaining. Some companies have also pointed to their human rights policies that they say already assess workers’ rights.

Shareholder proposals rarely pass, but a bid at Starbucks seeking an independent assessment of the coffee giant’s labor practices was approved this spring with 52% of investor support. It wasn’t enough to appease its investors, however. Starbucks separately was hit with a shareholder lawsuit this month, alleging that executives breached their fiduciary duties because the coffee chain’s reputation and operations were harmed by the labor concerns.

The labor strife is impacting a broad swathe of industries. Major strike activity is at the highest level in a decade, according to the Cornell IRL Labor Action Tracker. There have been at least 95 strikes across the US in 303 different locations so far in 2023, an increase of 68% from the same period just two years ago.

Shareholder activists are encouraged by the investor votes, but aren’t expecting corporate boardrooms to instantly embrace their proposals. While workers’ rights are getting far more attention now than in the past few years, it could still take a long time for companies to change how they approach worker organizing, said Jonas Kron, chief advocacy officer of Trillium Asset Management.

“We’re in it for the long haul here,” said Kron. “It’s a big battleship that’s going to take a while to turn.”

Union Controversies Grow

Investors voted on workers’ rights proposals at annual meetings in the spring, around the same time that the Writers Guild of America went on strike. Since proxy season has wound down and the results of the shareholder proposals rolled in, the stakes have risen in Hollywood with a new strike from the Screen Actors Guild-American Federation of Television Artists.

Netflix Inc, was the only entertainment company to face a union-related shareholder proposal this year—asking the company to adopt a policy on its commitment to freedom of association and collective bargaining. It secured 36% of investor support.

Shareholder activists focused labor proposals this year on companies, like Netflix, that have a unionized workforce but don’t have an explicit policy on freedom of association. The investors also sought third-party reviews at companies that have been enmeshed in labor controversies, stating that corporate actions didn’t line up with their commitments to respecting workers’ rights.

“They’ve committed to respecting these principles but have been uneven at best in their compliance,” said Mike Garland, New York City assistant comptroller for corporate governance and responsible investment.

In 2022, there were only a couple of proposals concerning unions that went to a vote: proxy proposals at Tesla Inc and Amazon.com Inc. secured 33.4% and 39% of investor support, respectively. The Tesla proposal asked the company to adopt a freedom of association policy while the Amazon proposal asked for additional reporting on freedom of association.

But this year, a concerted effort from shareholder proponents put more pressure on a wider swathe of businesses. At Amazon’s annual meeting this year, Amazon labor organizer Chris Smalls presented the re-filed proposal where he referenced alleged anti-union tactics at the company including intimidation and retaliation. Amazon said in its proxy statement that it has already produced a report addressing how its policies align with workers’ freedom of association and collective bargaining rights.

Other companies with proposals that went to a vote—including at Chipotle, Delta and Activision Blizzard—have this year faced allegations of unfair labor practices. Shareholder activists said highly publicized labor controversies drew attention to various risks that come with allegations of labor violations.

“I think a lot of investors need to see the horse running out of the barn before they support a proposal,” Kron said.

Bad for Business

In statements to investors, companies said the proposals were unnecessary, and some deemed them potentially harmful to the business.

In an email, Delta said the proposal it faced asked it “to voluntarily waive its rights under US labor laws to directly engage with employees about important issues, including facts about representation, its impact on their work lives and their relationship with Delta.” The proposal, which gained 32% investor support, sought a non-interference policy at Delta.

Kenneth Siepman, a lawyer at Ogletree Deakins who advises companies on labor and employment issues, said he’s concerned that some proposals focusing on unions could ultimately restrict companies’ speech. Siepman said that companies which adopt a policy of noninterference could be restricted from sharing their lawful views about a union.

“Free speech is really fundamental,” he said.

Some companies have crafted shareholder agreements that prevent labor proposals from reaching an investor vote. Apple Inc., for instance, reached a deal earlier this year with proponents including the New York City comptroller’s office to conduct and assess how its human rights policy relates to workers’ freedom of association and collective bargaining rights.

One argument the proposals put forward is that allegations of labor violations are bad for business. About 42% of US consumers have said they’re less likely to shop at a company that’s anti-union, Maryland State Comptroller Brooke Lierman said at Democratic-led roundtable on Capitol Hill this month.

“Reputation matters too today. Where poor human capital management or ethics issues are made public, damage to the brand can alienate both prospective employees and consumers,” she told Democratic members of the House Financial Services Committee.

With workers building momentum amid a tight labor market—following health and economic justice concerns sparked by the Covid-19 pandemic— just about every industry is at risk of facing both public and investor scrutiny.

“What’s really causing a connection is that just month after month there seems like there might be a different strike in a different industry,” said Tom Geiger, special projects director at the United Food and Commercial Workers Local 3000.

“It’s connecting with the overall public, with elected officials, and connecting with the media themselves,” he said.

—With assistance from Senior ESG Analyst Rob Du Boff.