Shareholder proposals are piling further pressure on companies including Starbucks Corp. and Apple Inc. to protect labor rights as activist investors concerned about union interference become more active in proxy battles.
Both companies were hit with proposals in September that called for labor rights audits following complaints by workers and others that the companies have been trying to curb union organizing. Amazon.com Inc. and Tesla Inc. were hit with similar proposals last proxy season that each gained significant support from approximately one-third of shareholders before ultimately falling short.
The proponents, including the New York City comptroller on behalf of the New York City Retirement Systems, are undeterred and see labor rights as a growing environmental, social and governance concern. They say companies’ long-term value could be harmed by union interference allegations.
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“The troubling reports of anti-union behavior and interference with organizing efforts by both Apple and Starbucks stand in sharp contrast with how these companies present themselves to customers,” New York City Comptroller Brad Lander said in a statement to Bloomberg Law. “Shareholders, including the New York City pension funds, are concerned that this misalignment with their brand and stated commitments to worker freedom of association poses reputational, legal, and operational risks that the companies cannot afford.”
Other companies should take heed of the activist investors’ concerns, lawyers said, as more proposals are expected in the future. While companies are already navigating increased union organizing, putting such matters up for shareholder votes will be “a further pressure point” that companies can’t ignore, said Amanda Brown, counsel at Reed Smith.
The proposals put before Starbucks and Apple call for independent assessments of workers’ freedom of association and collective bargaining rights. Both companies have made public commitments to union rights, but face complaints from the National Labor Relations Board and others that allege firings and other retaliatory tactics against workers attempting to organize, the proposals say. Starbucks and Apple’s annual meetings are both set for next Spring.
Both Apple and Starbucks, which have denied wrongdoing and defended their practices, didn’t respond to requests for comment. “[T]here should be no doubt that where partners choose to be represented by a union, we fully respect that choice,” Starbucks said on its website. Apple said in an earlier statement: “We regularly communicate with our teams and always want to ensure everyone’s experience at Apple is the best it can be.”
“All companies should be thinking to themselves: might we be next? What do we need to do so that we’re not the target of a proposal?” said Nadira Narine, a senior program director at the Interfaith Center on Corporate Responsibility, a shareholder advocacy group that focuses on ESG issues.
Pandemic Origins
In interviews, the proposals’ proponents pointed to public support for workers’ rights which was in part sparked by health and economic justice concerns that arose during the pandemic.
The shareholders spoke about the importance of union rights alongside other human capital management concerns including having access to data on benefits as well as diversity, equity and inclusion. They also noted that union membership can foster retention.
Recent proposals on labor rights have seen sizable support so far. A May proposal at Amazon secured a 47% of independent voters—those who can vote but don’t have controlling shares—and 38.9% in total, supporting more reporting from the company on workers’ rights to freedom of association and collective bargaining. The showing of investor support came as Amazon faces accusations of anti-union tactics amid a historic organizing effort at the ecommerce giant.
Amazon said in its proxy statement that it had already disclosed the information the proposal sought. The company also published a supplemental report disclosing how its human rights commitment and approach, the company said ahead of the vote.
“Our employees’ voices are critical to us, so we also go beyond mere compliance with legal requirements by listening and responding to ideas and concerns of our employees, empowering them to communicate and provide feedback through various formal and informal mechanisms,” the company told investors.
Tesla also faced a proposal calling on the electric vehicle company to respect employee rights to unionize that received 33.4% of votes in August. Last year, the NLRB concluded that Tesla has repeatedly violated US labor laws.
Tesla’s board told investors that the proposal wouldn’t create additional benefits to its employees or value for its shareholders because it has already included adequate disclosure over employee rights and is “actively engaged in protecting these rights.” Tesla said the proposal was asking it “to expend resources to create and maintain a policy framework and additional administrative bureaucracy which will not meaningfully alter” its human rights commitment.
The company also pointed out that its wages meet or exceed those at comparable manufacturing jobs where it operates, and that it recently increased its base pay even further.
The proposals at Starbucks and Apple say the alleged interference stands in contrast to the company’s human rights policies. The allegations include reports of intimidation tactics including retaliatory firings and threats to cut benefits. Starbucks has also been accused of closing stores that were attempting to unionize.
The NLRB has issued at least 20 complaints against Starbucks and is investigating 14 charges of unfair labor practices against Apple, the proposals say.
Starbucks said in late September that it wants to start contract negotiations in October at hundreds of US stores that voted to unionize. However, the union organizing Starbucks’ stores has said it’s skeptical about the move.
Reputational Risk
How companies treat their employees is far more visible now and carries more weight, said Marian Macindoe, head of ESG at Parnassus Investments, one of the proponents of the Apple proposal. Employees all have “megaphones through their social media accounts.” “You see the workforce tightening and people’s standards changing,” she said.
There’s also steady pressure on companies from Democrats. President Biden met at the White House in May with union organizers involved in campaigns at Amazon and Starbucks, among others. Thirty lawmakers led by Rep. Ro Khanna (D-Calif.) sent Starbucks’ CEO Howard Shultz a letter this week urging the company to work with unions. Democratic Senators Elizabeth Warren, Bernie Sanders, Ed Markey and Richard Blumenthal, also sent a letter to Schultz this week asking how much the company has spent on legal and consulting fees to counter the union growth.
One of the missteps companies often make is having the wrong people take the reins of conversations with advocates on human capital concerns, said Meredith Benton, a workplace equity program manager at shareholder advocate As You Sow who also runs consultancy Whistle Stop Capital. Miscommunication between a general counsel and human resources or a diversity officer can often lead to confusion and drag the process out longer, she said.
Companies should communicate from the top down how they want management to behave regarding employee organizing, lawyers and activists said. Businesses should also make sure that engaging with employees and listening to their concerns is a top priority, they said.
But it’s also important that employees feel they have the option not to associate or take part in collective bargaining, said Paul Chesser, a director at the National Legal and Policy Center, a nonprofit group that frequently opposes progressive shareholders on proxy issues. Chesser noted that employees could face peer pressure to join unions even if they don’t want to.
The proponents emphasized the importance of shareholder activism as one of the best tools to shift company behavior. While US labor laws prohibit threats or retaliation against workers, companies are still able to push back forcefully against unionization, they said.
“When you put [an issue] on the ballot you’re essentially taking the temperature of other investors,” Macindoe said. “It’s a signal to us, too; it sends a signal that it matters,” she said.
