By Hugues Letourneau, Responsible Investment Leadership Manager
SHARE is concerned with decent work because a company’s workforce is key to its long-term success. Poor employment and workplace practices are a source of risk and companies have a responsibility to avoid causing adverse impacts to the rights of workers. Furthermore, companies that invest in their workforce, value employee input and pay decent wages tend to display favorable characteristics like lower turnover and stronger performance.
Supporting our dedicated institutional investor clients, SHARE filed four shareholder resolutions this year asking Dollarama, Restaurant Brands International, Magna and Brookfield Asset Management to improve their disclosure on workforce metrics. The objective of our proposals was to help investors appraise whether a company is effective at optimizing the wellness and productivity of their workforce while upholding fundamental principles and rights at work. While the demand at each company was similar, the level of support of the proposals varied.
Workforce practices at RBI: taking the pulse of shareholders on the responsibility of a company toward franchisee employees
A quick glance at the regulatory filings of Restaurant Brands International (RBI) reveals a small employee headcount of 6,000. This figure includes employees at the 98 company-owned restaurants but it does not account for the bulk of the workforce delivering services under the Tim Hortons, Burger King or Popeye brands: the employees of the 25,646 restaurants operated by franchisees in more than 100 countries.
Over the past few years, reports of a number of incidents at RBI franchises have raised concern about the quality of workforce management in both its direct and franchise operations. These include the claw-back of employee benefits required by employment law and reports from Burger King and Tim Hortons employees in Canada and the US of on-call shift scheduling and unpaid overtime. In 2018, Burger King employees went on strike in New Zealand over low wages and employment conditions, arguing that they are paid less than industry competitors, including McDonald’s and Wendy’s.
Working with the Atkinson Foundation, SHARE asked RBI to report on minimum requirements and standards related to workforce practices (including wages and benefits, working hours and breaks, health and safety, shift scheduling and training) for corporate offices, branded operations and franchises. This proposal received 25.7 percent support from RBI shareholders which adds up to 50.22 percent of independent shareholders.
Workforce disclosure at large direct employers: the case of Magna and Brookfield Asset Management
While Brookfield Asset Management and Magna operate in different industries, they both share some similar workforce features: they have large direct employment footprints – unlike RBI which relies on franchisee employees – and operate across the globe in countries where human rights risks are sizeable.
Magna, a car parts manufacturer, has more than 174,000 employees across 348 manufacturing sites in 28 countries. In recent years, it has expanded manufacturing and sourcing activities in countries with high human rights risks, including China, India, Thailand and Mexico. The Catherine Donnelly Foundation filed this shareholder proposal related to workforce management and human rights reporting because Magna’s current disclosures fail to provide adequate information to help investors ascertain the company’s approach to workforce management and human rights due diligence and remedy in its global manufacturing operations and supply chain.
Brookfield, an operator and owner of real estate, infrastructure and private equity assets, has more than 100,000 employees in more than 30 countries. The company operates in countries ranked among the worst in the world for labour rights violations, including China, the United Arab Emirates and Colombia. This proposal was filed by the Atkinson Charitable Foundation because given the size of the company’s global workforce and the risks to human and labour rights in the locations where it operates, additional disclosure is warranted for investors to evaluate the company’s human capital management practices.
SHARE asked both companies to disclose more quantitative workforce metrics on topics that included health and safety, the types of complaints received through grievance mechanisms and the composition of the company’s workforces – including reliance on temporary workers.
At Magna, the proposal received support from 7.79 percent of Magna shareholders including some of the largest pension funds in Canada and the USA. The proposal at Brookfield received support from 10.32 percent of class-A shareholders, which adds up to 16.5 percent of independent shareholders once management’s ownership is removed from the total.
Dollarama: risks of modern slavery in consumer goods supply chains
Canada’s largest dollar store chain sources more than half of its products from over 25 different countries, primarily from China. Unlike Magna and Brookfield’s large direct employment footprint, human rights due diligence issues at Dollarama are mainly within the supply chain. Short lead-time on orders and demands for low cost production generates pressure on suppliers to be flexible and capable of ramping up or down their workforce at short notice. This dynamic increases risks of forced labour.
Dollarama has not yet adopted a policy explicitly prohibiting the payment of recruitment fees by workers and it relies on suppliers’ self-assessments to evaluate compliance to its Vendor Code. This is a timely issue given the recent Federal government consultation on labour exploitation in global supply chains. As shareholders, the Pension Plan of the United Church of Canada want to be assured that the company is doing its utmost to prevent any human rights abuses within its supply chain. On their behalf, SHARE asked Dollarama to issue a report detailing its due diligence process to identify and address risks to human rights from Dollarama’s business. The proposal received 10.96 percent of shareholder support, including support from some of Canada’s largest pension funds.
The takeaway from the 2019 voting results at these four Canadian companies is that investors are increasingly looking for evidence of effective workforce management practices supplemented by human rights due diligence to prevent egregious violations. Moving forward, SHARE will continue to stress the importance of the issues raised in the proposals with the companies and it will ramp up its work to educate asset managers on the proposals.