By: Catherine Smith, Manager of Proxy Voting Services and Senior Research Analyst
A shareholder proposal that raised concerns about child labour linked to tobacco products sold by Alimentation Couche-Tard received strong support from that company’s non-controlling shareholders at the annual meeting on 20 September.
Forty-two percent of the votes of non-controlling shareholders were in favour of the proposal, which was filed by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO). The proposal asked Alimentation Couche-Tard to report on how it identifies and evaluates its exposure to human rights violations in its supply chain.
The proposal was especially concerned with labour rights and child labour in the supply chain for the tobacco products sold in Alimentation Couche-Tard’s stores. According to the AFL-CIO, tobacco products accounted for 40% of the company’s sales in 2015. Tobacco production has been associated with violations of workers’ rights, and especially with child labour. These violations pose a significant risk for Alimentation Couche-Tard.
The tobacco for many of these products is grown in the United States. Labour laws there generally protect workers’ rights and prohibit child labour, but those laws exempt agriculture. For example, farm workers can be required to work overtime without additional pay, fired for attempting to organize, or exposed to workplace hazards, such as dangerous equipment and toxic pesticides, without adequate protection. Tobacco farming poses an additional risk to workers’ health because nicotine is absorbed through the skin when the plant is handled. Tobacco workers often have high levels of nicotine in their bodies, and suffer from nicotine poisoning, which causes intense vomiting, dizziness, rashes, and severe headaches.
US labour laws also exempt agriculture from most laws that prohibit child labour. Tobacco producers in the US have voluntarily agreed not to hire children under the age of 16. However, children aged 16 and 17 are employed by tobacco farms where they may work 50 or 60 hours per week and be exposed to harsh weather, toxic chemicals and nicotine poisoning. This is hazardous work, and under international law 16- and 17-year-olds should not work in these conditions. The International Labour Organization’s Minimum Age Convention establishes 18 as the minimum age for employment that “is likely to jeopardise the health, safety or morals of young persons”.
The UN Guiding Principles on Business and Human Rights state that businesses have a responsibility to protect human rights, and to address negative effects on human rights with which they are involved, even if they have not contributed to those effects. This responsibility extends to labour rights in companies’ supply chains. In order to meet their responsibilities, companies “should have in place policies and processes appropriate to their size and circumstances, including:… human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights.”
Being associated with violations of labour rights entails considerable reputational risks, especially when child labour in hazardous employment is involved. Alimentation Couche-Tard states that it require vendors it contracts with directly to sign a declaration that the business will respect human rights and occupational health and safety, but the company does not report how comprehensive or effective these declarations are or on how it enforces them.
SHARE recommended voting for this proposal, based on our proxy voting guidelines, and our assessment that Alimentation Couche-Tard would benefit from preparing and issuing the report the AFL-CIO requests. The proposal is consistent with the UN Guiding Principles on the steps businesses should take to protect human rights, and also with steps companies should take to protect themselves from being associated with human rights abuses.
According to the company’s report of the vote results, 6.9% of the votes were cast in favour of this proposal. However, the support of the non-controlling shareholders was much greater. Alimentation Couche-Tard has two classes of shares, one of which has 10 votes per share. This structure allows four of the directors and Metro Inc. to control 77% of the voting rights. If we assume that the controlling shareholders cast all of their votes against the AFL-CIO’s proposal, then 42% of the non-controlling shareholders’ votes were in favour of it, a strong show of support.
The Fair Labor Standards Act prohibits children younger than 16 from farm work that the Secretary of Labor has identified as hazardous, but children are permitted to work with tobacco if they are over age 12.
ILO General Conference, C138 – Minimum Age Convention, 1973 (No. 138) Convention concerning Minimum Age for Admission to Employment, Article 3. (Entry into force: 19 Jun 1976) Adoption: Geneva, 58th ILC session (26 Jun 1973) Status: Up-to-date instrument (Fundamental Convention) http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO:12100:P12100_INSTRUMENT_ID:312283:NO
United Nations Office of the High Commissioner on Human Rights, Guiding Principles on Business and Human Rights, United Nations, New York, Geneva, 2011, Principle 15(b), pages 15-16. http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf