Proxy Alert: Shareholder proposal on human capital management oversight at Brookfield Asset Management

Brookfield Asset Management 
Symbol: BAM (TSX/NYSE)
Annual Meeting Date: June 12, 2020
Filer: BC Teachers’ Federation, supported by SHARE

Recommendation:
Vote 
FOR shareholder proposal on human capital management oversight at the board level

SHARE’s Recommendation and rationale

SHARE’s 2020 engagement agenda places decent work at the centre. Among our specific objectives for the year is to encourage leading Canadian and international firms to adopt Board-level oversight and accountability for human capital management.

Clarifying the responsibilities of specific board committees improves the ability of shareholders to hold board members accountable on human capital management.

The resolution at Brookfield Asset Management is filed on behalf of BC Teachers’ Federation for the June 12, 2020 annual general meeting. The resolution recommends the company assign accountability to a board committee and amend the committee’s charter to monitor human capital management policies and disclosure and evaluate the disclosure of workforce metrics to shareholders. The full text of the resolution is available below.

If adopted, Brookfield would join McDonalds, Dollarama, and Thompson Reuters among companies that have adopted board level oversight for decent work in recent months.

This winter, SHARE had positive discussions with McDonalds. The company agreed to amend the charter of its board public policy and strategy committee to assign responsibility for oversight of workplace health and safety, respectful workplace environments, and diversity and inclusion. After meeting with SHARE, Dollarama agreed to similar language in its own board charter. Thomson Reuters, where we held similar discussions last year, recently published its own revised board committee charter adopting many of SHARE’s proposed changes.

Brookfield employs more than 150,000 people in over 30 countries. Many of these employees are front line workers who operate ports, roads and utilities or clean malls. Hence, their occupations fall under the  definition of essential services in countries like Canada[1] and the USA[2] which make up 31% of the company’s infrastructure portfolio – the largest geographical segment.[3] As the global pandemic unfolds, companies like Brookfield need to balance out health and safety risks to their workforce and the ongoing provision of essential services. This calls for a board structure that has the capacity to oversee workforce issues promptly and decisively. SHARE believes that assigning the oversight of human capital management to one board committee – instead of the current approach which is described below – would enhance the board’s capacity to respond effectively. It would also provide shareholders with an improved accountability channel at a time when human capital management issues are gaining importance in the investment community. The company has not codified human capital management or workforce oversight in any committee board mandates.

Furthermore, shareholders continue to be critical of the company’s refusal to provide meaningful KPIs and trends on some of its stated workforce-related targets. For instance, Brookfield has a commitment to “zero serious safety incidents” but does not provide any narrative or KPI reporting on how close it is to reaching the goal, how performance varies from year to year, or what steps will be taken to improve performance. On the other hand, Vinci Group, whose infrastructure portfolios includes transport, utilities and data transmission assets and shares similarities with Brookfield’s, discloses data on the frequency and severity of workplace incidents over time.

SHARE therefore recommends a vote FOR the resolution.

Resolution

Resolved: That the company assign oversight responsibility for human capital management to a board committee and that the committee’s charter be modified to include the following:

  • Review and monitor the company’s human capital management policies and strategies including those related to corporate culture, recruitment, retention, compensation, diversity, and training and development;
  • Review and monitor the company’s health and safety policies, practices and disclosure in the context of emerging risks to the workforce and;
  • Evaluate the company’s disclosure of workforce metrics and the value that they provide to long-term investors in the context of the company’s commitment to environmental, social and governance issues in its operations.

Supporting Statement

Brookfield Asset Management (“Brookfield”) has one of the largest employment footprints among Canadian companies. In 2019, the company had more than 150,000 operating employees across a USD 540 billion portfolio of real estate, infrastructure and other assets in more than 30 countries. There is broad consensus that human capital management is important to corporate performance and a growing body of empirical evidence demonstrating that skillful management of human capital is associated with better corporate performance, including better risk mitigation.

In times of a global pandemic, long term investors are even more acutely aware of the importance of effective human capital management, especially with regards to health and safety. This is particularly relevant to Brookfield given its management of essential economic assets such as ports, railways, roads and energy utilities. Brookfield’s assets are in many of the countries most affected by the COVID-19 virus, including China, the USA, France, the UK, Canada, Australia, Brazil and Colombia.

It is critical that Brookfield’s human capital management policies, strategies and disclosure are fit for purpose during this unprecedented global health crisis and we believe this requires oversight from the company’s board of directors.

Currently, the board’s oversight of human capital management is fractured and lacks clear codification. The board’s nominating and governance committee oversees the Corporation’s approach to ESG issues and reports to the board. The board’s management, resources and compensation committee reviews allegations of workplace misconduct. Finally, the board’s risk management committee receives reports on health and safety from an executive committee.  However, health and safety oversight does not feature in the risk management committee’s charter.

As long term investors, we believe that oversight responsibility for human capital management at the board level is necessary to enable the company to mitigate emerging risks, optimize performance and uphold its responsibilities under international human rights norms and frameworks. For a company the size and scale of Brookfield, this requires the assignment of human capital management oversight to a single board committee and the codification of these responsibilities in the committee’s charter. A growing and diverse list of North American-headquartered companies are following this practice. For instance, board committees of large employers such as BCE Inc., Thomson Reuters and Bunge Limited have explicit responsibility for the oversight of workforce practices and policies.

For information contact:

Hugue Létourneau
Manager, Responsible Investment Leadership
T: 206.809.1427//[email protected]

[1] https://www.publicsafety.gc.ca/cnt/ntnl-scrt/crtcl-nfrstrctr/esf-sfe-en.aspx

[2] https://www.cisa.gov/publication/guidance-essential-critical-infrastructure-workforce

[3] https://bip.brookfield.com/~/media/Files/B/Brookfield-BIP-IR-V2/BIP%20Corporate%20Profile%20-%20April%202020.pdf, p.5