Shareholder proposals result in better transparency on human rights due diligence

By April 13, 2018News

This quarter SHARE achieved two strong successes on human rights by raising the stakes of our engagements and helping shareholders exercise their right to file resolutions with a company. In both cases we were able to achieve important progress without going to a vote.

Filing a shareholder proposal, allows a shareholder to raise an issue of concern with a company’s management, board of directors and their fellow shareholders. If a proposal can be adequately addressed through the negotiation of an agreement with the company, the shareholder will withdraw.  If not, the proposal goes to a vote of shareholders at the AGM.

This year, SHARE filed shareholder proposals on behalf of our clients at First Quantum Minerals and Linamar, two companies that we have been engaging with, but to date have not been able to understand whether and how they are living up to international human rights standards.

The United Nations Guiding Principles on Business and Human Rights set out an international standard of practice for companies to respect international human rights, including labour rights, by identifying, preventing, mitigating, remedying and reporting on the human rights impacts associated with their business activities. Our engagements on international human rights seek to advance implementation of these guidelines where it is missing or weak.

First Quantum Minerals is one of Canada’s largest mining companies with operations on six continents and in areas where significant risks to human rights have been identified, yet its reporting currently is not clear about how the company identifies risks to human rights, takes steps to prevent and mitigate adverse human rights impacts, tracks the effectiveness of these measures, and remedies the adverse human rights impacts that it causes or contributes to. SHARE has communicated with First Quantum about human rights a number of times in the last few years with little change, so on behalf of the United Church of Canada Pension Fund and the Fonds de Solidarité FTQ we filed a proposal this year.

Working with the representatives from the company, we came to an agreement that will mean the company begins to provide clearer reporting on oversight and performance in key human rights risk areas this year and works with SHARE to expand its human rights due diligence to contracting, supply chains, joint ventures and mergers and acquisitions – critical but often overlooked areas of risks to human rights in the mining sector.

Like First Quantum, the decision to file a proposal at auto-parts manufacturer Linamar came after several years of engagement with a focus on decent work and labour rights. Originally the company was resistant to dialogue. Faced with this impasse, SHARE, on behalf of the ECHO foundation, filed a shareholder proposal, which asked the company to report annually on its policies, oversight, management, metrics and targets to address risks and impacts related to international human rights and labour standards at global manufacturing sites and in its supply chain.

Linamar’s tone immediately changed. After a short period of negotiation, the company committed to report annually on policies, oversight, management and performance metrics related to human rights and to fostering a workplace that is conducive to decent work in its global manufacturing sites and supply chain. This significant improvement will allow investors and other stakeholders to understand whether and how the company respects international labour standards, ensure decent work conditions, and mitigates against labour and human rights violations in its own facilities and supply chain.

This year’s human rights proposals are significant, not only because they help the companies to make progress in responsible business and respect of human rights, but also because they align with the global rise of legislation requiring transparency on human rights and labour rights due diligence in business operations. Due diligence legislation has been passed in the UK, France and the Netherlands and is being considered in Australia, Switzerland and elsewhere.

Here in Canada, the federal government has announced it will be establishing an Ombudsperson for Responsible Enterprise to address complaints about the business practices of Canadian companies abroad. SHARE sent a letter to the Minister of International Trade indicating general support for this move and providing suggestions to ensure the office meets the needs of responsible investors.

However, we also think that Canada needs to follow its global peers and enact due diligence transparency legislationso that shareholders can find out about the company practices and processes in a standardized way and without having to file individual proposals. Perhaps Canada’s leadership of the G7 this year will provide just the opportunity for Canada to step up in this role.