Employee Activism Is Coming To A Board Near You

Employees appear to be the next major stakeholders to test corporations’ willingness to respond to the Business Roundtable’s adjusted concept of what a corporation should be. Now that the Business Roundtable has endorsed the idea that companies should create value for all stakeholders (employees, suppliers, communities and shareholders) instead of focusing on providing profits only for investors, employees may be more emboldened to negotiate a larger share of company profits and other benefits for themselves. Employee activism may be entering a new phase.

This year, employees have been particularly willing to publicly confront companies for wage increases, benefits and other concessions. These actions can potentially pose significant challenges for corporate boards.

Among the latest examples of employee activism is the worker strike at General Motors. After GM paid a reported $6.6 million in dividends and approved $7.1 billion in stock buy backs for investors between 2016 and 2018, the company then decided it would close five North American plants and layoff 15 percent of its workforce. Layoffs and plant closures were not what GM workers were expecting for all their hard work. The United Auto Workers’ union is now arguing that GM workers should reap a greater share of benefits commensurate with having helped the company achieve record profits since 2008.

Other examples of worker activism include:

• More than 20,000 AT&T workers going on strike in August after contract negotiations with the Communications Workers of America stalled. Job security and rising healthcare costs were the worker’s primary concerns.

• Hundreds of Fresh Express workers walked off the job in June after contract talks with their union broke down after six months. Worker safety and a $3.00 an-hour wage increase were the main sticking points.

• Also in June, hundreds of Wayfair workers flexed some political muscle when they threatened to strike unless the online furniture company stopped supplying furnishings to US immigration detention centers.

• Workers at Alphabet staged walkouts this year in support of shareholder proposals that sought employee representation on its boards of directors.

Workers walking off the job or initiating other disruptive actions against their companies can depress corporate profits, damage a company’s reputation, diminish the company’s ability to grow its talent pool and hurt employee morale. None of these things improves stock price.

Employee engagement should be an item that is elevated on the agenda of corporate boards. Employee engagement is a critical component of human capital management, and in today’s tight job market companies may need to do more than they have in the past to attract and retain top talent. Making new efforts to understand the changing needs and concerns of workers, and understanding the changing makeup of each individual company’s workforce have become paramount.

Corporate boards may need to rely on their members with human resources experience to develop ways to survey workers and determine which issues should be prioritized and how they can be adequately addressed.  If there is not sufficient human resources experience on the board, recruiting a director with HR experience or hiring outside help to develop a strategy for building stronger relationships with workers now and in the future may be necessary. Members of the corporate management team should monitor worker issues and report to the board on a regular basis. The key is to engage workers before they take drastic actions like public protests, strikes or teaming up with investors to draft shareholder proposals. Each company will find its own strategies that work.

Workers play a major role in improving the fortunes of all companies. Developing strategies to keep workers enthusiast about their jobs and motivated to maintain productivity is becoming just as important as providing incentives to motivate executives to meet financial goals. This is another aspect of corporate strategy that corporate boards must improve upon in order to maintain sustained corporate profits.

Read more: Business Roundtable’s Stakeholder Focus May Inspire More Activism