Should worker concerns become a higher priority on corporate board agendas? It’s a question boards need to explore.
On June 19, employees of Alphabet, the parent company of Google, protested the company’s labor practices and business policies at its annual meeting in Sunnyvale, Calif. This comes after employees walked off the job last year in a series of protests over what they believe is the company’s lack of attention to sexual harassment allegations, discriminatory behavior and unfair treatment of contract workers at the tech giant.
The protests have led to greater scrutiny from some of Alphabet’s largest investors. Collectively, they have taken action by filing 13 shareholder proposals suggesting changes this year – the most in the company’s history. According to news reports, the proposals strongly supported by employees include one that ties the compensation of Alphabet executives to gender, racial and ethnic diversity recruiting and retention metrics and one that asks that a nonexecutive employee be placed on the Alphabet board. Although all of the proposals failed, they raise the possibility that similar proposals will be presented at other companies in the future. The process may already be underway.
On June 5, Democratic presidential candidate Bernie Sanders (D-VT) spoke at Walmart’s annual meeting, arguing for the company to raise employee wages to a minimum of $15 per hour and for hourly workers to have representation on the board. Both proposals failed. Also, in May, Amazon employees were the catalyst behind a climate change proposal that failed, but garnered nearly 31 percent of the vote. Directors should expect these proposals to be resubmitted next year.
The emergence of these worker-inspired shareholder proposals suggests that investors are willing to team up with other stakeholders in order to pressure boards and management into changing business practices and workplace policies. This is another form of activism that boards must contend with. While this doesn’t appear to be a major movement yet, in an environment where many companies are undergoing major transformations it is a reminder that companies must monitor how they are responding to worker issues that could hurt their reputation with consumers and damage their ability to recruit and retain the best employees. Being unresponsive to workplace issues can also turn into expensive lawsuits which can also damage the company’s reputation and bottom line.
It may be a good time for all boards to review how much their workforce is changing, how much they know about the concerns of their workforce and how they are getting that information. Normally, the management team would interact with the workforce and inform the board of any problems.
However, since workers at two major companies have convinced investors to back their requests for representation on the board, that signals a lack of trust between the workforce and management – something that can’t be good for the sustainable growth of any company. However it is correctable.
Boards must work cooperatively with management to identify worker issues and make sure there are policies and practices in place to deal with them. Many of the issues workers complained about during Alphabet’s protest involved the company’s response to sexual misconduct claims, the lack of efforts to improve worker diversity, gender pay equity and the company’s policies on human rights abuses.
These types of issues can be resolved internally without the spectacle of protests at annual meetings or the addition of an employee representative on the board. However, since many companies are transforming their workforces, there must also be an understanding that unforeseen worker-related issues may continue to arise. Boards can create a process to engage workers about business operations and also collect information and feedback about worker satisfaction and overall efficiency. Creating a partnership with workers for the good of the company will go a long way toward preventing workers from partnering with shareholders on proposals seeking employee board representation or anything else.