Boots: Shareholder activists demand fair living wage for workers
31 Jan 2024 | The Shareholder Commons & ShareAction
A group of shareholder activists claims Boots is not paying its employees a real living wage. Sara Murphy of The Shareholder Commons in the US and Dan Howard of ShareAction in the UK talk to Personal Care Insights about their plans to get the UK pharma chain’s parent company, Walgreens Boots Alliance, to create policies that pay workers “a decent wage from day one.”
Hi, everyone.
I'm Anita Sharma, the editor of Personal Care Insights at CNS Media.
I'm very pleased to be joined by Sarah Murphy.
She is the Chief Strategy Officer at the Shareholder Commons, as as Dan Howard, Head of good work at Share Action based in the UK.
Welcome to you both.
Thank you.
Sarah, let's start with you.
This all began, I reached out to, to yourself and Dan, just ahead of the Walgreens Boots Alliance shareholder meeting, because we knew that you had a proposal.
You were armed with a proposal, you were going to the shareholder meeting, in, in the US.
Tell us what happened and why you were there.
Yeah.
So, the simple version is that we had a shareholder proposal at Walgreens Boots Alliance, asking the company to pay a living wage to its employees and, and by extension, it's, those of its contractors and subcontractors.
That's the simple version of it.
The broader version of it is that we are working on what we're calling a living wage guardrail campaign.
And that is to ask the same of, a, a group of companies, a peer group of companies, because we recognize that that is a difficult thing for any single company to implement in a vacuum without putting itself at a, at a disadvantage.
We also recognize that while companies can and do derive benefits to themselves and to their own enterprise from improving labor practices, and those benefits can come in the form of reduced turnover and improved productivity and so forth, there's also a limit to how far that act that case actually holds up.
Meanwhile, for their diversified investors in those companies, they actually pay for it when companies externalize costs onto the broader marketplace, including the costs associated with a, an insecure and an unhealthy labor force.
So, we're, we're actually making an argument for shareholders and it also has a benefit to workers in the process.
So, that's What we were filing with Walgreens and what we're trying to achieve.
OK, so I reached out to Walgreens Booths, Alliance, and ahead of the shareholder meeting, they said to me, you know, Anita, we can't, we can't comment on this, on this proposal brought forth by the shareholder comments, but they did point me to their, their annual statement, if you will.
To your proposal in which their response was stated as we, we're doing our best, I'm paraphrasing here, but they said we're doing our best, and we are honoring the minimum wage set by, the feds, the federal government in the US, as as, the UK.
Real quick, Sarah, your thoughts on that?
Yeah, we don't quibble with the veracity of that statement, but it does demonstrate that Walgreens management misunderstands the issues of the proposal in kind of two key ways.
First, they either don't comprehend or they're not willing to acknowledge the significant differences between living wages and competitive wages, and minimum wage, as you say.
An employer can pay.
Wages that are competitive in its industry or region, but still leave its workforce impoverished.
The other thing is that they seem not to understand that the proposal's focus is, is its shareholders.
While Walgreens has indeed made progress in improving its team members' pay and compensation to the extent, and this is important that doing so maximizes the company's own success, the proposal deals strict.
With the economic interests of its shareholders and corporate activities that undermine those interests.
OK.
I wanna bring in, Dan.
You've been, the across the pond colleague, if you will, collaborator, with Sarah.
Dan, I would think that this also, hits home for you as.
Boots is based in the UK, right?
Yeah, so Boots is a very known retailer in the UK.
There's one on pretty much every high street over here, it's really is a, a household brand, so that's why we were interested in this proposal as.
It's important to say that Share Action has been engaging on this topic for over 10 years, so we've been mobilizing investors to engage with their investee companies, to pay both their directly employed and subcontracted workers a real living wage.
And when we started this campaign, Over 10 years ago, just 2 of the FTSE 100 were accredited living wage employers in the UK and now over half of the FTSE 100, pay a real living wage and are accredited, which shows the power that investors in the financial system can have in driving change on workforce practices and on the living wage in particular.
But I think what we are, you know, we're working with the Shareholder Commons and with Sarah, because.
We, we haven't seen as much progress from companies in the retail sector, so companies like Boots, who have large low paid workforces and business models that are predicated on low pay.
So we're really interested in working with Sarah and the shareholder Commons to understand how a systems stewardship approach can help to drive change in those sectors.
Where paying a living wage is most challenging.
OK, and it looks like, Sarah's been doing some, some, some dropping into some meetings.
So tell us about, I understand it was a quick, it was a quick interaction, but what exactly happened, at the annual meeting, Sarah, when you presented the proposal for a quote unquote, fair living wage?
Yeah, so, for, for those who may not know, to bring up a shareholder proposal in the United States, you do have to attend the annual meeting to move that proposal, otherwise, it can be dismissed.
And so, and I think as a bit of a relic of the, pandemic era, a lot of these meetings are conducted remotely still, and that was the case with this one.
So, I did dial in to move the proposal, and that's where proponents have an opportunity to, to make a statement in support of their proposal, generally 2 to 3 minutes or so.
And while investors can change their votes or lodge them for the first time on the spot, Generally, the voting has happened in advance already, and management in this case, as in most cases, makes no statement on the proposal beyond simply to refer, investors to the statement they made in their proxy as they, much as they did with you, Anita, when you, when you called and asked them.
So it was, a pretty standard procedure.
I read my statement, and they, they referred to their opposition statement as to why they don't support the proposal.
You know, I've been on both sides of the, of the debate here, covering businesses, extensively, publicly traded or not, but especially when they're publicly traded, there's that, you know, I'm not speaking for Walgreens, Boots Alliance, but in general, there is that drive, right, to, to maximize value for shareholders.
When you see job cuts, let's say, The reaction to that is usually a bump in profit for a company, which leads to a higher share of value for the company.
So a lot of folks will, will empathize with the situation that a lot of these companies are in, Sarah, where they appreciate what you, what Dan, your colleagues are up to, but at the end of the day, they say, we answer to shareholders.
Your, your comments to that real quick.
Right.
And we are saying that if a company is operating in the interest of its shareholders, they're getting it wrong when they externalize costs because the vast majority of their shareholders are diversified.
They're, they're mostly everyday savers who are just trying not to run out of money before they die, right?
That's your average shareholder is, you know, the, the, the teachers and the firefighters with pension funds and IRAs and so forth who are just trying to, to, to fund their, their retirement in some modest fashion.
And in order to do so, The fiduciaries who work on their behalf diversify their portfolios to protect them from the risk of any single company losing value in that portfolio.
Having done that quite successfully, where they're left is the greatest risk to their portfolios comes from the systems themselves that support the broader economy, and that's what we're trying to recognize is that yes, this is a shareholder value proposition, but we're getting it wrong when we focus myopically on a single enterprise and when that enterprise then externalizes its costs that its own shareholders absorb, and that is the case when it comes to living wage and, and underpayment of workers.
You know, Dan, we covered extensively the cost of living crisis.
It really showed up in a lot of, reports where, late last year when companies were reporting their earnings, they were saying, we really had to account for, the high inflationary environment where, where many consumers, especially those, dealing with a, a minimum wage or working with a minimum wage, were, were struggling.
What did you find at your end in that regard?
Yeah, we definitely saw that as in our engagement with companies last year, we saw that companies were offering increases, larger increases to their lowest paid workers in terms of percentage points, but if you look at the absolute amounts, I think pay inequality, and I can only really comment in the UK where we work, pay inequality is still, still vast.
And it's also important to note that the cost of living crisis has come after, you know, over a decade of pay stagnation, and workers really were not in a, In a, in a place where they were able to, to deal with that shock, so whilst we did see, significant increases last year, they, you know, they don't make up for, for the pay stagnation that's, that works have experienced over the, over the past decade.
So, that's what we are, working with investors and with companies to, to act on, and.
Yeah, I think that really, I think increasingly we are seeing that investors are conscious of the, you know, the systemic risks that come with increasing inequality and economic insecurity for, you know, for millions of people.
And I think what, you know, what that Sarah's doing and the shareholder Commons is doing, what we want to do in share action is try to mobilize that investor power to take action on the issue.
Yeah, it's the ESG power, right?
It's been a, it's been a buzzword.
For, for a few years now, at least, but there does seem to be this growing, is there this growing cohort of ESG investors who are really focused, on equality and they're, they're, they're willing to, perhaps move in that direction and even if that means, a lesser profit, what are you finding in that regard?
Is the movement still strong or is it waning a bit?
I might let, I might let Sarah answer that question.
Sarah, what do you, yeah, so what you're asking, there's a couple of important wee details in your question, Anita.
So, first, I think there are conventionally ESG investors who are interested in this, but the case we're making is a purely shareholder primacy, case.
It is just frankly, an investor who Let's, let's take the extreme proposition.
An investor who doesn't care at all about worker welfare, who considers all of that nonsense, should still support these proposals because the case is an economic one.
It is about portfolio value and it's about how you optimize that.
So, having said that, this is not a concessionary case.
This isn't about forfeiting value.
It might be potentially at any individual enterprise level.
But that is in service of optimizing diversified portfolio value.
So I, I hope that makes sense.
Absolutely, absolutely it does.
I'll go back to Dan, and just, just, just ask you over the past 10 years, Dan.
You said you've seen, you know, some, some significant progress, and, not to, to paraphrase you, but I, I believe you were saying there's still a lot more work to do.
You live, and I'm sure you represent a lot of workers in one of the most expensive cities in the world, right?
Right, yeah, so, yeah, we have, we have seen progress, but like I said.
Where we, where we wanna see more progress is in those sectors, where there are large numbers of low paid workers.
So I think we've seen in the UK at least, a widespread acceptance of the living wage as a concept.
People here tend to recognize what a living wage is and to differentiate that from the, from the minimum wage, which is fantastic.
And actually, in, in 2022 we coordinated a, the first shareholder resolution.
On the living wage at Sainsbury's, which is the 2nd largest grocery retailer, in the UK, and whilst that resolution didn't pass, it did result in pay rises for thousands of workers at Sainsbury's, and also had ripple ripple effects across the wider sector.
So, yeah, we're seeing an increase in acceptance of the concept of a living wage.
If you look at the data on pay rates in the UK, there's a real bump around the living wage rate, which shows that.
Lots of companies, even if they aren't living wage accredited, they are using the living wage to base their minimum pay rates on, which is fantastic.
We wanna see more companies doing that, but we also wanna see them committing to it in the long term as , because that's what workers need, they need that security, you know, not just this year, but beyond, and to know that their, their pay is gonna keep up with the cost of living.
All right, thank you very much for that, Dan.
Sarah, I'll give you the final word, your thoughts, as you, as you move on with your mission.
Yeah, thanks.
I think, what we're really trying to do is remove barriers that individual companies face to implementing some of these things.
At the end of the day, this isn't some sort of, like, great corporate evil against, you know, the, the, the forces of good.
There are a lot of really thoughtful people inside these companies who want to do more in this regard and know how to do more in this regard, but the fact is that they're fettered by an investor.
Landscape that will punish them when they do, right?
Exactly as you said, when there are job cuts, you know, we reward them with the stock price when, and when, when, when there are sort of union wins and, and other labor concessions, you see the share price fall because investors are punishing them.
What Trying to say as investors, this is a bad deal for your clients and beneficiaries.
It's much better economically for them to support these types of initiatives and investors, if investors do that, then it will help these companies to come along because otherwise, they just can't respond the way we're asking them to.
So, we're trying to work with them to make this possible, and I think that we can all get there.
All right.
I, I wanna thank you, Sarah Murphy of the Shareholder Commons, and Dan Howard at Share Action for your time today.
Really, really important subject, and I'm very appreciative of the fact that, you could share some of your thoughts with me.
Thank you so much.
Thank you.
