IN-DEPTH: Investors ramp up engagement on safety
Amid a broader increase in the volume of human capital management-focused shareholder proposals at U.S.-based companies this season, worker safety and other safety-related topics have been finding greater focus.
Diligent Market Intelligence (DMI) identified 10 safety-focused proposals advanced by investors in the first nine months of this year, up from five in the same period in 2023 and just one targeting Amazon in 2022.
“Worker voices have been augmented in the media in recent years, driving more investor focus on issues like safety,” Louis Malizia, corporate governance director at SOC Investment Group told DMI in an interview. “Greater participation of workers in the trade union movement has also driven attention for these issues, especially in the U.S. where workers often see unionization as a means to address factors like health and safety.”
Worker safety
SOC Investment Group is one of the shareholder groups to record the best level of success this season in bringing worker safety concerns directly to investors in a proposal that asked Chipotle Mexican Grill to commission a third-party audit of its policies on the issue. The demand won 30% support with the result described by the investor group as a promising sign that future engagement on the topic will advance so that policy changes are implemented that would filter down at an operational level.
“At a place like Chipotle, the exposure to violence and other customer-related risks is present,” Malizia told DMI. “Chipotle also has a pretty unique position as a direct employer of restaurant workers as opposed to the various franchised systems that exist across that industry. Changes in policies and practices can have a more immediate impact at Chipotle where the oversight and responsibility chain between frontline workers and senior leadership is direct."
A similar proposal, filed by shareholder advocate Cynthia Murray, asked Walmart to conduct a third-party independent review of the impact of its policies and practices on workplace safety and violence arguing that unsafe working conditions in the retail industry were under “increasing scrutiny” due to employee concern over a range of issues such as “organized theft and threats of physical assault and/or gun violence from customers and co-workers.”
The proponent warned that failure to effectively address the issue exposes the company to financial, reputational and legal risk, particularly following California Governor Gavin Newsom’s September 2023 decision to sign Senate Bill 533 into law, requiring employers in the state to take steps to prevent and respond to workplace violence by having employers develop workplace violence prevention plans.
The demand secured 19% support with Walmart’s board asserting that its “safety record is consistent with or better than that of U.S. retail peers.”
“Since the pandemic, there’s been a heightened awareness of worker safety which I think has enabled workers to express the issues impacting them in their workplace whereas companies in the past may not have taken these concerns as seriously,” Service Employees International Union (SEIU) Assistant Director Edgar Hernandez told DMI in an interview. “I think it’s a function of investors appreciating human capital management as risk factors for the companies that they’re invested in.”
Exposed industries
Often considered a sector-specific issue, restaurants, airlines and warehousing operations have been among those targeted, with railroad operators increasingly placed under the spotlight by investors in 2024.
Safety featured as part of one of the most divisive proxy contests this season where Ancora Advisors questioned railroad operator Norfolk Southern's safety record as part of its drive for a board overhaul that ultimately secured three seats for the dissident.
It followed a 2023 train derailment in East Palestine, Ohio and another incident in early March which the activist argued had reinforced the urgent need for a shareholder-driven reconstitution of the company’s board.
“Although our fiduciary obligation is to pursue optimal returns for the pensions, family offices and other clients who entrust us with their capital, nothing takes precedence over the health and well-being of individuals and communities,” Ancora said in a March statement. “Our proposed slate and management team are unanimous in their view that Norfolk Southern must become a safer and more reliable railroad before it can ever reach its full potential.”
The Ohio derailment was also referenced by Segal Marco Advisors in its resolutions this season asking fellow railroad operators Union Pacific and CSX Corporation for clarification on various safety issues.
“Recent derailments in the railroad industry... have drawn attention to the potential risks associated with these operations, necessitating a proactive approach to enhance safety measures,” Segal argued. “The 2023 East Palestine derailment has cost [Norfolk Southern] almost $1 billion and a similar derailment at our company could pose a significant financial risk.”
With newer safety-related demands expanding to target other sectors such as tech giants Alphabet and Meta Platforms this season on child safety and harm reduction, it's expected the push for greater protections is likely to continue.
“I think we’ll see more of these proposals in the 2025 proxy season and I think support levels will continue to be strong, if not stronger,” Malizia predicted. “These are not such lofty goals that will include massive government intervention or huge changes in economic policy. These are issues that are germane to the company and it’s an issue of focus and resource.”
