It struck me the other day that there isn't (to my knowledge) much info out there about how union-driven shareholder (or capital stewardship) campaigns work in practice, so I thought I'd post up a few thoughts based on my own experience of one such campaign. I'm not naming the company, though it will be obvious enough to anyone familiar with such campaigns in the UK.
The campaign was initiated by US unions to highlight and address the aggressive anti-union activity of the US subsidiary of a large UK-listed company. Representatives of the US unions came to the UK to talk to trade unionists and some key players in the SRI world. Following these discussions the decision was taken to file a shareholder resolution at the company's AGM calling on it to adopt a workplace human rights policy.
There are two things worth saying about this strategy right away. First, it was a slightly different approach to that taken in the US where often unions pair up resolutions - one on a pure governance issue, and another addressing a labour issue. Second, some in the SRI world argued against filing a resolution. Shareholder resolutions are still pretty rare in the UK and mainstream investor tend to see them as a very combative tactic.
I think this second point was mistaken for a number of reasons. Because resolutions are so rare filing one was guaranteed to draw attention to the campaign. Secondly, mainstream institutions that have a problem with resolutions in any case were hardly likely to come out swinging on behalf of trade unions. Thirdly, tying the campaign to a resolution meant it would focus investors' minds - they would have to vote one way or another. If the unions had just encouraged managers to engage with the company over the issue I have no doubt the campaign would have had less success.
Just as an aside it's worth pointing out that the company did try to frustrate the filing of the resolution, but was unsuccessful. In my experience this is not an uncommon tactic in the UK, and one to watch for.
Once the resolution was filed the requisitionists carried out a few different strands of work to push the campaign on. Meetings were held with most of the large investors in the company to set out why the resolution had been filed and what the unions were seeking to achieve. The tone of these meetings varied as you can imagine, with the mainstream houses less sympathetic than those with and SRI capability.
Separately a meeting was scheduled between the requisitionists and other interested investors and the company's senior management ahead of its AGM. It's notable that allthe big SRI houses attended the meeting when it took place. I think there is an important reputational issue here that is worth bearing mind. If SRI managers haave any point surely this is exactly the sort of initiative they should be involved with. They are vulnerable to exposure if they don't participate, and if they consistently vote against CSR-oriented resolutions (as some do...).
The meeting itself started off a little frosty but turned into a rather construction conversation, and the company ended up conceding a fair bit of ground. Although critical of the union campaign it agreed to review its policies and practices. I would say on the basis of the company's shift a number of investors in the room who would have otherwise voted for the resolution subsequently decided to abstain, although this arguably isn't that important in the long run.
At the AGM itself the resolution dominated proceedings. A number of workers from the US subsidiary got up to make statements about anti-union activity. It got a bit rowdy at one point. As much as I like a bit of knockabout campaigning this didn't actually go down well with sympathetic shareholders, and I think that's a message we need to acknowledge. I don't see any problem toning things down a bit to engender wider support.
Responding to the resolution, the company highlighted what it was doing to respond to the evidence of anti-union activity. The resolution itself didn't pass (no-one expected it to) but didn't do too badly, but in any case it had already played its part.
Fast forward a couple of years. I've recently been in touch with one of the unions active in the US subsidiary. They say things aren't perfect, but have got a lot better. The blatant anti-union stance the US side of the business previously took has been beaten back and the company now has procedures in place to address employee complaints about anti-union activity. There are still issues, but the union regards the campaign as a success and has put on members within the company since it started.
A few final thoughts on why the campaign was successful (in my view). Firstly I don't think the UK parent has any fundamental problem with unions, and so had no real opposition to having a relationship with them in the US. I think when they acquired the US business they inherited an anti-union culture that they had simply never sought to address. However this fed concern amongst some investors that the labour issue story was actually a symptom of the failure to properly integrate the US business. So perhaps the company felt it needed to demonstrate that it was in charge of the US operation, and dealing with the labour issue was one way to demonstrate this.
Secondly they probably realised that getting a reputation for being anti-union would probably put them at a disadvantage when pitching for business from organisations with some level of political control. And thirdly maybe they just didn't like the negative publicity and were willing to meet in the middle to make it go away.
Maybe I am wildly wrong, but what I don't think swung the argument at all was the belief on the company's part that they should listen to their owners, or that working with unions is inherently good (or otherwise) for shareholder value. I think this is a fairly fundamental point, since a lot of SRI activity (in the past at least) has been built on trying to find links between good behaviour and financial performance. Whilst I think this kind of work is interesting, it's not a route unions need to go down. You can achieve wins through capital stewardship campaigns without having to make these links.
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