I've had a couple of interesting conversations this week about how a lot of investors (even those with some ESG credentials) actually view workers. So this is a bit of a splurge of thoughts.
A first over-arching point is that is seems like quite a few ESG people only want to talk about the extremes when it comes to the workplace. So, for example, when most investors think about 'labour standards' they are drawn to supply chain issues, particularly in developing countries. Here the issues are stark, and therefore very difficult to overlook even if you can't think of a good instrumental reason to act.
At the other end of the scale, people are quite comfortable talking about the importance of human capital management when it comes to "talent" - so, management and executives. Here investors are comfortable making the case for treating people with respect, paying them properly and addressing discrimination on grounds of gender, ethnicity and sexuality.
But it's the rest of us - those in the middle and lower, who are never going to be senior managers, or board members, but aren't subject to extreme exploitation in the supply chain - where investors don't seem motivated to act. You can see this in the attitude of investors and advisers to things like defined benefit pensions. Although highly beneficial to workers, to many investors they are a risk and cost that doesn't really deliver them any benefit. So they are hardly likely to get behind workers seeking to defend them.
And on the flip side, the 'meritocratic' focus on ensuring that boards are more representative can look elitist. Obviously I'm not arguing that boards should not become more diverse, but if your interest is injustice within companies I'm not sure that's where I would focus a lot of limited resources (the fact that it does get a lot of attention suggests that workplace justice is not a high priority for many investors).
A second related thing that I've noticed that investors frequently suggest, sometimes implicitly sometimes explicitly, that information from unions about workforce practices for the workers in the middle is biased, or not the whole story, or "political". Yet they often seem completely credulous about claims from management in the same companies.
Now, my colours are firmly nailed to mast here. But one thing I have learned working for and with unions over the years is that companies lie. And I mean outright lie. So I am frequently surprised by how willing some investors are to take at face value claims from companies that actually the issues that unions raise aren't significant, or maybe don't even really exist. This seems to me to be quite a deep-rooted bias (in a psychological sense). Possibly it's simply because if you like a company enough to have an overweight active position you're going to have a positive view of the management of it, and discount info that casts them in a negative light. But whatever the reason, it strikes me a spending some time on.
Which leads me onto a third area I increasingly think about - conflicts of interest. If we look at some of the companies where unions have sought to raise concerns, it seems to me pretty self-evident that if workers' complaints were addressed then there would be an increase in labour costs. How significant this impact would be would obviously depend on their margins, but it's not cost-free.
If, as highlighted above, investors struggle to develop and/or believe an instrumental reason for promoting this change (eg it will pay for itself due to reduced turnover/improved productivity) then what exactly should they be doing? In some cases it might be better for workers if they remain uninvolved. Again, more thought is needed.
I do worry that 'responsible investment' has in general glossed over these issues. There has been an unthinking assumption that greater shareholder powers, greater shareholder engagement and "mainstreaming" of ESG are all inherently good things. It's clearly more complicated than that.