4 Min read | May 21, 2022

Focus on: inequality

  • ESG
  • Inequality
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We have long considered the implications of systemic inequality on communities, the workforce, and the business landscape. We will continue to prioritize the issue in our dialogues this year.

Four topic areas under inequality theme this year

Editor’s note: This article first appeared in our 2022 Focus List.

Workers continue to demand more from their employers on issues such as fair wages, fair treatment, and health and safety. Those calls are increasingly supported by other stakeholders in society, including customers and investors, which makes them harder for companies to ignore. Our engagements this year will take place across four sub-themes:

  • Human capital

  • Diversity, equity, and inclusion

  • Equitable compensation

  • Equitable access

Human capital

The success of any business is tied to worker and employee engagement. Our concern about income inequality and health and safety throughout the pandemic drove many of our conversations on human capital in 2021. We’ve encouraged corporate efforts to empower employees to speak up, and to ensure fair treatment and respect for all workers in their operations and supply chains.

Among other things, we consider the information a company’s board receives from employees on their experience, employee representation on the board, and fair pay and fair treatment of employees. One example of this is our work last year with Investors for Opioid and Pharmaceutical Accountability, where we led and supported dialogues with retailers and distributors on the issue of proper board oversight of the well-being of workers.

In 2022 we intend to continue these conversations as they pertain to the experience of workers across different sectors. Our support for employees as a crucial stakeholder group will also ground our proxy voting decisions on human capital issues, where we often vote for proposals that seek to provide opportunities for employees’ voices to be amplified within the business. We will continue to collaborate with other investors through organizations such as the Interfaith Center on Corporate Responsibility.

Diversity, equity, and inclusion (DEI)

While there is still much work to be done on the issue of DEI, we are happy to see some progress as more companies are taking steps to meet the expectations of a variety of stakeholder groups: customers, employees, government, and investors all included. In comparison to other sub-themes mentioned, we’ve seen more steady momentum on DEI within our engagements as companies are increasingly providing more information on diverse representation at different levels of the workforce.

We will continue to encourage companies to follow up on their commitments through looking to better understand their plans to implement their DEI strategies and how they intend to measure progress.

The need for transparency is increasingly being supported by new legislation and policies. For example, in Canada, federally incorporated companies must now disclose more information regarding diverse representation and their DEI strategies, or explain why they are not able to provide that information. Last year was the first time the public was able to access the enhanced disclosure since these changes came into effect.

Equitable compensation

Compensation is an important part of our discussion around income inequality. We have been discussing excessive compensation with companies for years now, typically explaining to them that excessively large compensation packages (as one aspect of income inequality) may destabilize our society over the long term.

Over the last seven years we voted against pay packages in circumstances where we found pay to be excessive, based on an absolute cap we set tied to median household income in the U.S. and Canada. We use this “say on pay” vote to discuss the concept of “pay for performance,” and we also use it to bring the conversation around to the broader impacts of excessive compensation and the risks income inequality presents to business and to society. Last year we held a roundtable with other investors, governance experts, and academics to find a way forward on this issue, and we’re looking forward to more progress in 2022 and beyond.

Equitable access

Access to vaccines, medicines, and treatment will be at the forefront of our engagement with pharmaceutical companies in 2022. In last year’s Focus List we observed that the health of each of us affects the health of all of us. In the face of new COVID-19 variants this continues to be true. Because our holdings span different sectors and countries, we are able to see the far-reaching impact on business and society of health inequity, and inequitable access to vaccines, medicines, and treatment. We hope a lesson from this pandemic is that sustainable long-term value creation must make health and equitable access to healthcare a priority. Collaborating with investors through the Interfaith Center on Corporate Responsibility and the Access to Medicine Foundation, we will continue to advance the discussion on this issue. We will encourage collaboration within the pharmaceutical and healthcare sectors to strengthen global supply chains and accelerate access to medicines and treatment.

Key takeaways

  • Our support for employees as a crucial stakeholder group will ground our proxy voting decisions on human capital issues
  • While there is still much work to be done on the issue of DEI, we are happy to see more companies taking steps to meet stakeholder expectations
  • Compensation is an important part of our discussion around income inequality and will continue to be at the top of our list of engagement topics

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