Many other employers followed yet 21 years on 4.3 million people still earn less than the living wage.
The issue is running red hot amid the growing cost of living crisis and is reaching a crescendo during the AGM season of Britain’s biggest companies.
The asset management industry has a critical role, not only in its constant engagement with company management but also in casting carefully considered votes on resolutions from pressure groups and others.
For our part, we are Living Wage accredited and a member of the Good Work Coalition, which was launched by ShareAction. But as an active investment manager, we also apply an intense focus on how other companies are approaching these issues – human capital management is paramount for every company’s future. Our engagement blueprint outlines our expectation that companies commit to pay all direct employees a living wage or equally valued equivalent.
Our investors engage extensively with executive teams and company boards all over the world on fair pay and employee wellbeing. So it might look, on the face of it, like Schroders would support a shareholder resolution that calls for a company to become a Living Wage Employer.
ShareAction has tabled a resolution calling for such a move by UK supermarket Sainsbury’s with a 2023 deadline. This would mean getting accreditation from the Living Wage Foundation, a charity which calculates a “Real Living Wage” rate each November based on cost of living estimates.
However, we do not intend to back the resolution at Sainsbury’s’ annual general meeting on 7 July. This is because we believe, after a detailed analysis of likely outcomes, that the resolution fails to fully consider both the business implications and potential wider stakeholder impacts.
As one of Sainsbury’s’ top five shareholders it is our duty to scrutinise this company on a regular basis on behalf of our clients. Our analysis extends beyond its financials to its employment policies and sustainability commitments.
Ultimately our current view is that Sainsbury’s is well-run and considers wider stakeholders in key decisions. We believe it is a leader within the sector for sustainability, as do other widely-watched rating agencies.
When it comes to their approach to investment in employees, Sainsbury’s is definitely not a laggard. Many of its employees across the UK were already on wages in line with the Real Living Wage when the resolution was filed.
After dialogue with us and others, Sainsbury’s announced in April that it would bring the wages for the remainder of its direct employees in line with the rates set by the Living Wage Foundation. This shows it is following guidance from the charity and is listening to its investors.
With these new wages, Sainsbury’s already meets the expectations of our Engagement Blueprint to pay a fair living wage, and goes beyond them when taking into consideration other benefits such as employee pensions and store discounts.
It is also important to note that no UK supermarket is accredited by the Living Wage Foundation and this is the first resolution we have seen calling for a supermarket’s accreditation.
We strongly believe, in this environment particularly, this could inhibit Sainsbury’s ability to remain competitive; for example, making it harder to keep prices of essentials low. This could ultimately be worse for its employees, customers and investors.
While Schroders makes judgments like these on a daily basis, they are playing out more publicly than before, sometimes with incomplete information. And we are seeing growing numbers of environmental and social resolutions tabled by shareholders.
At the same time, concerns over greenwashing are growing. Investors are increasingly engaged and want to understand how decisions are made. They want to know how asset managers are applying ESG criteria to their investments. And whether the actions of the companies they invest in measure up to their words.
There is also a growing recognition that ESG factors cannot be applied in a blanket way and without due consideration, as “unthinking ESG” is what results, which harms the credibility of sustainable investing.
We believe in active decision-making, which applies both to our stock selection and our voting decisions. Investment managers have a fundamental duty to understand the financial, social and environmental implications of each shareholder resolution, to ensure that they target meaningful change.
This vote, in particular, is a pivotal moment for active ownership. It is test of whether important nuances in these debates can be heard. If they are not, we risk jeopardising the ultimate goal of achieving the best outcome for all stakeholders, including customers, employees and shareholders.
By Kimberley Lewis is head of active ownership at Schroders
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