Institutional investors to companies: retain workers, keep paying suppliers and limit executive compensation

Anna Triponel

March 30, 2020

A group of 195 institutional investors representing over $4.7 trillion USD in assets under management have issued a statement recognising that “the long-term viability of the companies in which we invest is inextricably tied to the welfare of their stakeholders, including their employees, suppliers, customers and the communities in which they operate.” The investors have five asks of companies:

  1. Make emergency paid leave available to all employees, including temporary, part time, and subcontracted workers
  2. Put measures in place to prioritise health and safety, such as “rotating shifts; remote work; enhanced protections, trainings or cleaning; adopting the occupational safety and health guidance, and closing locations, if necessary”
  3. Take every measure to retain workers which “will permit companies to resume operations as quickly as possible once the crisis is resolved”
  4. Maintain “timely or prompt payments to suppliers” and work “with customers facing financial challenges”
  5. Adopt “the highest level of ethical financial management and responsibility” which could include suspending share buybacks and limiting executive and senior management compensation

The investor group recognises that some companies may be faring well in this crisis, and invites these companies in particular to go beyond the recommendations, including providing “childcare assistance, hazard
pay, assistance in accessing government support programs, employer-paid health insurance for laid off workers, or deploying resources to address the current needs related to the pandemic.”

A number of articles this week make similar arguments. For instance, Financial Times (FT) reporter Jamie Powell suggests three questions for ESG investors to ask of executives:

  • What sacrifices did you make to ensure full salaries for your workforce? “Perhaps investors could even ask management for an audited pandemic executive compensation sheet which details metrics such as reduced workers salaries relative to reductions in c-suite compensation, both on a nominal and percentage basis.”
  • What was your expenditure on government lobbying? “[F]or large companies paying retainers to Washington’s, London’s or Brussels finest lobbying firms, ESG investors might also want to know how much these fees increased relative to salary reductions.”
  • What did you do to take the burden off small business? “[D]uring the coronavirus, executives have a choice – do we abuse [our] power, or make sure we use it to help businesses smaller than ours? … For instance, they might decide to pay small businesses quicker and bigger companies slower. Similarly, they may relax payment terms for their customers to help them conserve cash.” Investors could ask for “audited table of Days Payable Outstanding (DPO) by supplier size over the crisis, compared with the period prior to the crisis” and, if the company didn’t take efforts to “ensure its stakeholders remained on firm financial ground”, it would need to “justify why not. … After all, if you’re stiffing your small suppliers during the pandemic, what does that say about your wider business culture?”

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