Wendy’s Shareholder Resolution News, Part One: Resolution calling for documentation of Wendy’s claims of social responsibility gaining real momentum ahead annual meeting…
Thousands march in the streets of New York City outside the downtown offices of hedge fund giant Trian Partners, Wendy’s largest shareholder, during the Time’s Up Wendy’s March in March 2018.
Financial Times: Responsible investment organization ShareAction calls Wendy’s shareholder resolution a “high quality, high impact” proposal, one of “13 most important ESG resolutions” of 2021…
Acting Chair of SEC: “This last year has helped to clarify why the perceived barrier between social value and market value is breaking down… Human capital, human rights, climate change – these issues are fundamental to our markets, and investors want to and can help drive sustainable solutions on these issues.”
This spring, Wendy’s annual shareholder meeting will not be the same sleepy, scripted exercise in self-congratulation that it has been since farmworkers and allies from the Campaign for Fair Food first addressed Wendy’s shareholders nearly eight years ago. Instead, this year’s annual meeting will set the stage for a dramatic new development in the growing consumer — and investor — movement for real, measurable social responsibility: A brilliant new shareholder resolution, filed by the Franciscan Sisters of Allegany, has made its way onto the ballot for a vote, and its call for Wendy’s to back up its claims of human rights compliance in its supply chain with real data is turning heads and gaining support in the world of responsible investment!
This is a developing story, one we will be following closely in the weeks ahead. Today we will take a closer look at the shareholder resolution itself, at the support it has already garnered straight out of the gate, and at the changing zeitgeist in the broader investment world into which the resolution has landed. In Part Two of our coverage, we will look at Wendy’s unsuccessful efforts to keep the resolution off the ballot and at some of the truths about Wendy’s social responsibility claims already revealed in that process. And as the shareholder meeting — and the vote — approaches in the coming weeks, we will share news of the growing campaign around the resolution, which is already shaping up to be one of the leading topics of conversation in the 2021 shareholder meeting season.
The investment world awakens: “Human capital, human rights, and climate change — these issues are fundamental to our markets…”
Let’s begin by looking at the changes underway in the world of investment writ large, changes prompted by the many upheavals of the past year, before turning our attention to the resolution itself and its growing support.
Two weeks ago, the Acting Chair of the Securities and Exchange Commission, Allison Herren Lee (pictured below), gave a speech at the Center for American Progress in Washington, DC, that made headlines throughout the investment world. Here below is an extended excerpt, which is worth reading in full for a sense of the scope of her analysis and its near perfect fit onto the evolving contours of the campaign to bring Wendy’s into the Fair Food Program over the past year, including the role of the new shareholder resolution within that campaign:
Acting Chair Lee, SEC
… There is really no historical precedent for the magnitude of the shift in investor focus that we’ve witnessed over the last decade toward the analysis and use of climate and other ESG risks and impacts in investment decision-making. That’s not to say that investor focus on issues that also have social or ethical significance is new. In the U.S., we can trace it back to 18th century efforts to align investing with religious principles, and see where it gained traction in the 1960s with respect to Civil Rights, and in the 1970s with respect to environmental issues.[1] But for a long time so-called impact or socially-responsible investing was perceived or characterized as a niche personal interest – the pursuit of ideals unconnected to financial or investment fundamentals, or even at odds with maximizing portfolio performance.
That supposed distinction—between what’s “good” and what’s profitable, between what’s sustainable environmentally and what’s sustainable economically, between acting in pursuit of the public interest and acting to maximize the bottom line—is increasingly diminished. Not only have we seen a tremendous shift in capital towards ESG and sustainable investment strategies, but ESG risks and metrics now underpin many traditional investment analyses on investments of all types – a dynamic sometimes referred to as “ESG integration.” In other words, ESG factors often represent a core risk management strategy for portfolio construction.[2] That’s because investors, asset managers responsible for trillions in investments, issuers, lenders, credit rating agencies, analysts, index providers, and other financial market participants have observed their significance in terms of enterprise value.[3] They have embraced sustainability factors and metrics as significant drivers in decision-making, capital allocation, and pricing.
This last year has helped to clarify why the perceived barrier between social value and market value is breaking down. COVID has driven focus on worker safety. Protests in the wake of the senseless killings of George Floyd and others have driven focus on racial justice. In both of these narratives we can also see connections to climate risk. With COVID, we saw supply chain disruptions similar to that which climate events can cause. We know climate presents heightened risks for marginalized communities, linking it to racial justice concerns. We saw in real time that the issues dominating our national conversation were the same as those dominating decision-making in the boardroom.[4]
Human capital, human rights, climate change – these issues are fundamental to our markets, and investors want to and can help drive sustainable solutions on these issues. We see that unmistakably in shifts in capital toward ESG investing, we see it in investor demands for disclosure on these issues, we see it increasingly reflected on corporate proxy ballots, and we see it in corporate recognition that consumers and investors alike are watching corporate responses to these issues more closely than ever.[5]
The Acting Chair of the SEC was hardly the first to note the widespread “shift in investor focus” toward addressing longstanding social ills through their investment choices and shareholder votes. Indeed, as analysts from AMG, one of the largest investment management companies in the world, wrote recently, “Almost everywhere we look, someone is talking about environmental, social, and governance (ESG) issues—financial media, investing conferences, even friends and family.” Even Ed Garden, Chief Investment Officer of Trian Partners and a former Wendy’s director, tried the ESG halo on for size, saying in a recent interview:
At Trian, we invest in what we think are fundamentally great companies where management and, by extension, the board, is struggling to make the company best-in-class: best-in-class organic revenue growth, best-in-class margins, best-in-class return on invested capital and best-in-class from an ESG perspective.
But until this month, no one with a platform quite so high as the top seat in the Securities and Exchange Commission had taken such a resolute stance on the rising importance of social issues like racial justice, climate change, and human rights in the investment world today, or on the growing “investor demands for disclosure on these issues.” Her speech signaled a new high-water mark in the rising tide of ESG investment.
The 2021 Wendy’s shareholder resolution: “Whereas: Wendy’s has acknowledged human rights ‘risk factors’ in its food supply chain…”
Consumers marching outside Wendy’s 2015 shareholder meeting in Dublin, Ohio.
The new resolution — filed by the Franciscan Sisters of Allegany, an affiliate of Investor Advocates for Social Justice (IASJ), and with the support of the Interfaith Center on Corporate Responsibility (ICCR), all longtime CIW allies and mainstays in the responsible investment community — falls squarely in the sweet spot of this new investor awareness. Combining nearly every key element cited in Acting Chair Lee’s speech — the COVID-19 pandemic’s disproportionate impact on poor and marginalized communities, the swelling demand for structural solutions to longstanding racial injustice, and the growing realization that the traditional approach to corporate social responsibility (CSR) has failed to adequately protect workers’ fundamental human rights in corporate supply chains — the resolution calls for a tangible accounting of the impact of Wendy’s social responsibility efforts to date, efforts Wendy’s claims are somehow comparable to the kind of real-world impact produced by the Fair Food Program in its competitors’ supply chains. The proposal requests a report that includes the following evidence:
Whether Wendy’s requires suppliers to implement COVID-19 safety measures;
Whether Wendy’s has suspended suppliers for violating its Code of Conduct;
How often Wendy’s suppliers are audited for compliance, including how many workers are interviewed personally on-site; and
Whether Wendy’s provides workers in its supply chain with access to an independent third-party complaint system to report abuses (and, if it does, how that system works and evidence of how it has been utilized by workers).
The disclosure called for in the resolution focuses on the effectiveness of Wendy’s Supplier Code of Conduct, and specifically on Wendy’s record of enforcement of human rights – in particular, but not exclusively, as related to the Covid-19 pandemic – in its supply chain. In short, the resolution simply seeks the facts needed to evaluate Wendy’s claims about its voluntary CSR program, information that one would assume, if there were such a record of enforcement, Wendy’s would be proud to shout from the rooftops. And yet, despite the eminently reasonable nature of the demands, Wendy’s has tried, and failed, to oppose the resolution at every possible opportunity, its request for permission to exclude it from the 2021 shareholder ballot denied by… the Securities and Exchange Commission. And so the resolution goes to a vote, the results to be announced at the annual general meeting later this spring.
Wendy’s shareholder resolution already gaining steam: “Let’s make 2021 the year of stewardship, and push for positive change.”
The timeliness of the exciting new resolution was not lost on the UK-based responsible investment watchdog, ShareAction. Here’s an excerpt from a press release from late last week in which ShareAction not only cites the Wendy’s shareholder resolution as one of “the 13 most important ESG resolutions to be voted on at AGMs [Annual General Meetings] in the coming months,” but describes it, along with the other 12 resolutions, as a measuring stick by which to “judge asset managers’ commitment to ESG”:
ShareAction highlights 13 resolutions on which to judge asset managers’ commitment to ESG
(Thursday 25 March, London) Responsible investment NGO ShareAction has highlighted the 13 most important ESG resolutions to be voted on at AGMs in the coming months. The list is being provided to a number of large asset owners to help them “hold asset managers to account on the votes that matter.”
Asset managers have long defended their holdings in environmentally or socially controversial companies by claiming to use their influence to shift companies towards more sustainable practices, through shareholder engagement.
But in 2020 those claims were put in doubt when a number of reports showed that many of the world’s largest managers systematically fail to vote for shareholder resolutions on ESG topics – one of the most obvious ways managers can use their influence.
ShareAction’s Voting Matters report found that just 15 out of 102 ESG resolutions received majority support last year, with the two largest fund managers, BlackRock and Vanguard, voting for just 12% and 14% of proposals, respectively.
In response, several asset managers pledged to improve their voting performance this year. In December BlackRock announced a new voting policy that it said would support more shareholder resolutions on climate and social issues.
As a result, all eyes are on this year’s AGM season, with many wondering whether deeds will match words. But which resolutions should investors be judged on? Over 2,000 shareholder proposals were voted on last year and a BlackRock spokesperson said:
“Not all shareholder proposals are created equal, and it would be wrong to equate good governance with voting against management without regard for a proposal’s impact. Blindly supporting proposals is not a responsible approach to stewardship.”
The volume of shareholder proposals presents a challenge for asset owners, many of whom want their managers to support worthwhile proposals, but lack the resources to identify which resolutions should be priorities for engagement.
As such, ShareAction has published a list of the 13 most important resolutions to watch this year, which it says are all high quality, high-impact proposals. The NGO is encouraging asset owners to ask their managers to vote for the resolutions on the list, to publicly pre-declare their voting intention, and to publish a rationale for any deviations in voting outcomes.
Guy Opperman MP, Minister for Pensions and Financial Inclusion, said:
“Shareholder voting works. Resolutions can deliver everything from decarbonisation targets to healthy eating strategies. Pension fund trustees, you have the power – ask your fund manager to support shareholder resolutions, or switch to a fund manager who lets you set your own policy. Let’s make 2021 the year of stewardship, and push for positive change.”
The list of resolutions to watch is as follows [NOTE: the list included here shows only the first 9 resolutions cited by ShareAction, the full list can be found here]:
The stage is set for the exciting weeks ahead as the campaign around the Wendy’s shareholder resolution heats up. Check back soon as we take a closer look at Wendy’s failed attempt to keep the resolution off the ballot, and what we’ve learned already — from Wendy’s own statements — through that process.
