Apple stand-off tests investor concern over workers’ rights

Hello from London, where we’re delighted to welcome Lee Harris today as the newest member of the Moral Money team. You’ll be treated to lots of Lee’s excellent journalism in forthcoming editions of this newsletter; for a taste of what to expect, check out her investigation for The American Prospect into safety conditions at a giant TSMC chip plant being built in Arizona, and her in-depth profile for Foreign Policy of economist Avinash Persaud.

Meanwhile, shareholder meeting season has rolled around again, giving a window into how investors are — or are not — putting pressure on major corporations over their environmental and social impacts. And though Apple’s high-profile meeting might seem to have gone without a hitch, the tensions around its approach to organised labour have not gone away. Read on for more.

Join top business people, experts and politicians at Climate Capital Live on 13-14 March in London or online, for two days of wide-ranging discussion on the push for serious climate action. As a Moral Money subscriber, register today and save 10% with code NEWS10.

Apple stand-off puts investors’ labour concerns to the test

Apple chief executive Tim Cook enjoyed a pretty smooth ride at the tech giant’s annual meeting on Wednesday, where shareholders voted against a proposal that would have required the company to issue a detailed report on whether it was using artificial intelligence ethically.

Cook talked up Apple’s growing investment in generative AI, and hinted at a major announcement in that area later this year.

But amid the AI excitement, Apple and other large-cap US companies are facing investor pressure over a rather less futuristic issue: labour rights.

On the eve of the annual meeting, several Apple investors issued a joint statement raising concern over the company’s approach to organised labour. Back in November 2022 these investors — including Trillium Asset Management, the New York City Retirement System and the Greater Manchester Pension Fund — had filed a shareholder proposal that would have required Apple to commission a third-party assessment of its response to attempts by its US retail workers to organise.

This came after workers in Apple retail outlets accused the company of “intimidation tactics to deter organising”, claims denied by Apple. The National Labor Relations Board later found that some of these complaints had merit, and that Apple’s work and confidentiality rules had improperly restricted employee efforts to organise.

Apple headed off the shareholder initiative — and the potential embarrassment of a shareholder vote against it — by meeting the investors and promising to commission a report as they requested.

But that report, which was published last December by law firm Jenner & Block, failed to satisfy the investors, they said in last week’s statement. Among their complaints, they said that the assessment had focused heavily on Apple’s stated policies, rather than how they were applied in practice; and that it failed to secure input from a representative sample of workers (notably, it omitted input from workers who had tried to organise). Apple and Jenner & Block did not respond to a request for comment.

The stand-off highlights some hot issues that US companies and their shareholders would do well to keep in mind.

One is the increasing focus of institutional investors on social issues. While the sustainable investment agenda still has an understandably heavy emphasis on climate change and the energy transition, the interest of (at least some) asset managers in worker rights was highlighted by the formation last November of the Labour Rights Investor Network. With founding members controlling $2.2tn in assets, the LRIN will push companies to “respect workers’ fundamental rights to freedom of association and collective bargaining”.

Shareholder resolutions demanding better disclosure on worker rights have started winning the support of major investors, including Norway’s $1.5tn sovereign wealth fund.

“I think we’re just at the beginning of a seismic shift in labour relations in this country,” Jonas Kron, chief advocacy officer at Trillium, told me.

This is far from obvious. It’s certainly true that labour market disruption during and after the Covid-19 pandemic helped to strengthen the hand of organised labour in the US. Unions have scored some notable wins over the past two years. Last year’s strike against the big three unionised US automakers — the first such action ever — resulted in significant concessions on wages and benefits.

In June 2022, Microsoft said it would take a neutral position on organisation by its video game workers — meaning “that we respect the right of our employees to make informed decisions on their own”. This contrasts with the stance taken by many other big US companies, which have defended their right to advise workers on the negative aspects of unionisation.

Yet the union membership rate has continued to slide, reaching a record low of 10 per cent of US workers last year. And while organised labour efforts have enjoyed a strong government tailwind under the most explicitly pro-union president for many years, a presidential election defeat for Joe Biden in November could reverse that dynamic — putting investor commitment to worker rights under added pressure.

Beyond investor interest in labour issues, the Apple stand-off also highlights their increasingly frequent demands for third-party assessments of environmental and social claims by companies. At Starbucks’ annual meeting last year, shareholders voted in favour of a motion demanding the company commission an external audit of its approach to organised labour. Amazon faced a proposal calling for an external audit of conditions in its warehouses, which 35 per cent of shareholders voted to approve in defiance of the board’s recommendation.

Last month, I wrote about new research from the Massachusetts Institute of Technology, showing a significantly stronger pace of emissions cuts among companies that submit their environmental reports to external audit. But, as New York University’s Alison Taylor wrote in response to our story, the quality of this third-party assurance needs scrutiny too. This investigation into environmental assurance work by KPMG highlights the risks of taking such audits at face value.

The response to Apple’s audit by NYC comptroller Brad Lander and his fellow activist investors makes clear that they are also now turning their focus on the quality of these external audits. In January, they issued a similarly negative appraisal of Starbucks’ audit, which they said lacked any evidence of worker input. (Approached for comment, Starbucks pointed to its statement last week on an agreement with worker representatives to “begin discussions on a foundational framework designed to achieve collective bargaining agreements, including a fair process for organizing.”)

The ball is now back in the investors’ court. Whether they launch a new campaign for more rigorous labour audits at Apple and Starbucks — and how much support they can rally among other major shareholders — will help decide the outlook for this branch of investor activism. And that, in turn, could have real implications for the future of US organised labour.

Smart read

Climate change is bad news for chocolate lovers, according to this FT Big Read by Susannah Savage, which tracks how farmers’ worsening conditions in Ivory Coast and Ghana are pushing up cocoa prices.