Shareholder resolutions filed at two internet giants are asking their board of directors to appoint at least one member with human rights and civil rights expertise. Investors filing the resolutions are pushing boards to address a lack of human rights and civil rights oversight that they believe could have a long term negative effect on shareholder value. These resolutions are yet another variation of the emphasis on ESG issues that boards are facing in 2020.
At this year’s annual general meetings, activist shareholders Arjuna Capital , As You Sow and JLens Investor Network are asking Facebook’s board and the board of Alphabet (Google’s parent company) to elect at least one director to their board who has “a high level of human and/or civil rights expertise and experience and is widely recognized as such.”
The resolution filed at Facebook argues that the social media platform “requires expert, board-level oversight of civil and human rights issues to assess risk and develop strategy to avoid causing or contributing to widespread violations of human or civil rights, such as supporting genocide, hate campaigns, or violence … Shareholders are concerned Facebook’s content governance has proven ad hoc, ineffectual, and poses risk to shareholder value.”
While the resolutions at Facebook and Alphabet are largely focused on “content governance” – including eliminating hate speech and fake news – they represent a broader set of concerns about how companies are handling human rights and civil rights issues. Communications and media companies may see more of these types of resolutions, especially in this election year, so boards should be prepared to show what steps have been taken to deal with claims of hate speech or other biases on their platforms.
In this environment where some investors are advocating for “stakeholder capitalism,” corporate directors should be aware that companies may be expected to do more to uphold the human rights and civil rights of the workers, customers and communities they serve. If shareholders believe companies have engaged in human rights abuses or lax civil rights enforcement, activists may file resolutions aimed at correcting the problems.
While resolutions asking for boards to add members with human rights and civil rights expertise have little chance of passing, they do allow boards to assess the level of concern shareholders have for such issues. The treatment of workers during the Covid-19 pandemic has cast a spotlight on potential human rights abuses across industries. Companies with employees that work on factory assembly lines, in warehouses or other high productivity-low paying jobs will need to assess their exposure to potential lawsuits regarding worker safety, compensation and benefits.
The resolutions at Facebook and Alphabet raise the issue of how the content a company produces (and/or how a company communicates with its customers and community), can violate the human rights or civil rights of sections of the population. Companies can pay a price in the form of reputational damage as a result of the messages they send, which can then translate into stock price losses and potentially financially damaging lawsuits. Additionally, to avoid future liability, companies may need to assess whether any new products or policies that they create threaten or violate the civil rights or human rights of others.
While most corporate boards will likely assume their company is doing all the right things concerning human rights and civil rights, it never hurts to make sure that concerns about these issues by shareholders or stakeholders haven’t been missed.