Around this time last year, The Gap Inc. held its annual meeting, where shareholders and directors of the national retailer faced a proposal from a family trust asking them to pull garment production out of Sri Lanka.
The government there was facing human-rights criticisms after a civil war that left tens of thousands dead and hundreds of thousands imprisoned, and the California-based Jaeger-Natkunam Family Trust, which owned 125 shares of Gap stock, was worried the company’s reputation would suffer.
So the trust’s principals wrote up a resolution outlining their concerns and asked that it be put before shareholders. It was — and went down to resounding defeat, collecting support from just 1 percent of Gap’s outstanding shares.
Few proposals from shareholders go far without management’s approval, and management rarely supports any proposal it hasn’t originated.
But I wondered whether we’d see a wave of shareholder proposals next year at U.S. retailers whose clothing is made in places like Bangladesh, where a building collapse last month killed more than 1,120 factory workers — about the population count of the village of Nassau in Rensselaer County.
Rev. David Schilling was noncommittal on my idea, acknowledging, though, that shareholder resolutions are “a good way to introduce a key issue to a company.” Schilling, a United Methodist minister, has pushed companies on workers’ rights for nearly 20 years at the Interfaith Center on Corporate Responsibility, where he now is senior program director. The Manhattan-based group is a coalition of 300 faith-based organizations, labor unions and socially conscious funds that use their investments — more than $100 billion in assets under management — to lobby for change.
The center’s website lists 150 public companies to which shareholder proposals have been submitted for 2013 annual meetings, but only a handful are national retailers and many of the resolutions there focus on recycling, board diversity and political contributions.
Schilling, who called the tragedy in Bangladesh “a major human rights disaster,” said the consumer and investor awareness raised by the factory deaths “can be translated into action.” Consumers can write letters to companies doing business in Bangladesh and other low-wage countries in support of worker rights and safety and ask what the retailers are doing to enforce vendor policies that many have in place. (These prohibit using child and prison labor, for instance, and guarantee freedom of association for workers.) Investors can push companies to exert more influence over how their products are made by ensuring suppliers work with factories that follow local building and fire codes. “Frame it as a corporate responsibility,” Schilling said.
Individuals, though, may see less success on their own with shareholder proposals than they would working through groups such as his, Schilling said. The center has 40 years of experience negotiating with apparel companies to encourage policies that promote “justice and sustainability in the world.” Besides, shareholder proposals face an obstacle course before qualifying for the annual meeting: most have to be submitted before year’s end for meetings held the following spring; they can be blocked for being too long (more than 500 words) or intruding on management’s turf (everyday operations).
Even passing those hurdles, a proposal still can be recommended for a “no” vote — as happened with the Jaeger-Natkunam resolution last spring.
The bottom line in Gap’s long-winded rebuttal on manufacturing in Sri Lanka: “We believe that apparel production in the country benefits its citizens.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]
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