Halliburton and McDonalds. One of them sells poisonous prehistoric sludge, and the other… is Halliburton.
OK, terrible joke. But these are two companies you don’t exactly associate with each other.
This year, they have something in common. They’re both the targets of resolutions filed by their shareholders asking them to identify and publicly report all the ways they impact human rights around the world.
And both of them refuse to.
The shareholder resolutions were filed earlier this year by the American Federation of State, County and Municipal Employees Pension Plan, a fund representing 1.6 million public service workers. The resolutions request that McDonald’s and Halliburton perform what’s known among NGO types as ‘human rights due diligence’ in their operations, and then make their findings public. A similar resolution was filed with Caterpillar, but the company got it thrown out on a technicality.
Crunchy shareholder resolutions are nothing new. The tactic began with the movement to divest from Apartheid South Africa in the 1980s, when religious institutional investors (megachurches have pension plans too) started asking where their money was going.
Since then, shareholder resolutions have proliferated, and have pushed companies to improve their environmental practices, appoint women and minorities to their boards and cap executive pay. In the 2000s, they began to increasingly focus on human rights, and just in the last five years, companies have been pressured by investors to adopt board-level Human Rights Committees (Yahoo, Google), conduct human rights impact assessments (Goldcorp) or report their political spending (Halliburton again).
According to As You Sow’s 2013 Proxy Preview (it’s more interesting than it sounds), this year 21 companies are the targets of human rights-focused shareholder resolutions. Goldman Sachs is being asked to establish a human rights committee. Chevron is asked to make public its criteria for choosing which countries to poke with holes. In addition to the AFSCME resolution, Caterpillar is the target of two others asking it to up its human rights game.
So what I’m telling you is that this year is no different from all the others: Bleeding-Heart Investor Files Finger-Wagging Resolution. What’s so newsworthy about these Hallburton and McDonald’s ones?
Two things: First, these resolutions are the first of their kind to ask that companies actually do something. In the past, shareholder resolutions have asked companies to adopt a policy or establish a committee recognizing human rights, but haven’t required companies to make sure they’re actually following those policies.
Nothing against policy commitments, but they’re just a first step. This year’s resolutions ask Halliburton and McDonald’s to go further than simply producing CEO-signed statements saying they want to avoid negative human rights impacts. These resolutions ask the companies to go find out what they are.
Which brings me to the second way these resolutions are new and different. They require Halliburton and McDonald’s to conduct human rights due diligence as defined by the United Nations Guiding Principles on Business and Human Rights.
I know, you stopped reading at ‘United Nations’, but hear me out, this is a big deal.
Everyone knows that in many parts of the world, multinational companies are richer, more present and more powerful than governments. Since 2005, the United Nations has been engaged in a process to, once and for all, define the human rights responsibilities of these companies, and the governments that host them. For eight years now, the UN has conducted a process where they have systematically asked governments, corporations and victims of human rights abuses: ‘What are the human rights responsibilities of companies?’
(full disclosure: I’ve been marginally involved in this process at various NGOs I’ve worked for. So maybe I’m hopelessly deluded and none of this matters and the UN should go back to alleviating poverty through celebrity adoptions.)
The Guiding Principles are the first time the UN has ever tried to answer this question. In 2011, the Guiding Principles were unanimously endorsed by the UN Human Rights Council, and since then, they’ve been endorsed by the EU, ASEAN, the African Union, the OECD and the IFC. They’re supported by the International Chamber of Commerce and industry confederations like the International Council of Mining and Metals. They’ve been discussed at the World Economic Forum and they’re referenced on company websites from Coca-Cola to Shell.
You get the idea: The UN Guiding Principles are supported by businesses, governments and civil society. So what do they actually say?
The UN Guiding Principles say to governments: You have to protect everyone within your borders from human rights violations, including violations by companies. And they tell companies that, no matter where you operate, no matter what you do, you have to avoid human rights violations. And finally, they tell ordinary people that if your rights are violated by a company, you have the right to have your complaint heard and addressed.
These sound like simple rules, but for the last 60 years, we haven’t had anything like this. Companies and governments argued over who was responsible for things like building roads to mining areas, providing housing for factory workers, cleaning up environmental damage in industrial zones. The Guiding Principles won’t solve all of these problems at once, but they draw a line around what companies have to do and what governments have to do, and that’s a start.
For businesses, the rule they impose is even simpler: Don’t violate human rights, wherever you are, whatever you do. This is the sentence supported by dozens of corporations in nearly every industry sector. And this is the sentence that McDonald’s and Halliburton want to be immune from.
Not violating human rights means identifying the ways your company affects them. For McDonald’s and Halliburton, this would mean publishing the results of company labor audits, contractual arrangements with governments and criteria for assessing business partners. It would mean looking into the labor practices of their suppliers, and the health effects of their products. It wouldn’t mean preventing every single problem, but it would mean knowing about them.
In their 2013 proxy statements, Halliburton and McDonald’s ask their shareholders to vote against the resolutions.
‘We believe that our policy statement, coupled with our continuing efforts to maintain and enforce these policies through our Code of Business Conduct, are sufficient and that further assessment and reporting are not appropriate,’ says Halliburton, right after a copy-paste of its four-paragraph human rights policy.
McDonald’s dresses up the wording a bit more, but makes the same point: ‘In light of McDonald’s unwavering commitment to human rights and ongoing reporting in this regard, we believe the additional reporting requested by the proposal is unnecessary.’
And add: ‘We further believe that the proposal represents the potential for a diversion of resources with no corresponding benefit to the Company, our customers or our shareholders.’
In other words, respecting human rights costs money and provides no benefits.
I’m not going to pretend to be offended by this. That’s exactly what you would expect a publicly traded multinational corporation to say. Their first duty, after all, is to their shareholders, to their profits. In a choice between respecting human rights and boosting quarterly returns, the latter wins, every single time.
This calculus, which sounds so icky when you put it like that, is the founding principle of our economy, and in spite of NGO types like me complaining about corporate greed all the time, actually works pretty well. Organising companies into markets fosters competition, efficiency, growth, all that stuff we talk up in generalities but smack down in specifics.
And this is why these shareholder resolutions give me so much hope. They’re not telling McDonald’s and Halliburton that they have to be perfect overnight, that they accept profound new responsibilities for the well-being of everyone who has ever ordered a Big Mac or pumped a tank of gas. The resolutions simply ask these companies to follow best practices as defined by the UN and supported by the business community. They ask that these companies take their own values, their own policies, seriously.
Make no mistake: These resolutions are going to lose, and bad. Last year, a shareholder resolution asking McDonald’s to produce a nutrition report on its products was rejected by 96.5 percent of its shareholders. And that’s OK. More resolutions like these will be filed with other companies next year, and the next.
This pressure isn’t going away. Every shareholder resolution asking for public reporting of human rights impacts entrenches the UN Guiding Principles and broadens the consensus that this is something companies should do and governments should require.
Reporting your human rights impacts is hard, I get it. But so is getting oil out of the ground, so is serving millions of hamburgers every day. I like to think that sometime in the future, you won’t be able to do one without the other.