BlackRock Investment Stewardship released commentary last week outlining its approach to company engagement on human capital issues. Consistent with the commitments in the Business Roundtable’s Statement on the Purpose of a Corporation, the BlackRock engagement approach emphasizes that “in order to deliver value for shareholders, companies should consider their other key stakeholders.” What is different about the BlackRock approach is the incorporation of human rights as a focus in its engagement.
Human rights: BlackRock references the UN Guiding Principles on Business and Human Rights, which defines human rights according to the International Bill of Human Rights and the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, including:
- Right to work, free choice of employment, “just and favorable” work conditions and unemployment protection;
- Right to “equal pay for equal work” without discrimination;
- Right to “just and favorable” compensation for work; and
- Right to form and join unions.
Investors leapfrog government: BlackRock has incorporated the UN and ILO principles into its approach even though the United States has not signed on to them, or other international human rights covenants, and will “ask companies to implement processes to identify, manage, and prevent human rights impacts that are material to their business, and provide robust disclosures on these practices.” This is similar to, but broader than, the principles-based approach adopted by the SEC on the disclosure of human capital metrics. State Street Global Advisors’ Stewardship Report has also identified “labor standards and human rights” as one of the focus areas of engagement on ESG issues.
Companies get ready: A recent Forbes article warns that boards will find greater pressure and more proposals to ensure companies provide a “living wage” as “progressive perspectives” on equality and compensation become more mainstream. The increased focus on human rights, combined with shareholder proposals requesting increased disclosure of diversity and inclusion information, pay gap data, income inequality, and board diversity, signals a rapidly expanding role of CHROs in stakeholder outreach on human capital philosophy, policies, and practices.