UK Retailers Told to Pay Workers Fairly
ShareAction and several investors are pushing for the real living wage on the shop floor this proxy season.
The UK retail sector has been subject to increased scrutiny on fair pay, as challenges brought by responsible investment charity ShareAction and its Good Work Coalition against companies at their annual general meetings (AGMs) evidenced last week.
ShareAction and investor members of the coalition – which collectively represent US$6.6 trillion in assets – asked Marks & Spencer (M&S), Sainsbury’s and JD Sports to pay both direct and contracted employees a real living wage of at least £12 an hour.
The real living wage – calculated by the Living Wage Foundation – differs from the national minimum wage, as it accounts for the ramifications of the cost-of-living crisis. The UK’s national living wage for workers aged 21 and over is currently fixed at £11.44 per hour, while younger workers get £8.60. Meanwhile, the real living wage is £12 an hour, or £13.15 for London-based workers.
“This year, we have decided to have a real focus on the UK retail sector – low pay is very prevalent in this industry, and we felt this was a sector where we could have the most impact,” Dan Howard, Head of Good Work at ShareAction, told ESG Investor. “We have seen significant progress from some companies who have raised their base rates of pay for directly employed staff, but we want to see more companies committing to doing the same.”
Incremental progress
Although both M&S and Sainsbury’s have raised their base rates for directly employed staff, ShareAction and the Good Work Coalition have asked them to extend this commitment to staff that they do not employ directly.
“Companies often don’t see it as their responsibility to dictate the pay rates of third-party and contracted workers,” said Howard. “But these workers are providing them with vital services that are central to a [their] business operations – companies should therefore take more responsibility and accountability on this issue.”
M&S’s reaction was positive, according to Howard, as the company hinted it has started looking into extending the real minimum wage to its contracted workforce.
Sainsbury’s, for its part, had already been subject to a related shareholder resolution filed by ShareAction and ten investors back in 2022, which called for the supermarket to become an accredited living-wage employer. The resolution was backed by proxy advisors Glass Lewis and ISS and received 17% of shareholder support.
“Since the resolution, we have seen really strong progress from Sainsbury’s in its approach to fair pay and positive engagements with the Good Work Coalition,” said Howard.
Charlie Crossley, Investment Engagement Manager at the Friends Provident Foundation, attended the supermarket’s AGM on behalf of the coalition.
“We wanted to keep up the momentum – a steady banging on the drum – to push for better, fairer wages at Sainsbury’s,” he said. “Some of its [third-party contractors] are still not paid the real living wage. Security guards are, but not cleaners, for example.”
Attending the AGM in person was an “instructive experience” for Crossley, who reported that staff morale had been a common theme across several questions raised by shareholders.
“There wasn’t much of a mainstream institutional investor presence, so I would be interested to see them attend in the future,” he noted.
Sports retailer JD Sports has generally been perceived as more of a laggard on the issue of fair pay. At the latest AGM, it resisted calls to commit to a fair pay benchmark set by an external organisation.
“We hear this argument from a lot of companies, but our response is that the national minimum wage is also externally set and that companies should really go a step further by paying workers in line with the cost-of-living – both in terms of being a responsible business, but also due to the benefits they would see from this,” said Howard.
Last month, the UK’s biggest supermarket – Tesco – also faced a question coordinated by ShareAction at its AGM. It was asked to justify the decision to award CEO Ken Murphy a £10 million (US$12.8 million) pay packet while contracted workers continued to receive less than the real living wage.
A similar question was posed during Ocado’s AGM in April.
Business case
The issue of pay can often just seem like an additional cost for employers, but from investors’ perspective, it is integral to a company’s long-term health and prosperity.
“Investors increasingly see low pay and income inequality as a systemic risk to their portfolios,” said Howard. “Paying a real living wage results in increased worker retention, improved recruitment, and increased staff motivation – those same arguments apply to third-party workers as well.”
Investors have also taken issue with the continued CEO-to-worker pay disparity. Last month, Tesco CEO Murphy was identified as the highest-paid retail chief executive in the UK. Sainsbury’s CEO Simon Roberts is also due to receive £5 million in pay this year – 212 times more than the average pay its employees will earn.
According to Howard, the heights reached by executive pay packets are a testament to the UK retail sector’s success in recent years.
“We think the fruits of that success should be shared more equitably across the organisation,” he said. “Paying workers on the shop floor a decent wage that meets the cost-of-living should be as equal a priority as ensuring CEOs and executives are rewarded.”
Earlier this year, a group of investors led by the Church of England Pensions Board (COEPB) and Brunel Pension Partnership developed the Fair Reward Framework (FRF) to address issues surrounding corporate pay.
“The lowest paid in society should be paid enough to meet their everyday needs,” Howard insisted.
Next, ShareAction will attend the AGMs of retailers Greggs, Next and Kingfisher this proxy season, with plans to make similar demands.
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