UK Retailers Under Microscope on Fair Pay
Institutional investors are pushing for the real living wage to hit the high street this proxy season.
The UK retail sector is under increasing pressure to pay their workforce a real living wage, as investors prepare to challenge the sector’s biggest offenders at AGMs in the coming months.
Members of responsible investment NGO ShareAction’s Good Work investor group – including AXA Investment Managers, Scottish Widows and Cardano – are co-filing resolutions at Next, JD Sports and M&S.
In particular, asset owners and managers want to know how many of the retail giants’ full-time and contracted staff are being paid below a real living wage.
“These resolutions are focusing on disclosure because investors currently don’t have much visibility of the scale of this issue, yet it can impact things such as worker retention,” Louise Eldridge, Head of the Good Work Programme at ShareAction, told ESG Investor.
“It is in the best interest of investors to understand how companies are addressing these kinds of risks – disclosure is the first step.”
Investors should consider unfair pay a systemic risk, as it has negative implications for the wider economy and the long-term interests of investors and companies, according to Charlie Crossley, Investment Engagement Manager at Friends Provident Foundation – a co-filer on all three resolutions.
“The fact that many working people still require government support with their income demonstrates how low wages affect the entire economy,” he said.
“These resolutions focus on transparency as a vital data foundation to move the retail sector towards fairer pay practices. Meaningful change requires sector-wide progress, which is why investors are co-filing resolutions across multiple companies at the same time.”
Fair pay across the workforce will improve staff retention, enhance productivity, strengthen brand reputation and ensure better alignment with stated company values like treating workers fairly and with respect, he added.
A 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 foundation argues a real living wage in 2025 should be £12.60 (US$16.24) per hour across the UK and £13.85 per hour in London. The UK government recently increased the national living wage (the legal minimum) to £12.21 per hour for those aged 21 and over.
“The difference is that the real living wage is actually determined by the cost of living and what is necessary for a decent quality of life, whereas the national living wage does not necessarily guarantee a decent minimum standard of living for workers,” said Eldridge.
Companies such as Aviva, IKEA, Burberry and Lush are real living wage accredited employers.
Table scraps
Next, JD Sports and M&S have all failed to respond to previous attempts to engage on the issue of introducing a real living wage for all employees, according to the co-filers.
“We previously tried to engage with Next through our investment manager and the Good Work coalition, but we haven’t received the transparency we would have hoped for, so co-filing this shareholder resolution is the next step in escalating our efforts,” said Heather Taylor, Director of Finance and Resources at UK charity Trust for London – a co-filer of the shareholder resolution at Next.
Next announced record level pre-tax profits of just over US$1 billion this financial year. Despite this, Next’s lowest paid workers aged 21 and over only earn the national minimum wage.
JD Sports also posted strong pre-tax profits of £917 million for the financial year ending February 2024 – although this was slightly lower than an expected US$1 billion. The company’s lowest paid workers receive the national minimum wage with no London weighting.
M&S does pay its full-time staff the real living wage – but they don’t extend this to third-party contractors.
“[M&S] has created a two-tier workforce within their operations,” said Crossley at Friends Provident Foundation.
Attention to unfair pay for the workforce is exacerbated by continued pay hikes at the executive level.
All three companies offer their senior executives significant pay packages – the CEO of Next earns 226 times the pay of its average worker, while the CEOs of M&S and JD Sports earn 200 and 88 times more respectively, ShareAction said.
“When a company is making this much money – paired with inflated CEO pay – it should make sense for that company to ensure their workforce is also paid fairly, especially when it is clearly affordable for them to do so,” said Eldridge.
A new report by consultancy Deloitte predicts this year’s AGM season to see a growing number of firms seeking shareholder approval for new pay policies that could substantially increase executive remuneration levels.
Mounting pressure
The issue of fair pay has seen an increase in investor attention in recent years, since the onset of the Covid-19 pandemic and the cost-of-living crisis.
In 2022, Sainsbury’s faced a shareholder resolution filed by ShareAction and ten investors which called for the supermarket chain to become an accredited living-wage employer. The resolution was backed by proxy advisors Glass Lewis and ISS but received 17% of shareholder support.
These latest resolutions will go to vote at each company’s AGM this year – Next is slated for mid-May and M&S and JD Sports later in the summer.
“The retail sector is just one example of a sector where the issue of unfair pay is very widespread – it’s a problem that investors should be thinking about across all sectors,” said Eldridge.
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