Beating Amazon by one, Alphabet (Google) has a baker’s dozen (13) shareholder resolutions on its proxy for its annual meeting on 19 June; many of them dealing with similar issues. In order, the proposals request: equal shareholder voting, an end to inequitable employment practices, including non-compete and non-disclosure agreements, the establishment of a societal risk oversight committee, a report on sexual harassment risk management, majority vote for the election of directors, a report on gender pay, a report on ‘strategic alternatives’, i.e. the sale or break up of the company, the nomination of an employee representative director, a simple majority vote, a sustainability metrics report, the prohibition of a special Google search engine in China, a clawback policy and a report on content governance.
Some of these have appeared on Google’s proxy before, including those wishing to improve shareholder democracy – declassifying shares, majority voting for directors and the removal of supermajority votes – but also the ‘strategic alternatives’ proposal, the resolution calling on the company to cease even thinking about a search engine for China that would allow the government to spy on its population, and the sustainability metrics report.
Others are new, for example the ‘end inequitable employment practices’ proposal. Google states clearly in its response that it wishes to continue to use non-compete clauses, though it is phasing out NDAs and will abide by the law – which has not yet been enacted – that will prevent ‘non-poaching’ agreements between tech companies. In another new proposal, and a similar one to that found on Amazon’s proxy, the resolution calling for a special committee to assess societal risk from its products, there is a sensible recommendation that a committee of stakeholders be assembled to advise the committee. Another new proposal arising out of the #MeToo movement and a number of press reports seeks additional disclosures on the company’s policing of sexual harassment.
Many of the company’s actions and policies on the prevention of sexual harassment are of recent vintage and it is not clear that they have had the desired effect of reducing the company’s exposure to risk, so information for shareholders on their effectiveness would be useful in assessing ongoing risk from this issue. But the resolution also calls for tying executive performance pay to metrics associated with the incidence of sexual harassment, as well as reporting to shareholders on incidences of sexual harassment and the actions taken in response.While not as dramatic as Democratic presidential candidate Bernie Sanders’ from-the-floor proposal at WalMart to give workers a seat on the board and pay them a living wage, the proposal for an employee representative director to be elected to the board is a bold one in the US. The election of such a director is unnecessary, says the company, because employee concerns are heard through a wide array of management/employee communications. However, these communications do not appear to have been effective in preventing the employee walk-outs and statements and letters cited by the proponent.
Regarding the content governance report, the resolution asks that the company more effectively police the instances of hate speech and the misuse of company products to subvert the political process, “to support the illegal trade in arms and to facilitate human rights violations”. While Google’s Transparency Report includes a very large amount of data on enforcement of its content governance policies, it does not detail content violations that were missed and subsequently reported. It is the efficacy rate of the policies that is missing.
But to put the company’s response in more context, in a company blog post on 5 June, Google-owned YouTube said it was going to ban white supremacist content, for example, videos that it says “justify discrimination, segregation, exclusion of specific groups of people”. It will also apply this policy to videos that deny well-documented events, such as the Holocaust and the Sandy Hook Elementary School shooting. As NPR journalist Mary Louise Kelly commented at the time: “… kind of mind-blowing to think that all of that was allowed on YouTube until now”. Despite this ban, the company will still permit videos it classifies as ‘borderline’, which is not clearly defined, as well as other problematic content.
And what of the proxy advice? Glass Lewis is for equal voting rights and the report on employment practices, the report on sexual harassment policies, majority voting for directors, the clawback policy and the report on content governance. It recommends against the rest. For example, it calls the gender pay statistic – women’s pay as a percentage of men’s pay at the company – a misleading statistic, and is against the removal of supermajority voting because Google has multiple classes of stock with different voting power and requiring supermajority voting actually could protect public shareholders in this instance.
ISS agrees with the last analysis and also recommends against removal of the supermajority provisions. It also recommends against voting for the ‘strategic alternatives’ resolution, against the election of an employee director, against the resolution on the China search engine because it says the company is not currently developing one – though a shareholder resolution preventing such development might stop any change of heart at the company. Finally, it recommends against the report on content governance because, it says, the company has improved its policies and practices and is making sufficient disclosures in its various Transparency Report; though the latest YouTube disclosures might cause a change of opinion on this last point.
However, ISS is far more supportive, generally, than GL of the various shareholder resolutions.It recommends for equal voting rights, for prohibiting inequitable employment practices, for the societal risk oversight committee, for the report on sexual harassment, for majority vote for directors, for the report on gender pay gap, for a report on sustainability metrics, and for an amended clawback policy. The vote recommendation on the special committee is very unusual for ISS. Typically it says the board is best positioned to make such decisions – see its recommendation on the employee director, for example – but Google’s failure to set up an adequately skilled advisory council, which subsequently “fell apart”, according to its analysis, and its assessment that the full board was simply not overseeing risk effectively caused this unusual recommendation.