JPMorgan AM divests UK’s Royal Mail over worker strikes

Investors are increasingly concerned about company approaches to managing industrial relations, said PIRC and ShareAction.

JPMorgan Asset Management has divested shares of Royal Mail after a long-running industrial dispute between the company and postal workers over pay and working conditions.

The UK’s regulated postal operator – which is owned by London-listed parent company International Distributions Services (IDS) – faced strikes over the past year and had considered going into administration if it failed to agree a deal its worker union.

JPMorgan said in its latest stewardship report, published last month, that the company faced scrutiny over “labour management issues, with a difficult balance between efficiency and modernisation versus supporting staff pay at a time of heightened living costs”.

Tapering of customer demand after an increase in parcel volumes during the pandemic put additional pressure on profits, it added.

“Having considered the complexity of the situation and the sensitivity of profits reductions to pay increases, it was not clear to us that a successful compromise could be reached,” it said. “As a result, expecting an outcome that would be negative both for shareholders and staff, we elected to divest Royal Mail stock.”

JPM AM said that it had held meeting with the management team and sustainability experts at Royal Mail to address the issue.

The manager declined to provide details on the funds impacted by the decision and on the exact timing of the divestment.

Last month, the Royal Mail and the Communication Workers Union (CWU) announced that they had come to an agreement, which included a pay rise and a one-off payment for workers, a profit-sharing scheme and a commitment to reduce environmental impact.

Union members are due to vote on the agreement this month with results to be announced in June.

A Royal Mail spokesperson declined to comment on the divestment by JPM AM but said that the agreement was a “good outcome” for stakeholders.

Tom Powdrill, head of stewardship at UK proxy adviser and consultant PIRC, said that company approaches to industrial relations is an increasing concern for investors.

“Frankly it’s not surprising to see Royal Mail as one of the companies where this has played out, given the protracted nature of the dispute there,” he said.

“While it’s unusual to see a divestment, this is not the only one,” he said, noting that Danish pension fund Pædagogernes Pension had recently sold off Amazon shares over workers’ rights.

Powdrill said he expected to see strong shareholder support on agenda items addressing warehouse working conditions and collective bargaining rights at the Amazon AGM later this month.

Rosie Rawle, Senior Campaign Officer at ShareAction’s workforce engagement programme, said that the industrial dispute at Royal Mail was a “clear example” of a material investment risk for shareholders.

“Investors should also engage with companies on critical workforce issues, like industrial relations, and credible engagement needs to be backed by an escalation strategy, which may include divestment,” she added.

Rawle said that ShareAction would engage with Royal Mail through its investor network over the coming months, pushing the company to improve worker pay and conditions.