Ethical investment and Tesco

Tesco executives have seen off a resolution at its AGM that it should pay more attention to the working conditions of agency workers in its suppliers in the meat processing industry.

The resolution, filed by Unite and the West Yorkshire Pension Fund, and supported by pensions research and advisory consultancy on corporate governance and corporate social responsibility Pensions Investment Research Consultants, attracted the support of 11% of shareholders while a further 7% abstained. It asked Tesco to act for better treatment of workers in the industry, especially to ensure that foreign workers employed at its UK meat supply chains are treated equally and get the same pay, and called specifically for Tesco to:

– allocate a non-executive board member to its Corporate Responsibility Committee

– commit to publicly reporting annually on performance and progress on relevant Tesco policies

– implement a manageable model for demonstrating progress.

In a union survey of 48 meat factories, more than half use agency labour all year round, with agency workers – 80% of whom were born overseas – receiving pay of around 38p/hour lower than permanent staff, 60% of whom are born in Britain.

The response of Tesco executives was that the company’s guidelines already ensured sufficient protection for workers, in particular that they go ‘far beyond the legal requirements and ensure all workers are treated fairly and without discrimination,’ and that an inquiry under the auspices of the Equality and Human Rights Commission was already underway. Workers who are the subject of the resolution are not employed by Tesco but by suppliers of the company.

Unite said that the percentage of shareholders supporting the resolution was double its expectations. Unite will write to Tesco, taking up a reference by Sir Terry Leahy, Tesco chief executive, that it would talk to the union. Usdaw, which is recognised by Tesco for workers in its stores, was not part of the action.

Tesco reported annual pre-tax profits of £3.13bn in 2008 (about £10 per second), a 10% increase on the company’s performance in 2007, on the back of food prices which have run ahead of inflation for much of the past twelve months. The company attracted sales of more than £1bn per week (and a profit margin of over 5%).

A separate resolution on the agenda on executive pay, calling for an extension to the one-year period in which leaving or retiring executives can exercise share options, attracted greater levels of opposition (41% voted against) but was still unsuccessful.

Whether or not such motions are ‘successful’, in the sense of being passed at the AGM, the publicity they generate and the question marks they raise over corporate practices are still hallmarks of success for the people filing them. Given shareholder proxy votes usually stashed in the back pockets of board executives, any vote over 10% is usually considered a significant protest vote although seeing as proxy votes are largely lodged on behalf of the pension funds representing people like you and me, they ought not to have such a clear perspective on maintaining the executive status quo as they evidently do. Tesco does have question marks over its ethics, whether it be over working practices in the supply chain or over the quality of its chickens, or over its abilities to buy out of town land to exercise the planning committee at some subsequent point. Whether or not the media is still interested next year, as opposed to this year in which executive malpractice has been a recurrent theme, is a different matter but that should not detract from the points which need to be made about the controlling power of big business.