Human Capital Management (HCM) and COVID-19: Engagement in the 2020 AGM season

We are in the middle of a public health crisis, and no essential worker should have to fear for their safety or that of their family just to do their job.

— New York City Comptroller Scott M. Stringer

The COVID-19 crisis has both illuminated and intensified economic inequality. The growth of temporary, casualised and precarious work in recent decades has left some workers more exposed to the impacts of the pandemic than others. In Melbourne - like cities globally - the second wave of the pandemic is predominantly due to transmission in the workplaces and homes of essential, typically low-paid workers, who are unable to work from home.

Following the first large-scale COVID-19 industry shutdowns, there was an acknowledgement in the investment sector that investors should fortify their engagement with companies on the often neglected “S” in ESG, including workers' rights matters.

Early discussions focused on how responsible businesses might navigate bailouts and restructuring while supporting their workforce and maintaining long term performance. As the crisis deepened, and the close relationship between labour conditions and public health became clearer, these discussions have evolved.

In April 2020, ACCR outlined a set of principles to guide investor engagement on decent work and workers’ rights during the COVID-19 crisis. Here, we extend these principles to provide investors with guidance on how to engage companies on workers’ rights during the pandemic to ensure that companies adhere to strong labour rights standards.

This engagement guide draws on lessons learnt from the 2020 US and UK AGM seasons, and ACCR's analysis of significant Australian cases of workplace transmission in frontline and essential industries, to ensure companies are protecting workers’ - and the broader community - in the short term, and properly managing their human capital and enhancing value creation in the long term.

There is no single definition of “essential industries”. For the purposes of this brief, we consider essential industries to be those industries that have continued to function through COVID-19, and where workers are unable to work from home. This includes, but is not limited to, workers in: warehouses, farms, meat production, healthcare, aged care, early childhood education, supermarkets.

Workplace Health and Safety

Companies have a responsibility to ensure a safe workplace for their entire workforce, irrespective of whether they are directly employed or hired through third party contractors or labour hire agencies.

• Effective WHS plans recognise that workers’ have specific expertise to monitor and manage workplace risks. Investors should engage companies on:

  • How they have involved workers in the development, implementation and monitoring of a pandemic plan. This should include pandemic leave provisions, adequate provision of PPE, and development of and training in safe donning protocols.
  • What mechanisms they have put in place to ensure that workers do not face consequences for raising safety issues and/or removing themselves from an unsafe work environment. Potential consequences include: loss of wages, loss of shifts or even loss of work.
  • How contractors, subcontractors and labour hire workers are included in pandemic plans, and how the company ensures clear lines of responsibility for the reporting of potential transmission and infection breaches.

• Paid pandemic leave is essential for ensuring that workers can take time off if they are unable to work due to an actual or suspected COVID-19 infection. Investors should engage companies on:

  • whether they have instituted paid pandemic leave provisions
  • any limitations in the amount of paid off time available
  • whether pandemic leave provisions are extended to the entire workforce (including casual employees and indirect workers).

• Anecdotally, worksites with high densities of trade union membership have seen less workplace transmission than non-unionised worksites. Investors should engage companies on how they work with other stakeholders – including unions, workers and the communities in which they operate – in designing and implementing their response to the crisis.

Responsible Contracting

Labour hire and subcontracting in high risk, front line sectors represent specific and significant risks for workers, the community - and in the case of renewed lockdowns - the broader economy. Subcontracting often results in a lack of transparency and accountability for a workforce, with lead contractors eschewing responsibility for training, failing to provide adequate Personal Protective Equipment (PPE), and even failing to provide minimum wages and conditions. Lines of responsibility are often unclear, and critical information is easily miscommunicated.

Since the start of the pandemic, there have been numerous examples where labour hire has exacerbated COVID transmission rates, putting workers and the broader community at risk.

• Companies must disclose the number of COVID infections in their entire workforce. This should include direct employees, and indirect workers (including contractors and labour hire workers).
• Investors should engage companies regarding how they are ensuring that all contractors and subcontractors are provided with sufficient training, PPE, social distancing in order to complete their jobs.
• Investors should engage companies on whether labour hire workers or contractors have been brought in to met staffing shortfalls, due to employee self-isolation, and what processes the company has put in place to inform labour hire workers of COVID-19 risk on the site, and ensure that they have adequate access to pandemic leave provisions to allow them to self-isolate if necessary.

Human Capital Management and Government Stimulus

Human capital is critical to the long term performance of companies. Stimulus packages and bailouts must be used to maintain the employment of the existing workforce, prevent the erosion of human capital, and allow companies to emerge more successfully on the other side of the crisis. Stimulus measures and bailouts should not be transferred to shareholders via dividends or share buybacks.

• Companies must disclose how they are using government payments to maintain the employment of the existing workforce, so that investors can assess whether they are using these payments to secure the long term performance of the company, or the short term benefit of shareholders and executives.