From the CIO
At first glance, it’s easy to think that the interests of an investor in a for-profit company would not align with those of workers in the same company. Research recently compiled by Trillium Asset Management shows the opposite to be true, and today’s Impact in Action report draws from their recent white paper “The Investor Case for Supporting Worker Organizing Rights.”
Trillium is a leader in activating shareholder capital as a tool to engage directly with corporations to develop and implement policies that better support a broad range of stakeholders, including workers. Supporting the right of workers to organize reflects Trillium’s conviction that profits should not supersede basic worker and human rights – and their research shows that shareholder value can be enhanced by high-quality management-labor relationships.
-Kate Campbell King, CFP®
Aligning Workers’ Interests with Sustainable Investment Values and Goals
- Firms with union presence and collective agreements see greater worker productivity. One study in Norway found that an increase in unionization across an industry by 1% raised overall firm productivity by 1.7-1.8%. They attributed this to the “voice effect,” or the ability of unions to aggregate worker sentiment more efficiently.
- Union presence increases worker satisfaction and decreases turnover. Studies have shown that customer satisfaction decreases with increased employee turnover. Companies and shareholders both benefit when they can reduce the costs associated with replacing, hiring, and training employees. See the UPS story below.
- Companies should be held accountable for their commitments to legal norms. Multinational companies often refer to and affirm their obligations to comply with various international agreements that recognize freedom of association as a human right. In the US, the National Labor Relations Act was passed in 1935, and made it federal policy to protect workers’ freedom of association by encouraging collective bargaining.
- Union presence improves worker health & safety. Unions advocate for health and safety training protocols that reduce risk in industrial operations, minimizing injuries, absenteeism, and turnover. Increases in unionization rates are associated with decreases in on-the-job deaths.
- Companies face reputational risk from anti-union activity. Recent efforts to stymie unionization at Amazon and Starbucks have not gone well for those companies. Surveys from 2021 demonstrate that 68% of Americans support labor unions; worker interest in joining a union has increased from 32% in 1995 to 48% in 2017. See Starbucks story below
- Supporting unions is one way to support racial and gender equity. Unions decrease the racial wealth and gender gap and empower workers to collaboratively build equitable and psychologically safe environments. In union-friendly states, pay boosts for newly unionized Black (+13.1%) and Hispanic (+18.8%) workers are generally larger in comparison to those for unionized workers overall (+10.2%). Benefits for women are even more dramatic: on average, women in non-unionized workplaces earn only 78 cents for every dollar paid to non-unionized men; in unionized workplaces, they earn 94 cents for every dollar paid to unionized men.
Better Outcomes for Workers – and Investors
In the past, unions have been the driving force behind many social benefits we take for granted today – including the federal minimum wage, a 40-hour work week, anti-discrimination laws, unemployment insurance, and workers’ compensation. Then and now, well-functioning unions secure improved working conditions through negotiating wage increases, better access to healthcare, additional training or safety protocols, and stable work schedules.
Today, many investors want their investment portfolios to consider issues of social equity for which workers have long fought. Trillium’s compilation of research demonstrates that success for workers doesn’t necessarily mean investors must give up financial returns. Successful integration of unions can lead to improved productivity, lower costs in addressing employee turnover, and promote customer loyalty from a public interested in equity. Investment engagement with workplace equity issues has the potential to improve financial outcomes for companies and shareholders, and help move our economy towards greater sustainability and our society towards greater justice.
Impact Stories
Starbucks Opposition to Unions
In 2021, when two Starbucks stores in Buffalo, NY, voted to unionize, the company attempted to frustrate their unionization efforts in multiple ways. Trillium teamed up with the advocacy staff at Parnassus Investments to respond with a joint investor letter representing $1.3T in assets. Their letter requested that the company recognize the election and negotiate in good faith. They later met with Starbucks’ CEO to encourage company neutrality in future union drives. To date, more than 250 stores across 26 states have filed for union representation, and Trillium is continuing their advocacy efforts to entreat the company to engage more positively with unionization efforts and to more fully implement their stated labor rights commitments.
According to a survey from January 2022, 42% of Americans expressed that they are less likely to purchase from a company attempting to stop its employees from unionizing.1
Comparing Unionized UPS with Non-unionized FedEx and Amazon
Investors can compare these three logistics companies as an example of the financial benefits of unions for companies. In 2018, UPS drivers earned about $23/hour compared to Amazon and FedEx’s contract drivers who earned between $5.30 and $14.40 per hour after accounting for driving costs. In 2021, UPS drivers earned an average of $36 per hour and had a collective bargaining agreement that guaranteed annual increases. In 2021, UPS reported a year-over-year operating profit increase of 20% and raised projections for full-year results, with the UPS CEO optimistic about the company’s ability to navigate the tight labor market. By contrast, Amazon and FedEx both dropped in stock price and attributed losses of $2 billion and $500,000 largely to lost productivity as a result of understaffing.2 This example illustrates the impact of strong benefits and a sense of security about future earnings and how that can support worker loyalty and tenure.
Companies spend approximately 20% of an employee’s salary to replace an employee who leaves. A company’s talent retention capability can be a signal of financial health of the company because of the significant capital expenditures required in rehiring.3
Resources
1 “Poll: Most Starbucks Customers Want Starbucks Workers to Unionize,” More Perfect Union, February 24, 2022.
2 “Is Your Business Struggling with a Labor Shortage? Consider a Union,” Brookings (Brookings, March 9, 2022.
3 “Exploring the Relationship between Employee turnover Rate and Customer Satisfaction Levels,” The Exchange 4,no. 1 (September, 2015).
 | About Kate Campbell King, CFP®Kate Campbell King is the Founding Partner and Chief Investment Officer at North Berkeley Wealth Management. Kate provides clients with a unique approach to their financial decision-making. |
This commentary on this website reflects the personal opinions, viewpoints, and analyses of the North Berkeley Wealth Management (“North Berkeley”) employees providing such comments, and should not be regarded as a description of advisory services provided by North Berkeley or performance returns of any North Berkeley client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. North Berkeley manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.