The influence of shareholder activism on global workforce practices

Abstract

The rising significance of knowledge as a driver of competitiveness has heightened investors’ interests on managing workforce and developing talent strategies globally. In this article, we seek to examine the types of workforce-related demands activist shareholders are requesting from firms they are invested in and how firms are responding to these demands. We discuss whether shareholder activism can serve as a driving force to improve workforce practices as well as attract and retain top talent. Specifically, we examine shareholder proposals that focus on workforce practices such as overcoming employee discrimination, complying with international labor standards, improving health and safety practices, eradicating pay disparity, and developing fair executive compensation practices. Our analyses reveal that the most active shareholders advocating for workforce-related improvements are socially responsible investment funds, religious groups, and public pension funds. Although we find that most of these proposals are rejected in annual shareholder meetings, the evidence also suggest an executive preference for private negotiations, which sometimes leads to the withdrawal of proposals, rather than public shareholder voting. Furthermore, we explore how shareholders and other stakeholders are increasingly embracing investment strategies and corporate acquisitions as effective means to strengthen the talent pool within their organizational workforce. We advocate for the need to increase collaboration among shareholders, executives, and other stakeholders to foster meaningful and effective global workforce practices.