When Microsoft published its proxy statement in October, it contained an unusual shareholder resolution. The proposal? Adding a rank-and-file employee to Microsoft’s board of directors.
Microsoft’s filing left the identity of the shareholder behind the proposal a mystery, but GeekWire followed up ahead of the company’s annual meeting this week and got the name: NorthStar Asset Management. And after a short time on the phone with NorthStar’s head of shareholder activism, it became clear that what first seemed like a novelty is actually part of a broad strategy to reshape corporate governance in Sen. Elizabeth Warren’s image.
Microsoft is one of the first major companies NorthStar is pushing to democratize its board — but it won’t be the last.
NorthStar plans to submit similar shareholder proposals to additional companies in 2020, though the firm wouldn’t specify which ones. This year, NorthStar submitted resolutions calling for employee representation on the boards of Microsoft and FedEx.
Based in Boston, NorthStar describes itself as a “socially responsible investment firm,” which manages assets on behalf of its clients. NorthStar CEO Julie Goodridge founded the firm in 1990 and remains its sole owner. NorthStar has been sponsoring shareholder resolutions on behalf of its clients since 2000, on a range of issues from LGBTQ rights to environmental practices.
The investment firm manages more than 75,000 Microsoft shares, worth more than $11 million based on Monday’s closing share price.
Goodridge got the idea for the Microsoft resolution directly from Warren, according to Mari Schwartzer, director of shareholder activism and engagement for the firm. Warren’s Accountable Capitalism Act — one of her campaign proposals on her quest for the White House in 2020 — struck a chord with Goodridge.
Warren, Sen. Bernie Sanders, and others on the left are changing the conversation about worker representation at big companies. Warren’s plan would require 40 percent of board directors to be selected by the corporation’s employees at large U.S. companies. Sanders’ proposal requires 45 percent of board directors at large firms to be employee-elected.
“We thought this could be a great opportunity for us to have some conversations with companies about employees and their role as a stakeholder in the company,” Schwartzer said.
NorthStar’s resolution asks Microsoft to explore the possibility of putting a non-management employee on the board of directors. Microsoft CEO Satya Nadella is currently the only employee on the board, though it has become larger and more diverse in recent years.
Microsoft’s board recommends that shareholders vote against the proposal, calling the idea “unnecessary” and claiming it “will not enhance shareholder value,” in the proxy statement.
The board said the resolution could force it to lower its standards in selecting directors:
Our existing director selection process is designed to identify and nominate the strongest director candidates from all available sources, including our employees. We believe an employee candidate for the Board of Directors should be evaluated by the same standards and criteria as any other candidate. This proposal would require us to deviate from our existing rigorous processes and could diminish the effectiveness of our Board.
It’s difficult to actually pass a shareholder resolution but Schwartzer said NorthStar views this as the first step on a longer journey.
“We want to take this opportunity to have a conversation with other shareholders,” she said. “Proposals go to a vote often … frequently we’re able to re-file them and, in many cases, the proposal will get a higher vote after its second or third time out.”
If Microsoft were to add a non-management employee to its board, it would be highly unusual for an American company. The concept of employee representation on corporate boards has gained popularity in Germany and other European countries.
Over the past year, there has been a spike in employee and shareholder activism as big companies face increased pressure to take a stand on political issues. Earlier this year, Amazon shareholders submitted a record 11 independent resolutions focused on facial recognition technology, climate action, salary transparency, and other equity issues.
Employee activism is also on the rise, buoyed by a strong labor market and some of the federal government’s more controversial policies. Workers at Google, Amazon, Microsoft, and smaller tech companies like Tableau and Chef, have organized walkouts, demonstrations, and other acts of protest to pressure their employers.
Microsoft has held firm in its resolve not to cancel government contracts, a focus of the new wave of employee activism. Google has sunsetted certain contracts but the company remains at odds with its employee activists. Some of those activists accuse Google of attempting to suppress dissent by firing four employees last month. Google attributed the dismissals to violations of its data security policies.
“We feel like the proposal we put forward would give the company an opportunity to have that direct interaction with their employees,” Schwartzer said. “Whether it’s directly on the board, or representation directly to the board, it could give the company the opportunity to avoid something like what we just saw at Google.”
The shareholder resolution introduced by NorthStar will be up for a vote at Microsoft’s annual meeting this Wednesday, Dec. 4. For the first time this year, the meeting will be entirely virtual.
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