Guardrail ON POVERTY WAGES

Protecting Diversified Portfolios from the Threat of Income Inequality

Poverty wages don’t just undermine workers: income inequality penalizes the national and global economies with losses that will burden investment portfolios for years to come.

Closing the living wage gap worldwide could generate significant increases in the well-being of workers, leading to a more than 4% increase in global GDP.

Investors are capitalizing on this opportunity with a guardrail asking companies to implement pay practices throughout the value chain that create—rather than extract—value. The guardrail provides that companies not only pay a living wage to their employees, but also ensure the same from their contractors and sub-contractors.

UK-based ShareAction is working with The Shareholder Commons on this living wage guardrail campaign, which will be brought to multiple companies in the 2025 proxy season and will address the reality that while poverty wages can increase profits at some companies, they externalize costs that burden investors’ diversified portfolios.

Watch our Labor & Inequality Webinar

take action

Take action on poverty wages by voting FOR proposals at these upcoming annual meetings.

To support this work, we encourage all investors to:

Vote

…In favor of proposals that companies pay a living wage to direct employees and contract workers,

…Against designated directors at companies that fail to pay a living wage to employees and contract workers,

Publicly declare support for Living Wage Guardrail for the express purpose of preserving diversified portfolio value.

Engage

If in communication with target companies, reinforce expectation that they comply with the Living Wage Guardrail and indicate support for shareholder proposals/no-votes at non-complying companies. Explain that your concern involves the impact of poverty wages and income inequality on your entire portfolio.

Co-file proposals at target companies.

for asset owners,

Be an active client and..

…Engage with asset managers to push for support on labor initiatives and a Living Wage Guardrail (as an institutional policy, rather than as a carve-out just for the one asset owner).

…Write asset-management mandates to require managers to practice system stewardship. Model language can be found here.

for asset managers,

…Explain the system-stewardship value proposition to clients. The Cambridge Principles frame this concept concisely.

…Engage with proxy advisors about the need for proxy voting advice that supports the value of a client’s entire portfolio.

…Update investment beliefs and proxy voting guidelines to give staff and advisors the direction they need to act on systemic issues, and ensure trustees have accounted for the full effect of their stewardship choices. Model language can be found here.

See What Investors Are Saying

“Addressing a social issue such as inequality requires action across society with government leadership. As an asset owner, UPP can leverage our ownership stakes in companies and stewardship tools to promote market guardrails, or limits on corporate behaviors that excessively externalize social and environmental costs. Promoting adequate guardrails on key issues within our portfolio can help reduce unequal access to opportunities and mitigate persistently unequal outcomes.”

—University Pension Plan Ontario

“We will… be inclined to support company approaches to remuneration which seek to support those workers on lower incomes and/or who are most likely to be impacted by increased cost of living. This includes payment of a local “living wage” i.e. the pay which is required for all workers and their families to meet their living costs and support a decent standard of living… We may consider votes against companies where we identify risks relating to workforce pay levels or other work practices.”

—Railpen Proxy Voting Policy

Learn more

Our case study—“Living Wage and the Engagement Gap”—establishes the relationship between poverty wages and long-term diversified portfolio returns, and the imperative for investors to act.