Amazon Covid Settlement Board of Directors Focuses on Workforce and ESG
Amazon.com Inc.’s recent settlement with California regarding Covid-19 employee notifications is the latest example of how pandemic-related workforce safety has become an environmental, social concern and major governance for boards of directors.
The tech giant, following a state investigation,
The settlement shows that Covid’s health and safety concerns are a core responsibility of boards of directors, according to company law experts. It comes as asset managers, pension funds and activist investors pressure more companies to make their responses to Covid an important social responsibility.
“What Covid has done is focus investors, employees and consumers on the ‘S’ of ESG,” said Tensie Whelan, director of the Center for Sustainable Business at the NYU Stern School of Business. These “social” issues include workers’ health and safety, a living wage, and the equity and diversity of the workforce, she said.
The penalty is only a small fraction of the more than $ 1 billion in daily sales that the e-commerce giant has averaged for 2020. But dollar value may not have been the main point for the. California Attorney General.
“It is more important that the Attorney General was able to bring Amazon to the table and suggest they accept and admit that this is a problem,” said Massachusetts State Treasurer Deborah. Goldberg, at Bloomberg Law.
The November 15 settlement in California was the first of its kind with a firm on the state’s new “right to know” Covid law. The deal concerns a technical detail of how Amazon discloses Covid cases through mass employee notifications, Amazon spokeswoman Barbara Agrait told Bloomberg Law. The regulation requires Amazon to disclose the specific number of cases to employees within 24 hours.
There have been no issues with the way the retailer informs individual employees of potential Covid exposures, Agrait said. The company spent $ 15 billion to keep workers safe during the pandemic, she said.
“We are happy to have resolved this issue and to see that the MA did not find any substantive issues with the security measures in our buildings,” she said in an emailed statement.
But California isn’t the only state to probe Amazon’s pandemic practices. New York filed a complaint in February alleging the retailer violated state labor laws over inadequate Covid employee notifications and cleaning procedures. Amazon has asked a federal court to block the lawsuit, saying its facilities in Queens are subject only to federal laws.
Regulators naturally tend to take action against top companies like Amazon to create a deterrent effect on other companies, said Kevin LaCroix, lawyer and executive vice president of RT Specialty LLC, a brokerage firm. insurance focused on management liability issues.
“Right now, businesses face many challenges due to the disruption due to the pandemic and have a lot of things vying for their attention,” he said.
The California AG action tells boards and executives to “give the right weight to these notification issues,” he said.
Goldberg of Massachusetts was one of three state treasurers who lobbied Amazon and its board over Covid rates among its workers in June 2020. The New York City Comptroller also research information via a shareholder proposal from December 2020 on Amazon’s response to occupational health and safety in the face of the pandemic.
Workplace safety is integral to the growing attention of institutional investors and other stakeholders to ESG topics, said Kenneth Henderson, partner in transactions and corporate governance at Bryan Cave Leighton Paisner LLP in New York.
“You can imagine institutional investors, many of whom are very focused on ESG issues, raising the question with the board of directors and senior management: what are you doing to comply? ” did he declare.
BlackRock Inc., the world’s largest asset manager, has already shown its willingness to take action on workforce issues.
In February, BlackRock backed an unsuccessful human rights due diligence power of attorney proposal at Tyson Foods Inc., citing concerns about a widespread outbreak of Covid-19 among workers in poultry factories.
“This disruption has introduced risks to business operations and therefore financial performance,” said BlackRock.
BlackRock said it will continue to ask food producers about their approach to workforce health and safety.
Amazon and other cases point to the need for companies to publish more detailed information about their workforce, said George Georgiev, professor of business law at Emory University Law School.
The Securities and Exchange Commission is considering changes to the SK regulation that would require companies to disclose more detailed measures of human capital, including statistics on employee turnover and the number of full-time and part-time employees. Such changes would help investors spot potential workplace issues and other ESG issues, Georgiev said.
“If we have specific disclosure rules around these data points, then the shareholders will have the data, and there will be things that stand out and get the attention of activists,” he said.
The scrutiny by investors and other stakeholders of the treatment of workers is not expected to abate once the pandemic is over, Whelan said.
Almost three-quarters of boards have stepped up discussions on human capital strategy, according to 2021 annual business directors at consulting firm PwC investigation.
Whelan and others called for more ESG expertise among directors so they can better understand worker concerns.
Many boards have looked at workforce issues through special committees that focus on managing human capital under ESG, Georgiev said. Some others delegate labor matters as the responsibility of the compensation committee, he said.
“They’re trying to make sure the workforce is at the center of board deliberations one way or another,” he said.
Boards don’t necessarily need to be subject matter experts to tackle workforce issues and other difficult ESG issues, said Henderson of Bryan Cave. But they need directors who know how to ask the right questions.
“For years, boards have dealt with matters requiring experts,” but that doesn’t mean directors have to be experts themselves, he said.