Investors have been given a checklist of six areas to scrutinise when seeking to engage with companies to improve employee poverty and working practices.
The checklist was contained within a dedicated report entitled Influencing UK Workforce Practices Through Responsible Investment published by ESG lobbyist group ShareAction on Friday.
ShareAction found that board accountability, transparency, capacity issues, short-termism, employee incentives and the corporate structure, were the six areas most linked to contributing to poor working conditions and inadequate pay for employees.
“Investors can do more to move companies in a direction that can benefit workers, as well as business and the societies in which they operate,” the organisation said in a statement introducing the report.
“This briefing outlines a number of challenges to investor engagement and provides recommendations for investors to better engage portfolio companies on their workforce practices in the UK.”
The report found that a lack of comparable data between companies has historically made it difficult for investors to measure companies on workforce issues and warned that businesses, in the past, have been tempted to use convoluted organisational structures as an excuse for inadequate data.
It also suggested that companies blamed a lack of resources as a reason for not providing more specific data on workforce issues. At board level, a focus on short-term returns was blamed as a reason for insufficient progress, while a lack of internal accountability was often the reason why companies didn’t prioritise improvements.
In September, ESG Clarity reported an interview with Hermes Investment Management’s head of sustainable investing, Andrew Parry, in which he warned of stark economic implications, if companies didn’t respond to the growing divide in society between the haves and the have-nots.
“Companies need to recognise that a society that is unequal, where the ‘haves’ have more and the ‘have-nots’ have less, is not good for future demand,” he said at the time. “Commerce is about increasing demand and that becomes difficult if you have a large amount of people with no money.”