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Apr 14, 2020

Walmart shareholders to vote on employee board representation

Company had sought to exclude measure ahead of AGM

Walmart shareholders will vote on a measure looking to add employee representation to the company’s board at a time when such ideas are gaining some political traction in Washington, DC.

Cynthia Murray, a Walmart associate, has filed the proposal to be voted on at the company’s annual meeting on June 3. It aims to ramp up the representation of employee perspectives on the board by including hourly associates in the initial list of candidates from which new director nominees are picked.

Walmart announced last Friday that the AGM, like many being held this proxy season, will take place in a virtual-only format due to the public health impact of the Covid-19 outbreak.

Specifically, the proposal calls for Walmart’s board to ‘adopt a policy… of promoting significant representation of employee perspectives among corporate decision-makers by requiring that the initial list of candidates from which new nominees are chosen… by the nominating and governance committee include (but need not be limited to) hourly associates. The policy should provide that any third-party consultant asked to furnish an initial list will be requested to include such candidates.’

In a supporting statement, Murray says: ‘There is growing consensus that the presence of employees on corporate boards can contribute to the long-term sustainability of a company… According to the National Bureau of Economic Research, giving workers formal control rights increases female board representation and raises capital formation. In Germany, the co-determination model of shared governance has been lauded as an excellent check-and-balance against short-termist capital allocation practices.’

Walmart unsuccessfully sought SEC no-action relief allowing it to exclude the proposal. It cited Rule 14a-8(i)(7), by which it argued that the proposal deals with matters relating to the company’s ordinary business operations. ‘[T]he proposal squarely implicates the company’s ordinary business operations as it relates to the company’s management of its workforce, including the company’s relationship with its employees,’ wrote Kristopher Isham, senior counsel with Walmart, in a letter to the SEC.

However, the agency states on its website that it is ‘[u]nable to concur that Rule 14a-8(i)(7) provides a basis to exclude’ the proposal. The staff did not respond via letter with further details of its reasoning.

The proposal comes as the notion of employee board representation has taken on a higher profile in political discussion, although any such legislation faces inevitable opposition in Congress. Former candidate for the Democratic Party’s presidential nomination Senator Elizabeth Warren, D-Massachusetts, in October announced that she was reintroducing the Accountable Capitalism Act. Among other things, the legislation would require that workers elect 40 percent of board members.

Senator Bernie Sanders of Vermont, who until recently was also running for the presidential nomination, put forward a similar idea during his campaign. Under his plan, 45 percent of the board of any large corporation with at least $100 mn in annual revenue, corporations with at least $100 mn in balance sheet total and all publicly traded companies would be directly elected by the firm’s workers. His campaign notes that this is similar to the German concept of employee co-determination.

As in Washington, Murray’s proposal may face a steep hurdle. It appears to be the first time – at least recently – such a measure has been included formally at the company’s AGM. At last year’s meeting, however, shareholders overwhelmingly rejected a proposal raised from the floor requesting that the nominating and governance committee consider hourly associates among the list of potential director candidates, according to a regulatory filing.

A request for comment from Walmart was not returned.

Ben Maiden

Ben Maiden is the editor-at-large of Corporate Secretary , an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter , covering regulatory and compliance...
Editor-at-large, Corporate Secretary