National Express under More International Scrutiny
National Express is under renewed governance pressure over its long-standing intransigence on reviewing labour standards at its North American operations with investors again putting forward a special resolution at this years AGM calling for remedial action.
The shareholder case has been strengthened by the release of a new report by two UK parliamentarians that details a continued litany of employee complaints over working conditions and a refusals by the company to recognise well-accepted standards around freedom of association.
In the report, entitled Broken Commitments, Vulnerable Workers, UK Labour MPs Ian Lavery and Jim Sheridan say they found evidence of suppression of unions as well as poor working conditions throughout National Express US subsidiary Durham School Services and amongst school bus workers in locations including South Carolina, Tennessee, Florida, Illinois and New Mexico.
Release of the report also triggered an ‘Early Day Motion’ in the UK House of Commons condemning the company and in part calls for:
“all National Express shareholders to seek clarification on this issue from the board of directors and to vote for the resolution on this issue at the forthcoming AGM on 6 May 2015.”
The AGM resolution is backed three UK local authority pension funds, Nottinghamshire County Council, Greater Manchester and London Borough of Islington, together the funds hold more than 3 million National Express shares, approximately 2% of the total register.
Last year the three funds issued a joint call with the Teamsters Union for the company to address “systemic and longstanding” issues with its human capital management and for the board to “expand the role and responsibilities of its Safety and Environment Committee” and adopt “a meaningful and enforceable” human rights policy at its North American subsidiary.
UK corporate governance expert Dr Raj Thamotheram described last years AGM proposal in these terms: 'This resolution is so reasonable its hard to understand why National Express simply didn’t just accept it.’
Despite active Board opposition, the 2014 resolution received almost 13% of votes cast. The combined For and Abstain vote of independent shareholders (excluding the Cosmen holding) reached 20%.
2015 will mark the fifth year of engagement with the company over US labour standards.
Given that for more than a decade US subsidiary Durham has regularly run afoul of National Labour Relations Board (NLRB) adjudications over treatment of employees, freedom of association and recognition matters, the concerns would appear to have some foundation.
Despite some conciliatory efforts by both labour representatives and stakeholders to find common ground, the decision by the Board to oppose this year’s shareholder initiative reflects a continuing non-responsive attitude to good faith engagement.
A quick look at the local support and widespread network TV news coverage the British MPs recent US visit attracted highlights the self inflicted reputational damage of the Board position and the potential business risk associated with the school bus contracts that form the core of the Durham business model.
Resolution 22 at the AGM attempts to address long term shareholder concerns and mitigate potential risks to both corporate reputation and impacts on the share price.
It proposes that a mutually agreeable representative examine claims and counter claims and then report to the Board and shareholders via the company’s website.
Active shareholder consideration is warranted.
PIRC has been consulted on the terms of this resolution and the aforementioned local authority pension fund requisitionists are clients.