FedEx’s Domestic-Partner Benefits: Spurred by Shareholder Activism? (Diversity, Inc: 6/1/10)

By Gail Zoppo for Diversity Inc.
June 1, 2010

With 19,922 shares of FedEx in its portfolio, socially responsible investing firm NorthStar Asset Management filed a shareholder resolution with the shipping giant in April after discovering the company didn’t offer same-sex domestic-partner/spousal benefits, even in Massachusetts where same-sex nuptials are legal.

NorthStar’s proposal highlighted a discrepancy between the company’s policy and senior-executive compensation, one of the areas SEC rules allow resolution challenges: FedEx “does not offer health care or insurance coverage benefits to married same-sex partners or same-sex domestic partners of senior executives and their families, except in California,” while its EEO policy states employee equality. Although specifying “senior executives” in the proposal, the intent was to get same-sex domestic-partner benefits for all FedEx employees, says Julie N.W. Goodridge, president and founder of NorthStar. Goodridge was the lead plaintiff in the landmark lawsuit, Goodridge v. Department of Public Health, which led to the legislation of same-sex marriage in Massachusetts.

Challenging corporate EEO policies or executive compensation by proxy isn’t new, but NorthStar’s resolution strategy was unusual because it sought to directly amend same-sex domestic-partner benefits.

“I can’t say that I’ve ever seen that exact approach before,” says Daryl Herrschaft, director of the Human Rights Campaign’s Workplace Project. “There have been other resolutions that have attempted to talk about domestic-partner benefits through the equality principles, that the organization should adopt a set of equality principles that includes equal compensation without regard to sexual orientation or gender identity. But what Julie is doing sounds a little bit different than that.”

Less than a month after NorthStar’s filing, however, FedEx quietly leaked its decision to begin offering the option of same-sex domestic-partner/spousal benefits to all of its 200,000-plus employees in the United States, as DiversityInc reported in May. They will go into effect on Jan. 1, 2012.

A coincidence? Yes, says FedEx spokesperson Sandra Munoz. “Frankly, the timing of our decision and NorthStar’s resolution are just coincidental,” she says, confirming that the company’s LGBT and allied employees prompted the decision. “Several of our employees have been asking for the benefit and, because we knew the economy has improved, we’re able to expand our benefits.”

Goodridge says policy changes such as this require a multi-pronged approach, and often companies will pre-empt a shareholder vote and implement the change to avoid the cost. HRC’s Herrschaft concurs: “Resolutions help get the conversation started and, more recently in many cases, in avoiding the voting of the resolution entirely [whereby] the company moves to adopt the policy once it receives the notification.”

Progressive Shareholder Activism

The proxy approach to further corporate equality has been around for years. In 1998 the SEC reversed an earlier decision involving Cracker Barrel that allowed companies to exclude shareholder resolutions concerning workplace issues and matters of significant social policy. “That case opened the door for this type of activism,” says Herrschaft.

Since then, shareholders have filed resolutions with corporations such as Walmart, ExxonMobil Corp. and Verizon Communications to amend their EEO policies.

Why have the resolutions been voted down? In Verizon’s case, where the issue is including discrimination based on gender identity or expression, a company spokesperson states: “Verizon’s strong anti-discrimination policies and strict enforcement of its zero tolerance policy made the requested amendment unnecessary.” Verizon is No. 11 on The DiversityInc Top 50 Companies for Diversity® list. Verizon also is one of only three companies in the DiversityInc Top 50 that does not include gender identity in its antidiscrimination policies; the others are MGM MIRAGE (No. 24) and Comerica (No. 45).

ExxonMobil—which after its merger in 1999 became the only U.S. employer to revoke both a nondiscrimination policy covering sexual orientation and domestic-partner benefits and is the only Fortune 100 that does not have an EEO policy covering sexual orientation or gender identity—continues to argue that changing its policy is unnecessary. According to the recent SEC statement in response to a resolution filed for the 11th year in a row to amend its nondiscrimination policy, the company states: “ExxonMobil’s policies go beyond the law and prohibit any form of discrimination. Based on these existing all-inclusive, zero-tolerance policies, the Board believes the proposal is unnecessary.”

Since 2000, ExxonMobil shareholders have submitted resolutions to add sexual orientation to its EEO policy, and, since 2008, include gender identity. Unlike NorthStar’s recent FedEx filing, a proposal to specifically add same-sex domestic-partner benefits for ExxonMobil employees has not yet been filed. “Employee benefits are generally considered outside the scope of what shareholder resolutions can address,” reports HRC.

Similarly, Walmart has received shareholder resolutions over the past few years, backed by the United Universalist Association of Congregations in Boston, to add gender identity or expression to its nondiscrimination policy. Although the board majority has in the past voted against this proposal, the latest proposal has a voting deadline of May 31, 2010. Same-sex domestic-partner benefits have also not directly been addressed by proxy. As a result of not offering them, Walmart has been excluded from participating in the DiversityInc Top 50 competition.

Despite opposition by some boards, shareholder activism is gaining momentum. Take ExxonMobil’s recent shareholder resolution to add sexual orientation and gender identity to the company’s EEO policy. Although the resolution didn’t pass, the issue continues to gain support, with 821 million shares valued at more than $49 billion voting in favor of the proposal.

It’s still legal to fire someone because they’re lesbian, gay or bisexual in 29 states; in 38 states, it is legal to fire someone for being transgender, reports HRC. Plus, the vast majority of companies offer inclusive EEO policies:

* All of the DiversityInc Top 50 companies have same-sex domestic-partner benefits, a requirement to be on the list
* Ninety-four percent of The 2010 DiversityInc Top 50 Companies for Diversity include gender identity in their nondiscrimination policies, up from 74 percent in 2007
* Seventy-two percent of the companies rated in HRC’s 2010 Corporate Equality Index provide protections on the basis of gender identity or expression, up from 5 percent in 2002. This is “perhaps one of the biggest success stories of any single criteria,” states the report

Although shareholders often don’t even read proxy statements, they should. The process gives underrepresented groups a voice by wielding collective power, including institutional investors such as colleges and universities.

Moreover, shareholder activists are on the lookout for new opportunities to help make corporations more competitive and profitable. Resolutions are generally written to limit or disclose executive compensation or political contributions or to challenge issues involving corporate responsibility, such as the environment, labor relations and human rights.

NorthStar’s resolution for same-sex domestic-partner/spousal benefits at FedEx was an attempt to help the company better compete. FedEx earned a score of 70 on the 2010 HRC CEI, losing points for not having same-sex domestic-partner health benefits, among other criteria. Its competitor, UPS, scored 100.

“No one has ever done this [type of] resolution,” says Goodridge, whose Boston-based firm has filed nine resolutions on behalf of shareholders this year. With Wall Street executive compensation being called into question recently, “we thought, ‘Why can’t we ask the board to report on the executive compensation and benefits for top-level managers who have same-sex partners?’ Because we’re not allowed to talk to them about ordinary business. We don’t even know if there are any same-sex partners at FedEx who are in top-level management.”

This is the second resolution NorthStar has filed with FedEx. In 2009, the firm submitted a proposal on behalf of blogger Sara Whitman to add “gender identity” to FedEx’s nondiscrimination policy. FedEx pre-empted a shareholder vote by implementing the change, so the resolution was withdrawn.

Despite progress, Herrschaft notes a disturbing trend: anti-gay groups using the proxy process to advocate their causes. Fortunately in March, shareholders of The Walt Disney Co. overwhelmingly rejected a proposal by Parents and Friends of Ex-Gays and Gays to amend the company’s nondiscrimination policies, which include sexual orientation and gender identity or expression, to add “ex-gays.” The Walt Disney Co. is No. 33 in the DiversityInc Top 50.

Overall, shareholder resolutions in favor of adding LGBT protections and benefits enjoy popular support, reports HRC. “We’ve seen a lot of companies realize that protecting LGBT employees equally is actually good for the bottom line and not something they should be fighting against,” says Herrschaft. “And the work of shareholder activists in beginning that dialogue has met with a great deal of success.”

The SEC requires that shareholders own at least $2,000 worth of shares (or 1 percent of all shares) to file, according to the AFL-CIO. The company’s proxy statement describes the procedure for filing.

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