The Vote Roundup: Understanding Microsoft’s six shareholder proposals
This week, we’re decoding the voting decisions that Microsoft shareholders will be mulling over right now.
At Microsoft’s upcoming December AGM, shareholders can vote on six shareholder proposals that cover issues ranging from diversity and inclusion, to producing technology used for military training.
Here’s what those key proposals are about:
Microsoft’s diversity and inclusion efforts
This proposal asks whether Microsoft’s diversity and inclusion efforts are costing more than they’re worth.
The proposal cites Microsoft’s 2021 Global Diversity & Inclusion Report as failing to provide “a complete analysis of the quantified net benefit to shareholders, costs, and risks” of the company’s focus on diversity.
It asks the tech giant to do a cost-benefit analysis of its Global Diversity & Inclusion (D&I) efforts.
Microsoft believes that the proposal’s submitter, Ridgeline Research, harbours “animosity to diversity and inclusion commitments”, and believes it is unfair to single out its D&I efforts for a cost-benefit analysis.
Microsoft’s approach to hiring people with criminal records
Shareholder North Star Asset Management states in this proposal that job candidates who were previously incarcerated face discrimination due to their criminal record, and that this particularly impacts Black and Brown people.
They say that despite signing the Fair Chance Business Pledge, a commitment that companies do not discriminate against candidates with criminal records, Microsoft hasn’t put in place practices to enforce it.
The proposal asks Microsoft to report on whether its hiring practices on people with arrest and incarceration records align with its diversity, equity and inclusion goals.
Microsoft responded saying that it’s already put up safeguards to prevent discrimination, such as not asking about candidates’ criminal records until after offering them the job. It says that 98% of job candidates with criminal records were hired.
Microsoft’s pension plan, climate change, and risks to the economy
In this proposal, activist-investor-group As you Sow asks Microsoft to assess whether its 401(k) pension funds are hurting the economy by investing in companies that contribute to climate change.
Their argument goes like this: The pension plans are invested in businesses that contribute to climate change > Contributing to climate change could hurt the economy > Hurting the economy would go against the company’s fiduciary [legal] duty to invest in the best interests of pension members.
However, Microsoft thinks that As You Sow misunderstands how 401(k) plans work, and the company is under a duty to invest only to grow the pension funds, not consider environmental concerns.
The tech company also said that, contrary to As You Sow’s claims, it does actually offer greener investment alternatives through hundreds of environmental, social and governance (ESG) investment options.
The human-rights risks of governments using Microsoft technology
This proposal by Boston Common Asset Management and Impact Investors highlights the risk of Microsoft’s technology being weaponised. They argue that it’s at risk of “gamifying” warfare by allowing the US military to use its products, like the virtual-reality headset HoloLens, to train soldiers.
The shareholders argue that, without proper restrictions, the use of Microsoft’s technology could violate people’s privacy and human rights, and disproportionately impact marginalised groups.
They want Microsoft to assess whether governmental use of its technology contributes to privacy, civil, and human rights violations.
Microsoft defended its practices and said that it will not withhold technology from the military who defends the country. It reassured shareholders that ethical issues on its military-related products are being addressed through conversations with relevant stakeholders.
Microsoft’s association with military-training weapons
This proposal also focuses on the company’s virtual-reality headsets and military contracts, but for different reasons.
This shareholder, Harrington Investments, is instead raising concerns about how military contracts could impact the tech giant’s reputation and consequently its finances.
They are asking shareholders whether they want Microsoft to assess the risks of being associated with military-training weapons.
However, Microsoft again defended its business with the military on the basis of national security, and asked shareholders to refer to their response to resolution seven [above].
Increased tax reporting
This final shareholder proposal, submitted by AkademikerPension and other co-filers, claims that Microsoft’s current tax practices make it hard for investors to assess whether the company is paying tax responsibly. They highlighted that a Microsoft subsidiary in Ireland recorded profits of $315 billion in 2020, despite having no employees.
Concerned about increased regulation on financial reporting in the US and EU, the shareholder wants Microsoft to produce a tax report in line with the Global Reporting Initiatives’ (GRI) Tax Standard.
In response, Microsoft highlighted that GRI standards aren’t commonly used by US companies.
The company defended its tax practices by saying that it conforms to every country’s tax laws, and that some of its reports need to remain confidential as they contain sensitive information.
These proposals at Microsoft certainly aren’t micro, discussing high-level issues such as national security and the management of millions of dollars in pension money. Microsoft has recommended shareholders to vote against all of the above proposals.
If you are a shareholder, how would you vote?
To view the full arguments, please see Microsoft’s AGM notice here.
