Flashback to my Tesco campaign

Last night Channel 4 broadcast an hour-long programme "Chickens, Hugh And Tesco" in which the celebrity chef Hugh Fearnley-Whittingstall unveiled his one-man campaign to transform Tesco's animal welfare policies; following (uncredited) in my footsteps. He, like me, was driven to propose a resolution at its AGM and to get sufficient support to force the company to put the resolution before its shareholders. As I blazed this particular trail in 2007 I thought I would share my experience on my blog. In December 2006 the development charity,War on Want (of which I am Company Secretary), published a report entitled "Fashion Victims: the true cost of cheap clothes at Primark, Asda and Tesco" It was a devastating expose of the employment practices of our big high street retailers who outsource their manufacture of clothing to suppliers in the Third World, paying substantially less than a living wage, based on research undertaken in Bangladesh. I happen to own some Tesco shares, so I decided to move a resolution at its AGM in june 2007 in the following terms:"Conscious that the Company's Annual review for 2005 states that the Company offers a 'market-leading package of pay and benefits' and that its core values include 'Treating our partners as we like to be treated' and seeking'to uphold labour standards in the supply chain'; Acknowledging the report published in december 2006 by the development charity WAR ON WANT and entitled 'Fashion Victims: The true cost of cheap clothes at Primark, Asda and Tesco' that the Company, among other UK corporate retailers, sells clothing cheaply because its workers in garment factories in the developing world are paid substantially less than a living wage and need to work exceptionally long hours; and Regretting that the Company's third party audits have failed to register such unacceptable working conditions which contravene the Company's values: resolves that the Company takes appropriate measures, to be indepently audited, to ensure that workers in its supplier factories are guaranteed decent working conditions, a living wage, job security, freedom of association and of collective bargaining including, where available, the right to join a trade union of their choice"

I sent the resolution to Tesco's Company Secretary Jonathan Lloyd in April 2007 and back came his reply "I am writing to inform you that your request to move a resolution at the Tesco AGM...is not valid under the relevant rules and therefore it will not be included in the Notice to shareholders." He said however that the Company would like to talk to me about my concerns.The resolution was in fact perfectly valid but what Mr Lloyd meant was that, under the Companies Act, I required the support of a minimum of 100 shareholders with a paid up average sum per member of £100 in order to requisition (i.e.compel the Company to table) the resolution.

So I set about collecting the requisite number of Tesco shareholders. I wrote to the Guardian who (under their heading 'Join me on putting Tesco on the spot') published my letter on 26 April calling on Tesco shareholders to support me. The following day Lucy Neville-Rolfe, executive director, corporate and legal affairs at Tesco, had a letter in response (headed 'Tesco:every little helps Bangladesh develop') ("Every little helps" is Tesco's foremost advertising slogan) in which, disarmingly, she said she was pleased that I was seeking to engage with Tesco, that I raised important issues but that Tesco did not accept War on Want's allegations about Tesco's practices. She continued that the right response was to trade with developing countries - as if we had suggested the contrary - and ended her letter with the rather sinister words "The alternative - and believe me, it would be easier - would be for us to stop sourcing in countries that have economic and social problems which are beyond the capabilities of any organisation alone to fix." I wrote back to the Guardian "The issue is not trade or no trade with developing countries; of course War on Want believes fervently in the principle of trading. The issue is the working conditions of the outsourced workers and Tesco and other corporate giants have the clout to impose employment terms on their suppliers. If Tesco is genuine about its ethical pretentions, rather than raising skittles why do Lucy Neville-Rolfe and her fellow directors seek to block my resolution instead of supporting it as I urged them to do when I wrote 'If a corporate body with the muscle of Tesco is willing to put its considerable weight behind such a resolution, it will send a very strong signal to corporate competitors and strike a powerful blow for corporate ethics'"

My campaign was picked up by the media. The BBC filmed me outside a Tesco store in Coventry and I was interviewed on the Sunday morning "God's slot" programme and the Guardian in particular provided good coverage; all praise to their City editor Julia Finch who on the day of the AGM did a piece on an Activist shareholder in which she attacked Tesco for "fighting hard to prevent" the resolution being put to shareholders and remarked "What is surprising is that few institutional shareholders, even those who constantly shout about their corporate social responsibility, are likely to flag even tacit support for the sentiment behind the resolution".. Other papers joined in.the Daily Telegraph (on 15 May) headed a piece "Investor puts ethics on Tesco's agenda" and quoted me"I'd like to see all our corporate retailers taking their ethical responsibilities seriously. It's not anti-Tesco" I sought support from wealthy individuals I had acted for as a solicitor and who I reckoned would be sympathetic e.g. Richard Branson whose PA replied "I am afraid that due to Richard's hectic schedule he is unable to respond to your request."Friendly responses to my appeal, however, started to come in in dribs and drabs, emails and hard copy, and it was greatly boosted by backing from the Joseph Rowntree Charitable Trust which held nearly one million shares. I did the round of investors' organisations, getting pathetically muted noises from bodies like the churches' PIRC (recommendation to its members to abstain) who should have supported me, more from some socially-conscious investment concerns like Threadneedle Asset Management and the UK Social Investment Forum but lots from little people. Ultimately I secured well over my statutory minimum and Tesco conceded my requisition at a meeting I had with its Chairman David Reid and Mr Lloyd at the Institute of Directors at which they said the Company had never before had an individual shareholder's resolution. They would include the resolution in the AGM Notice to their shareholders and they would, as required by statute, publish my statement in support of the resolution as well as the Company's statement supporting its recommendation to members to vote against. Although Tesco were entitled to charge me for publishing (as they apparently did with Hugh F-W who had to cough up nearly £90,000) they decided not to do so.

My statement read as follows:
"The background to the resolution is the report 'Fashion Victims: The true cost of cheap clothes at Primark, Asda and Tesco' published in December 2006 by the Charity War on Want (of which I am company secretary), based on recent research in Bangladesh, which Lucy Neville-Rolfe, the Company's Corporate and Legal Affairs director, praised in a letter she wrote to the Guardian newspaper. as the title of the report made clear, it exposed the appalling working conditions of workers in the supplier factories in the developing world who make the clothes which UK retailers including Tesco, sell so cheaply. The workers are paid substantially less than a living wage. The Company agrees that, in Bangladesh for instance, a living wage should be at least £22 (Tk 3000) per month yet the national minimum wage board in that country has just proposed a minimum of £12, still only half of the most basic living wage. War on Want found that the starting wages in the six factories where the clothes are made discussed in the report, ranged from £7.54 to £8.33 monthly and that the garment workers had to work exceptionally long hours, regularly 80 hours per week, to eke out survival. Ms Neville-Rolfe in her guardian letter acknowledged frankly and fairly that conditions were 'hard and that standards differ from those in the UK.'

the Company prides itself on its ethical stance. The resolution quotes the 2005 Annual review which refers to 'core values.' 'treating our partners as we like to be treated' and seeking 'to uphold labour standards in the supply chain' as well as the claim to offer a 'market-leading package of pay and benefits'. The Company is a member of the Ethical Trading Initiative (the ETI) and thus subscribes to its Base Code, agreed by founding trade unions,NGO and corporate members, which reflects the most relevant international standards with respect to labour practices(the ILO Conventions). the ETI considers that the labour standards incorporated in the Base Code constitute a minimum requirement for any corporate code of labour practice and, when corporate members join the ETI, they commit to implementing the Code in their supply chains and reporting annually on progress in doing so.

The Company has made a start in implementing the Code. The Company secretary has stated that in 2006 Tesco conducted 1,000 audits to ensure that its labour standards are being maintained and that such audits play a very important role in providing reassurance for workers that the Company takes their welfare very seriously and in identifying and resolving issues with suppliers.

The ETI, however, emphasises that diagnosing problems is only a first step to change and that the agreement of suppliers to institute corrective actions and make sure they are followed through is equally important. It is with this in mind that the resolution has been put forward. Its aim is to ensure that the Company exerts the undoubted clout it wields with its suppliers in the developing world to effect changes in working conditions to bring them up to a minimum of what the best employers take for granted for their workers in this country - a living wage, reasonable hours of work, job security, freedom of association and the right to organise in a trade union of their choice. And to empower the Company to monitor the changes that have to be implemented by audits that are completely independent and seen to be so.

Let us have no illusions. treating workers decently has a price-tag. It will affect profit margins. But it is unethical for wealthy corporate retailers in the UK and their shareholders to continue to treat outsourcing, beneficial as it may be in the sense that it provides jobs for people who otherwise would have none, as an absurdly cheap option. voting against the resolution will be, and be seen, as a sign of shareholder narrow self-interest and greed. Voting for it will be, and be seen to be a dramatic initiative by shareholders to reinforce the Company's good intentions to improve the lot of its poorest workers. To paraphrase John Milton's famous words 'I see in my mind a noble and puissant company rousing herself like a strong man after sleep and shaking her invincible locks.' Passing the resolution will truly provide reassurance for its workers that the Company takes their welfare so seriously indeed that it transforms their lives in reality, not merely on paper."

And so to the AGM at the Queen Elizabeth II Conference Centre on 29 June. My resolution was no.23 but before it was one to approve a proposed bonus scheme for the Chief Executive Sir Terry Leahy who was to receive an £11.5 million windfall on top of his phenominal salary; nearly 20% of shareholders refused to back this. In due course I spoke to our resolution. I pointed out that it was here despite opposition from Tesco's Board, yet there was nothing revolutionary about it. I said all we sought was that the Company do effectively what the Board , in its opposing statement, claims the Company is doing,applying ethical standards in its supply chain with a rigorous programme in place. I stated that the resolution called on the Company (in compliance with the ETI's Base Code to which it is a signatory) was "not only the right thing to do but will redound to the Company's reputation and commercial benefit and to the advantage of its shareholders" I disputed the Board's claim that I called for "inflexible" measures. I said I saw no reason why contracts (incidentally the Company Secretary had refused my request to see the terms of the contracts made with its suppliers on the grounds of commercial sensitivity) made with suppliers could not stipulate due compliance with the ETI Base Code standards and I pointed out that I spoke with a lifetime's experience as a lawyer. In a clarion passage I said "The irony of the Board recommending shareholders to vote against our resolution to increase the meagre pay of its outsourced workers - which the Company puts at somewhat more than the minimum of £12.22 per month in Bangladesh - whilst at the same time provocatively recommending that shareholders vote for Incentive plans which will augment the already absurdly generous remuneration packages of its top executives - boosting the Chief executive's take-home pay by up to £11.5 million on top of last year's £4.62 million - may be lost on the Board but is certainly not lost on this shareholder or, more to the point, on the public at large. there is nothing that lowers a company more in the estimation of right-thinking people generally, as other corporate giants have found, than a public display of executive greed in an affluent world going hand in hand with a public display of corporate miserliness and indifference towards those at the bottom in an impoverished world who contribute so munificently to our corporate wealth" And my peroration went :"If, on our deeply polarised planet,'Make Poverty History' is not to remain an empty slogan we all, retailers, shareholders, customers, suppliers and of course government, have a part to play. Let Tesco, as the market leader, steal a march on its competitors and blaze an ethical trail by passing this resolution."

The net result exceeded our reasonable expectations. The real object of my campaign was to highlight the injustices manifested in the way workers in the Third World are treated and the unhealthy social polarity between an affluent, often obscenely affluent, north and a grossly impoverished south. Incredibly, despite the Company's admonitions, 8.6% of shareholders backed the resolution and another 20%, by abstaining. refused to reject it. What is more my campaign received accolades for its exhibition of shareholder activism, for stimulating corporate democracy.The Investors Chronicle (a Financial Times publication) in its 28 March/3 April 2008 issue, gave it as a case study. "Although Mr Birnberg's resolution was defeated, the unprecedented event caused a wave of publicity, including TV interviews and newspaper articles. tesco strenuously defended its reputation in the press. 'I never expected it to be passed - the object of the exercise was to raise awareness' he says. 'If you feel a company is behaving in an amoral fashion, why not propose a resolution to raise it publicly? At the very least, you will embarrass the directors, and hopefully get changes too.'"

And raise awareness it surely has. In the 18 months that has elapsed since, the British public (and I believe further afield) has become conscious of the abuses inherent in our bi-polar world. Other corporate retailers Primark, Asda and Marks & Spencers have felt the cold blasts of social criticism for their exploitation of Third World labour and even for Third World practices here at home. And my corporate activism has become something of a model for others, like Hugh Fearnley-Whittingstall, to emulate, publicly raising other important issues. What is more, in the cold recessionary climate of 2009, the manifest injustices and grotesque greed of executives like Tesco's CEO and his ilk in a world riven with poverty, has been illuminated as a cause of the instability and indeed collapse of the whole financial system. What I said at the Tesco AGM has been shown to be so clearly true.