Responsible technology: Active engagement with Meta and Alphabet

Stewardship is helping to shape and define best practice in fast-changing industries such as consumer technology.

Published on 23/05/23.

Responsible technology

When it comes to stewardship and engagement, many people immediately think of the work undertaken to help traditional markets and industries adapt their business models to the demands of the modern world.

However, stewardship is equally important for growing markets, helping to shape and define best practice in fast-changing industries such as consumer technology. These businesses move at speed and require high level engagement around a number of issues relating to privacy and human rights.

We have also witnessed growing concerns around technology companies’ potentially negative human rights and societal impacts, as well as around society’s trust in them – which is key for sustainable, long-term value creation.

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2023 annual general meeting: co-filing shareholder resolutions

As a global asset manager with extensive investments in the technology sector, we believe that we have a role to play in encouraging responsible technology practices and helping protect clients from associated investment risks. Our research found that companies collecting personal data and developing AI systems are exposed to human rights, regulatory, operational and reputational risks, and that a fine line separates success from failure in terms of responsible technology policies and practices. This work framed our engagement discussions with firms exposed to data privacy issues. In line with our engagement policy, at the beginning of each engagement, we defined clear objectives for the engagement, and a corresponding timeframe to allow them to achieve those, which could lead us to using escalation techniques when progress is too slow or when the level of responsiveness is not satisfying.

Lessons learned from our engagement with tech companies show that, while they – most of the time - do acknowledge that data privacy, responsible AI and human rights are material risks for their business models, they are not taking sufficient steps to address and mitigate such risks.

As a result, we decided to escalate our engagement and to co-file two shareholder resolutions at the 2023 annual general meeting (AGM) of Meta and Alphabet.

The investee company: Meta

Our engagement approach

As a tech giant whose revenues are largely dependent on the collection of users’ personal data, Meta is part on our engagement focus list since 2021 on data privacy and human rights issues, with regular discussions focusing on:

  • transparency in public reports on data privacy policies and practices,
  • oversight of the issue at Board level,
  • data collection minimisation (adequate, relevant and limited to a company’s specific purposes),
  • privacy by default – ensuring that user data is protected as standard.

Some of our objectives have been met. For example, Meta established a privacy committee at Board level and set-up the Oversight Board in 2020. However, we felt there is much more work to be done, and we continued to engage with management on these issues. In 2022, we met with the company to discuss specific AGM resolutions relating to data privacy as well as Meta’s poor ESG ratings1 .

As we deemed Meta’s answers to be unsatisfactory, we decided to escalate engagement and voted against management – going beyond a simple adherence to our voting policy standards. Our votes included supporting shareholder proposals linked to our own engagement requests, including a resolution requesting the publication of a third-party Human Rights Impact Assessment (HRIA).

Our voting decisions were also cast with the aim to improve the company’s governance and board accountability, which in our view is key to Meta’s reporting and progress against social issues. In that context, we opposed the re-election of founder Mark Zuckerberg as director, supported a shareholder resolution requesting the removal of disproportionate voting rights attributed the company’s founders, as well as a shareholder resolution requesting an independent board chair.

Further escalation

Despite the significant level of support from institutional shareholders recorded on responsible technology-linked proposals, including the one related to the HRIA publication, no notable structural changes were made to the company’s oversight of data privacy and human rights issues. Therefore, we have decided to go public and co-file the shareholder resolution related to the HRIA publication, that will be re-submitted to vote at its 2023 AGM. Ahead of the 2023 AGM, we also intend to cast our votes 2 :

  • against the re-election of Mark Zuckeberg and for the “one share one vote” shareholder proposal, to express our dissatisfaction with the concentration of powers within the hands of the company’s founder and the lack of accountability to shareholders’ requests,
  • against the re-election of the Privacy Committee Chair, signaling our concern with the lack of significant progress in addressing privacy-related risks,
  • in support of other relevant responsible tech-related shareholder proposals, including the one requesting a report on enforcement of community standards and user content as well as the one requesting a report on child safety and harm reduction.

Post-AGM results & learnings  (update on 15/06/23)

The proposal requesting the publication of a Human Rights Impact Assesment (HRIA) report recorded 17% in support, although the super-voting shares benefitting Marc Zuckerberg hide significantly higher support from independent shareholders (estimated at 48.2% by AXA IM).

Zuckerberg’s disproportionate influence over voting results is even more striking when looking at the “one share one vote” shareholder proposal, which recorded overall level of support of 27.9% – meaning that 77.5% (estimated by AXA IM) of votes from outside shareholders were cast in support of the removal of Zuckerberg’s super-voting shares. This may cause some frustration among certain shareholders, which could explain the small but notable level of opposition against Zuckerberg’s re-election (which faced 8.1% of opposition).

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The investee company: Alphabet

Our engagement approach

Given the outsized impact of Alphabet, holding company of Google, on society, we have been engaging the Company on responsible technology issues since 2019, with a specific focus on:

  • board oversight of data privacy and human rights,
  • the implementation of best-in-class privacy policies and practices,
  • integration of relevant human rights and privacy-related indicators in executive pay.

As part of this engagement, in 2019 we co-signed a letter to the Board Chair requesting a meeting to discuss the management of human rights issues and the implementation of the UN Guiding Principles on Business and Human Rights across the company’s operations and value chain. In absence of satisfactory response, we decided to co-file a shareholder resolution at Alphabet’s 2020 general meeting requesting the company to establish a Human Rights Risk Oversight Committee of the Board of Directors.

Since then, we continued to regularly meet with the company to discuss human rights issues. As part of the Global Network Initiative, Alphabet gets its HR & privacy risk assessments reviewed by an external third party, and the Board and Audit committee are frequently updated by the Chief privacy officer and the privacy counsel. Moreover, the company decided in 2022 to integrate ESG objectives – encompassing human rights and privacy issues notably - in its new executive bonus program.

Further escalation

While these are effective oversight measures, Alphabet remains under high scrutiny on HR & privacy issues. Regulatory and reputational risks are increasing especially with the growing adoption of artificial intelligence systems that may increases risk of privacy violations and discrimination.

We have therefore decided to co-file another shareholder proposal at Alphabet’s 2023 AGM, requesting the company to provide more quantitative and qualitative information on its algorithmic systems. Ahead of the 2023 AGM, we also intend to cast our votes 3 :

  • in support other responsible tech-related proposals, including for example the one requesting the publication of a Human Rights Impact Assessment of targeted advertising technology, as well as the one requesting a report on alignment of YouTube policies with online safety regulations,
  • in support of the “one share one vote” proposal in order to maximize the impact of our votes on future resolutions and promote enhanced Board accountability.

Post-AGM results & learnings  (update on 15/06/23)

The proposal on Alphabet’s algorithmic systems recorded a substantial support of 17% of votes, similar to the levels recorded on other responsible tech-related proposals (including the HRIA proposal and the YouTube policies-linked resolution, which both faced around 18% of votes in favour).

The highest level of support recorded on a shareholder proposal was cast against the “one share one vote” resolution, which faced 30.8% of support votes, highlighting shareholders’ expectations around greater accountability. Note that the company discloses, as of April 4, 2023, that its executive officers hold 52.9 of the voting rights.

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