Police arrested dozens of demonstrators on February 16, 2020 during an anti-ICE rally in front of ... [+]
Which side are you on, Thomson Reuters? Despite Reuters journalists reporting on stories like family separation, rapid deportations, and the failure of Immigration and Customs Enforcement (ICE) to provide adequate healthcare to detained transgender migrants, investors have raised concerns about whether Reuters’s parent company, Thomson Reuters (NYSE|TSX:TRI), has adequately assessed the risks of providing its software to ICE and seeking financial benefit from ICE’s growth. Thomson Reuters has held 80 contracts with ICE worth nearly US$75 million, and currently holds seven distinct contracts with ICE worth nearly US$50 million.
BCGEU, a major Canadian labor union with $110 million of assets under management, filed a shareholder proposal last month to take a stand on the deeply American issue of human rights abuses perpetrated by ICE. The BCGEU’s assets are invested in a number of companies, including Canadian multinational media conglomerate Thomson Reuters. I spoke with BCGEU President Stephanie Smith about this investor relationship, and what the union is doing to leverage their collective voice in favor of migrant rights.
The very concept of a media company actively profiting from business with ICE may sound confusing. What exactly is Thomson Reuters’s connection to ICE — and its documented human rights abuses?
You have struck at the heart of the matter. Is Thomson Reuters a media company? It may have historically been a media company, but Thomson Reuters is increasingly a technology company, selling content and software-as-a-service.1 Thomson Reuters’s software offerings include its CLEAR® product, a powerful data analytics software that is used by law firms and law enforcement, including ICE.
Thomson Reuters currently holds US$50 million in contracts with ICE, including those under which Thomson Reuters makes its CLEAR® software available to ICE. ICE relies on the data and technology provided by Thomson Reuters products such as CLEAR® to track and arrest immigrants on a massive scale. CLEAR® is a powerful data tool that enables background checks for investigative purposes by accessing and consolidating records across multiple databases, including utilities, DMV records, property, criminal and court records, arrest records, business data, healthcare provider information, live cell phone records and license plate recognition.
Does Thomson Reuters have any human rights policies that it seems to be contradicting with this relationship?
While Thomson Reuters’s business has evolved, its guiding principles have not. It’s governed by the Trust Principles, which Thomson Reuters says “have guided our company for almost 80 years and they continue to help us operate fairly.”
What are the Trust Principles? Adopted by Thomson Reuters in 2008, the Trust Principles are a set of five principles that originated from the Reuters news business in 1941 and are focused on ensuring that the company operates with “integrity, independence and freedom from bias.” These principles are great for a media company, but they are inadequate for the technology company that Thomson Reuters has become.
Other prominent companies in the software-as-a-service space have adopted the United Nations Guiding Principles on Business and Human Rights (UNGPs), including RELX PLC, the owner of Thomson Reuters’s biggest competitor, LexisNexis.
Also, Thomson Reuters is a signatory to the United Nations Global Compact and its Ten Principles, one of which requires that signatories not be complicit in human rights abuses.
The BCGEU’s shareholder proposal asks the Thomson Reuters board to consider whether it should be adopting the UNGPs, and to consider whether its contracts with ICE are in compliance with the UN Global Compact.
What exactly is the BCGEU’s connection to Thomson Reuters? Can you explain the capital stewardship strategy the BCGEU is known for, and currently employing against Reuters?
The BCGEU’s shareholder engagement program follows the creation of a segregated, actively managed Canadian equities portfolio. In 2014, our union’s Treasurer and Chief Financial Officer, Paul Finch, sought and received approval from our governing board to divest our assets from fossil fuels, and accomplished this by creating a segregated fund that broke from our investment firm’s pooled fund strategy.
One of the key aspects of the new segregated fund was the ability to have direct control over proxy votes and start engaging in capital stewardship. This is core to our union’s investment strategy, which is based on our belief that ethical investing will provide superior risk adjusted returns over the long term. This philosophy is not unique to the BCGEU: it’s shared by our union’s global equities manager, Al Gore’s Generation IM. Other unions that have implemented impressive capital strategies include the Service Employees’ International Union (SEIU), the United Food and Commercial Workers (UFCW), and UNITE HERE.
The BCGEU’s capital stewardship program helps us leverage our power as an investor to demand action from companies on the issues that matter for our members — and all working people.
Capital stewardship is a major priority for our union, and as long-term investors we believe that smart capital stewardship is vital to protect our investments and our members. It’s not an either-or; well-managed companies that manage their enterprise risks are stronger investments. Mike Musurac — formerly AFSCME’s representative to the New York Employees Retirement System (NYCERS), which held over $200B in assets — used to say that large public market investors don’t have the luxury of treating people and the environment as externalities because we own parts of the whole economy.
Under the BCGEU's capital stewardship strategy, our union has submitted shareholder proposals to companies including the Royal Bank of Canada, Brookfield Asset Management, Canadian National Railway and Loblaw on topics such as human rights, sexual misconduct and executive compensation. Our union's strategy has succeeded in achieving strong commitments on human rights due diligence, vertical pay analysis, food waste and climate disclosure. Our proposals have routinely earned strong votes of 20-40% at company shareholder meetings, and we are very proud of the burgeoning work we are part of in this field in Canada.
Thomson Reuters is one of the companies we’re invested in. As a long-term investor, we want to ensure that Thomson Reuters is living up to its obligations as a signatory to the United Nations Global Compact. And furthermore, we need to see Thomson Reuters address the risks resulting from the human rights impacts related to how its software is being used. Human rights advocates like Mijente, Immigrant Defense Project and Law Students Against ICE have been organizing for years on this issue and are demanding every tech company that works with ICE to immediately halt its support for the agency at this time.
For those who are new to the technicalities of shareholder proposals, can you briefly break down the process of how this kind of activism works?
Shareholders are entitled to submit proposals for consideration at shareholder meetings. These proposals, called shareholder resolutions, request that a publicly traded company take a certain course of action. While these resolutions are not binding on the board of directors, resolutions receiving a strong level of support can serve to influence and guide a board of directors on its corporate governance and related practices. Resolutions have helped companies to take a number of actions over the years — for instance, Morgan, I know you were deeply involved in getting Lockheed Martin to add sexual orientation to its non-descrimination policy many years ago, and in convincing McDonalds to reduce pesticides in its potatoes while leading the Responsible Endowments Coalition.
This particular shareholder proposal was filed under Canadian corporate law. The BCGEU submitted its to Thomson Reuters in mid-February 2020. Thomson Reuters published the information circular for its shareholder meeting on April 17, 2020; the circular includes both BCGEU’s shareholder proposal and Thomson Reuters’s response. We encourage registered shareholders to vote their shares for our proposal before or at the June 3, 2020 AGM. Details on how to vote your shares and about the virtual AGM can be found here.
Shareholder proposals aren’t only about social values and ethical considerations. What’s the argument the BCGEU lays out to vote for this proposal, from a financial perspective?
As a long-term investor, we need to see Thomson Reuters address the risks resulting from the human rights impacts related to how its software is being used. Our proposal asks the Thomson Reuters board to provide more information on whether and how it has assessed and mitigated the human rights impacts of its contracts with ICE. Banks in particular have already faced major reputational risks from their association with immigrant detention and see this issue similarly for Thomas Reuters. In response to a shareholder proposal we filed earlier this year, Canada’s largest bank, the Royal Bank of Canada, confirmed it had screened the U.S. private prison industry and committed to greater human rights disclosure and engagement.
In their response to our proposal, Thomson Reuters leans heavily on the Trust Principles, and says they must remain impartial and not take sides in terms of who they do business with.2 They also rely on users to self-certify that they are using Thomson Reuters software in a “legally permissible manner.”3
If you are striving for impartiality as a media company, that’s one thing. But striving for impartiality when it involves human rights violations resulting from the use of your products is entirely another. Thomson Reuters’s Trust Principles do not absolve the corporation from its responsibility to ensure that its products are not being purchased by governments that use them to commit human rights abuses. The UNGPs require meaningful human rights due diligence and stakeholder engagement. Thomson Reuters has provided no evidence of such due diligence or engagement.
This leads us to one conclusion: Thomson Reuters has not assessed or mitigated the risks of providing its software to ICE.
What are you expecting to be the outcomes of this shareholder proposal? Do you think others will join on?
Thomson Reuters is 66% owned by Canada’s Thomson family, through The Woodbridge Co. Ltd.4 When Reuters was acquired by Thomson in 2008, Woodbridge agreed to have Thomson Reuters adopt the Trust Principles, and Woodbridge signed an agreement to support the Trust Principles.5 Woodbridge is in essence the caretaker of the Trust Principles.
The BCGEU has delivered a letter to Woodbridge that outlines the concerns with the Trust Principles and asks Woodbridge to abstain from voting on our shareholder proposal, to allow the true sentiment of shareholders to be expressed.
Our proposal outlines some serious concerns with Thomson Reuters’s risk management practices. CWA Canada, the union that represents Thomson Reuters workers in Canada, shares these concerns. Risk management concerns are primary concerns for institutional investors with significant stakes in Thomson Reuters, so we expect strong support from these shareholders.
Thanks to Jasmine Rashid and BCGEU Capital Stewardship Officer Emma Pullman for their contributions to this piece. Additional documents and a footnotes key related to citations 1-5 are here. When reached out to for comment, a spokesperson for Thomson Reuters referred the author’s team to this document, page B-2, for the Board of Directors stance on the shareholder proposal. Full disclosures related to my work here. This post does not constitute investment, tax, or legal advice, and the author is not responsible for any actions taken based on the information provided herein.
