Mastercard AGM to feature human rights and gender pay votes

May 10, 2019
Board urges shareholders to reject both proposals

Mastercard shareholders will vote on proposals regarding human rights and gender pay at the company’s AGM on June 25, after the company failed to get permission to exclude the measures.

The proposals are another example of the increasing focus on human capital management – which covers a wide range of issues such as diversity, inclusion, talent development, succession planning and workplace culture and misconduct – among shareholder measures over the past couple of years, and the accompanying focus on those issues by governance teams and boards.

One proposal at issue, if approved, would request that the Mastercard board direct the nominating and corporate governance committee to create a standing committee overseeing the company’s responses to domestic and international developments in human rights that affect its business.

Consumer group SumOfUs, which brought the proposal, states in its filing that ‘Mastercard’s exposure to conflict in human rights risk is significant as our company operates in [more than] 210 countries and territories, some of which have a significant risk of human rights violations. Companies can face risks related to human rights even when they only perform support functions.’

It notes that online infrastructure companies may face public criticism by, for example, doing business with or processing payments for neo-Nazis or white supremacists. ‘None of Mastercard’s current board committees have been assigned responsibility for overseeing human rights issues,’ SumOfUs writes. ‘We believe the significant risks associated with adverse human rights impacts at Mastercard warrant specific accountability and responsibility at the board level.’

The board has urged shareholders to vote against the proposal, stating that the company ‘is committed to treating all people fairly and with dignity, and our interest in human rights extends to all areas in which our business is involved and where we have particular expertise.’

The board does not believe that establishing a separate human rights committee is necessary to properly exercise oversight of the issue, it writes in the proxy, adding that the nominating and corporate governance committee is responsible for considering issues significant to Mastercard regarding CSR and diversity initiatives, as well as other concerns raised by investors.

‘The committee reviews legal, regulatory and public policy matters significant to Mastercard, and its charter gives the [committee] the power to study or investigate any matter of interest or concern, including the retention of independent counsel or other expert advisers.’

The board also states that its existing approach ‘reflects our unwavering commitment to social responsibility and human rights’, pointing to, among other things, its 2018 sustainability report to explain the company’s efforts in the human rights area.

‘We operate our network on the principle that consumers should be able to make all lawful purchases, and our franchise rules ensure compliance with the laws pertaining to the acceptable use of our payment processing services by merchants, acquirers and issuers,’ the board writes. ‘When we process payment transactions, we do not have visibility into goods that are purchased or the use of those goods. When we are made aware of illegal activity or rules violations, we work closely with law enforcement and acquirers to shut down those activities.’

Mastercard had previously sought permission from the SEC to exclude the proposal from its proxy statement. In a letter to the agency earlier this year, the company’s outside counsel states that the proposal should be excluded on the basis that it relates to ‘the company’s ordinary business operations because it addresses the decisions concerning the company’s products and services, in particular the use of those products and services by specific types of merchants.’

The SEC staff did not agree, stating in response that, ‘[i]n our view, the proposal transcends ordinary business matters.’

GENDER PAY GAP
If approved, the other shareholder proposal – submitted by Arjuna Capital – would ask that Mastercard report on ‘the company’s global median gender pay gap, including associated policy, reputational, competitive and operational risks, and risks related to recruiting and retaining female talent.’

In its supporting materials, Arjuna Capital states that the median income for women working full time in the US is 80 percent of that of their male counterparts. ‘[US] companies have begun reporting statistically adjusted equal pay for equal work numbers, assessing the pay of men and women performing similar jobs, but mostly ignore median pay gaps,’ Arjuna Capital states.

‘The [UK] now mandates disclosure of median gender pay gaps. And while Mastercard reported a 22.5 percent median hourly pay gap and 42.2 percent median bonus pay gap for its [UK] operations, it has not published median information for its global operations.’

The firm states that actively managing pay equity is associated with greater female representation within companies at a senior level, and points to research suggesting that more gender-diverse leadership leads to better stock price performance and return on equity. It adds that this research suggests that best practices include ‘tracking and eliminating gender pay gaps.'

The board has urged shareholders to vote against the proposal. It states in the proxy that ‘we believe that our reporting of our efforts to recruit, retain and promote women, coupled with our reporting of equal pay, fulfills the objectives of this proposal.

‘At Mastercard, diverse perspectives are a critical component of our business strategy. We embrace all elements of diversity – and we believe that can only happen through a culture of decency built on inclusion. We compensate all employees equitably and competitively regardless of gender, race or ethnicity. We strive to develop a deep understanding of the best ways for Mastercard to increase diverse representation of people at all levels of the company. We recognize that beyond equal pay, the hiring and advancement of women and minorities in leadership positions is another crucial objective toward our inclusion efforts.’

The board adds that Mastercard measures and reports gender pay equity, and notes that women hold 27 percent of the seats on the company’s board.

It states: ‘We work to ensure pay equity and we are delivering good results. To support our commitment to pay equity, we have established a framework for examining pay practices annually with the support of third-party analysis. All roles in our organization are reviewed and benchmarked to the external market, and we assess compensation decisions for potential pay disparities by gender, among other categories.’

Mastercard also asked for SEC permission to exclude the proposal. In a letter to the agency, its outside counsel argues that it should be allowed to do so because the proposal relates to ‘the company’s ordinary business operations by impermissibly seeking to micromanage the company.’ The attorney also argues that the proposal ‘has been substantially implemented and [the company’s] practices, policies and procedures compare favorably to the proposal.’

The SEC staff disagreed with both arguments, denying the company permission to exclude the proposal.

A Mastercard spokesperson declined to speculate on the outcome of the shareholder votes and said the board’s recommendation to shareholders ‘speaks for itself.’

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