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Ruth Saldanha: A few weeks from now, the 2021 proxy season will be underway. One of the company's investors we’ll be watching very closely is the one at Alphabet. The parent company of Google just announced a 20-to-1 stock split. Shareholders have filed 11 proposals at Alphabet around issues related to data privacy, racism and the environment, among others. However, because of a dual share class structure at Alphabet, it is next to impossible for investors to earn a majority. So then why file at Alphabet at all?
Sarah Couturier-Tanoh is the Manager of Corporate Engagement & Advocacy at SHARE and has filed one of the 11 proposals, the one relating to the human rights impact of its new advertising technology. She is here today to talk about the filings.
Sarah, thank you so much for being here today.
Sarah Couturier-Tanoh: Thank you for inviting me.
Saldanha: Now, SHARE has filed one of the 11 proposals at Alphabet, the one on human rights. What are some of the issues investors should be aware of with regards to Google and human rights?
Couturier-Tanoh: Well, Google is the largest digital advertiser in the world. So, I think it is important for investors to pay attention to privacy-related issues and see exactly what the proposal we filed on behalf of one of our clients, United Church of Canada Pension Plan, is about.
So, the proposal asks the company to conduct what we call a human rights impact assessment on the new targeted advertising system called the FLoC, it stands for the Federated Learning of Cohorts, and it was supposed to be implemented in 2023. In short, the current system relies on tracking cookies and it will be replaced by a different technology and civil society actors and tech experts have expressed concerns about the FLoC, especially on user privacy. And a week ago, Alphabet announced that it finally will not implement the FLoC and will replace it with another new technology called Topics. So, obviously, we're happy that the company acknowledges shortcomings of the FLoC, but there is still a lot to unpack to understand how Topics will impact user privacy. And one thing for sure is that it is critical for Alphabet to perform a human rights impact assessment on whatever new technology is implemented, if it may affect the privacy rights of billions of users.
Saldanha: So, which are the other 10 proposals are you most closely watching?
Couturier-Tanoh: Well, I think all the proposals filed this year. At least one I know at Alphabet deserves investors' attention and I don't think it'd be fair of me to single out specific proposals. That being said, because of the nature of its activities and where it commercializes its products and services, Alphabet is exposed to tech-related risks that certainly need actions from the company like data privacy, artificial intelligence, disinformation, et cetera. So, I guess, I will closely pay attention to how investors approach emerging risk through their voting practices.
Saldanha: Now, Alphabet has a dual share class structure which indicates that the proposals will most likely not get a majority. So, what will these proposals even achieve?
Couturier-Tanoh: Well, I believe the establishment of equal voting shares would definitely benefit shareholders. Alphabet is a public company, and the fact there is a dual share class structure is not to mean that the shareholder voice should not be heard and taken seriously. So, if a proposal gathers significant support from unaffiliated shareholders, in my opinion, it doesn't matter that much if it doesn't get the overall majority, so boards should be responsive. And in that perspective, I don't believe that the proposals will be vain if they make a validation from the shareholders.
And I'm sure all proponents expect to have a constructive dialogue with the company's management and board and get the changes they request if they are warranted.
Saldanha: So, has the company ever addressed the issues raised in the past and resolved them to shareholder satisfaction, despite not getting a majority in the shareholder proposals and votes?
Couturier-Tanoh: Well, it's quite common for a company's management to not support shareholder proposals, and I'm sure that every shareholder who filed the proposal at Alphabet has a different experience engaging with the company. But from what I know the management had constructive dialogues with several investors in the past, and I know that changes happened because proposals were filed and voted. I also know that those changes are often not as satisfactory as proponents would expect. So, I think it's important for shareholders to continue filing these proposals to build awareness on particular issues like this in tech, and emerging tech risks and allow other shareholders to express their sentiment on these matters.
Saldanha: Well, thank you so much for joining us today with your perspective, Sarah.
Couturier-Tanoh: Of course, happy to do so.
Saldanha: For Morningstar, I am Ruth Saldanha.
