In this issue of Criterion Connections, Christina Madden of the Criterion Institute speaks with Gerry Hudson, Secretary-Treasurer of the Service Employees International Union about his work advocating for essential workers, the investment risks of valuing efficiency over worker safety and rights, and his views on what the future of work could look like “after COVID-19.”

COVID-19 has upended all financial and economic projections as well as any predictions we may have had about what the future will look like. Do you see this as an opening to rewrite the narrative of what the future of work could be? 

Absolutely. The future of work is here and it’s critical to engage in these questions of what will constitute a good or risky investment. That’s not new but the pandemic has made the urgency crystal clear to those who might not have been thinking about it already. And now, rather than a debate about whether or not some of these issues we’ve been raising about worker safety are essential to managing investment risk, you’re starting to see a shift to understanding that they are.

I definitely see this as an opening to either rewrite a narrative or strengthen a narrative that we and other allies like Criterion have been elevating that helps define what is deemed good or risky. Part of this comes down to a distinction between people who invest from a speculative point of view and those who are sustainable, long-term institutional investors. For anyone who is a sustainable long-term institutional investor, this is absolutely a moment when people have to redefine risks or amplify risks they were previously looking at on the margins.

In mid-March SEIU launched Protect all Workers to ensure the health, safety and economic well-being of every single working person in this country. SEIU members are essential workers on the frontlines of this twin economic and health crisis: healthcare providers, public employees, janitors and so many more. More people finally woke up and saw that the service and care workers they have always relied on to make our country run, who were always essential, but were previously treated as invisible. Our job now is to make sure we don’t go back to the way things were before.

This is true in other areas, particularly where safety is paramount – in food distribution and McDonald’s workers, or transportation with Uber and Lyft. Nobody is going to get into an Uber or a Lyft if safety isn’t at the center of their experience. Nobody will want to go to a long-term care facility, or leave their kids at a daycare facility, if safety isn’t the most important thing. In this pandemic, every single intersection of our workforce is finding if they can’t do their jobs because of a lack of protection, their customers can’t feel safe either.

This has a huge human impact, but even just in strictly fiduciary terms, how does the economy function, and how do you invest, if you can’t convince consumers that buying is safe and if the workers won’t do their jobs to bring goods and services to customers? The narrative has to shift.

What does this mean for companies? 

At a recent investor forum, we heard from a nurse at one of the largest hospital chains in the US, HCA Healthcare. As she described the situation at her hospital, she just doesn’t have the right protective equipment. This is a problem for the workers and for the patients, but also for the company. How is HCA going to be able to provide the services that it promises if it can’t protect the workers who serve the patients that its business model relies upon?

The company’s public statements are largely saying that the workers aren’t telling the truth about the conditions, but what incentive would a worker have to say that if it weren’t true? We’re seeing companies doing a lot of reputational risk management.

Without making assumptions about any particular company, over the last couple of decades, we’ve seen an emphasis across the economy on efficiency which, over the long-term, leads to an incredible absence of resiliency.

Companies are spending money on share buy backs, dividend payments, and what we would consider excessive executive compensation, and then when there is a downturn, they end up without a savings account and need to run to the federal government for a bailout.

There are companies getting money in the current stimulus who also received money in 2008 and 2009 and spent it and now they’re broke. Maybe the CEO made a lot of money but the shareholders didn’t.

That’s just on the share price side, not the logistics. If you look under the business model of the companies that are delivering healthcare in the US, we have inadequate numbers of beds unless you’re looking only at the average demand under normal circumstances. What happens to the situation if you need more beds, like we do now?

You can also look at food distribution. The whole supply chain is at risk and being exposed. The government is insisting people have to go back to their jobs in meat packing, even if they might die at the meatpacking facility. Why? Because the supply chain is set up so the only way we can deliver things is through efficiency. You produce it one day, send it to the stores the next day, and it immediately gets sold.

This is problematic during a pandemic but also more generally. The current situation is revealing a whole bunch of other things that could go wrong. Take climate change. Why couldn’t that disrupt supply chains? It could and it has, just in a different way.

We see a real need for this structural shift. If you don’t manage these very real risks, you end up with a tail risk that would once be called a black swan event even though it is not a black swan event at all. These are documented, preventable risks. It’s worrisome from a worker and community perspective – the most vulnerable communities are the ones bearing the brunt of this – but it’s also very worrisome from an investment perspective, especially for long-term investors like pension funds or any institution holding money in a long-term trust for the greater good.

This is similar to the way Criterion has talked about gender-based violence as a risk to investments. Companies with sexual harassment allegations began to see shocks to their stock prices as the #MeToo movement gained momentum, society became less tolerant of sexual harassment, and media scrutiny increased.  But the problem wasn’t the change in society. The problem was that these companies had not taken measures to implement policies and institute a workplace culture that would have prevented sexual harassment and violence in the first place and now had decades of “stored risk” because of that.  

The gender-based violence example fits all too well. Previously all the risk was borne by the worker, but that’s changing. A Canadian trade union ally was recently talking about their recent negotiations and how in their contracts now if someone is a victim of domestic violence, they get two weeks paid leave. That kind of language is very rarely in contracts even though it completely makes sense. Most people who experience violence, whether it happens at work or at home, are forced to suffer through it. But from a worker productivity perspective, how are you going to be productive? You need to get help, adjust your living situation, and do things that will allow you to come back and do your job well. Too often we assume people just deal with it.

It reminds me of something Reverend Dr. William J. Barber II of the Poor People’s Campaign said recently, that “one of the ugly psychoses of America that we continue to see played out in this moment is when too many in power are too comfortable with other people’s death.” We see this a lot in the current pandemic, people saying, “Let’s just ramp up the economy.” Making it into a false choice between people’s health or the economy doesn’t help anyone. What are you doing to protect workers? What sick time are you offering? Will their families have healthcare? Are you going to pay them if they have to quarantine because they went into work and got sick? Will they be compensated for the risk they’re taking?

It’s ironic who is essential. Someone recently said, “A hedge fund manager is not essential.” Whether I have safety or good health is not dependent on someone who is overcompensated for trading futures. Someone who is producing or selling food, a cleaner making sure the public space is clean, these workers who are historically under-compensated in wages and benefits are essential. I don’t see how it is a sustainable model if that doesn’t change.

What kinds of responses are you seeing to the COVID-19 crisis that give you hope that this could be a turning point for worker rights and safety? 

We’re seeing some people respond heroically in this moment, mostly workers and their families and their communities. We’re seeing policymakers respond in various ways. And we’re seeing investors cautiously, mostly behind the scenes, beginning to talk about their environmental, social and governance risk management as something they need to ramp up.

We’ve seen some investors doing even more. The Interfaith Center for Corporate Responsibility (ICCR), for instance, organized a letter co-signed by institutions representing several trillion dollars under management, including SEIU’s pension fund, about all workers needing sick time. Individual pension funds are also doing interesting things. San Francisco Employees Retirement System sent out a survey to their asset managers asking how they’re going to handle the pandemic. Other large institutional investors across the United States are working together, mostly behind the scenes, and posing these kinds of questions to multiple large companies.

I think you’re going to see more and more of that. In most cases, the long-term investment community is doing corporate engagement, talking offline with companies, giving them a chance to respond to feedback. If you don’t see changes in behavior you could see shareholders becoming more aggressive in terms of raising these questions publicly.

Some of these are issues that existed before and have only been amplified during this time. We’re in the shareholder season but all the resolutions coming up at annual meetings were filed before the pandemic. They’re just being voted on during the pandemic and framed in that context. All these meetings that are usually held in person are being held virtually so there is less investor access. It will be interesting to see how the vote count comes out on the issues in light of the pandemic and the spotlight on essential workers.

Many investors we talk to, including some pension funds, seem to be making a shift, being thoughtful, doing their due diligence with regard to worker safety. There is a lot of momentum in that direction.

What opportunities do you see for organizations like SEIU to influence the trajectory of the future of work, whether by engaging investors or otherwise?  

There’s been a lot of work in the last few months and there are probably an unlimited set of opportunities to move this conversation. The question is where to focus and where you can you have the most influence.

There is clearly a place for the conversation in the workplace. Safety and information workers’ need to do their jobs must be discussed in the workplace. We’ve seen some positive steps in that regard. We need to expand conversations with communities and community allies. Public health needs to be at the center. Our members are not just workers. They’re multi-dimensional people. Some have children in school, grandchildren in daycare, family members working in different industries. Some go to school.  There has been some frustration over being told “You are this kind of worker.” The community is an essential place for these kinds of conversations to happen.

Public policy is another obvious arena and we’re having a lot of those discussions at a local, state, and federal level.

And then of course, the bargaining table. As contracts come up, we need to update them. We respond in the short-term in discussions with employers. What is the next step and how do we embed that in how we put together new contracts?

Ultimately these conversations have to come together, and we need to create tables where employers, workers and the government can come together to form unions so we can ensure our communities are healthy, safe and thriving.

Finally, capital markets and investors. There will a major adjustment in how capital is allocated and capital allocators need to put these kinds of issues at the center of their decision-making processes, both to protect workers and investments over the long term.

Whose voices and expertise do you hope will shape those decisions?   

The workers should be at the center of those decisions, as well as the communities in which they live. This is one of those moments when the people most impacted may have the most knowledge about what could be done, yet they’re not usually consulted. Investors will normally call a company’s leadership when an issue arises or if they have questions about a company. They’re not necessarily talking to workers or the community. Or when the workers are consulted, it’s happening inside some power dynamic where they can’t speak freely.

Take Tesla for instance. Elon Musk has been in the news because he decided a Tesla factory should reopen even though the health department in Alameda County, California has said it’s not ready. In the news there are a lot of stories about workers, but they’re comments are all anonymous saying they’re not going to risk their employment to talk about what’s going on. Those workers are essential from an investor point of view. Tesla investors should be asking what those workers are worried about. But Elon has indicated he’s moving forward no matter what.

We need new structures to be able for investors to talk to workers. As a labor union, we believe in collective bargaining agreements that allow workers to raise issue without fear of being terminated or disciplined. For example, worker organizations in California are bringing Uber and Lyft drivers into conversation with investors. Investors find it interesting because it’s not a perspective the company shares with them. Workers have insights on the policies that work well for workers or that work well for the consumers they’re trying to deliver services to.

Other innovative ideas have come up which may seem more relevant now. Walmart workers filed a resolution suggesting workers should have seats on the company board. This is actually quite normal in parts of Europe and would give investors a different perspective on what’s happening within a company. This is particularly relevant now in companies where workers are doing essential work. Investors could ask workers, “Is it a safe place?” If I were a cashier at Walmart, even if they’re providing me with protective gear, what are they doing to ensure customers are following procedures to keep everyone safe?

We have janitors in Miami, featured in a recent al-Jazeera article, where the cleaning services contractor has basically given water to clean the building. A rag and water. That’s obviously not safe for the janitor, but it’s also not safe for anyone else. There may not be any dust when the cleaning is done, but it’s not disinfected. We’ve seen that we need a whole new set of standards around these industries just to be able to use the services.

The second group essential to the narrative is scientists. There are a lot of conversations now, in the COVID-19 context, about “Is this risk real?” Often what’s being told by the company doesn’t add up with the public health recommendations. For hospital workers, the science says you should use an N95 mask and then the Center for Disease Control says if you can’t find one you should use a regular mask. That’s not a solid health-based decision. There is a lot of uncertainty and all we can do is follow the data.

We’ve seen this with climate change. Companies with an interest in the data not being real have had an influence on the science. You can see companies that are afraid of taking losses trying to question the science of what it takes to be safe. Managing those risks involves costs, like investments in workers, R&D, institutions that need a tax base to provide public health to be able to function.

Scientists have a lot to say in this moment. We’d be much better off if we listened to them and the workers.

In your view, what is the most critical question we should be asking now about the future of work? What is at stake if we don’t address that question? 

How do we put people and their safety at the center of the economic model we’re all working on? If we don’t put that at the center, there’s tremendous risk that we’ll see a decline in living standards of all but the .1% who can hide from the social risks that the pandemic has exposed.

This economy over the last forty years has largely been driven by consumer spending. People have to have money to spend and they need to feel safe in order to spend it. Safety needs to be at the center of the economic model. We’re really in trouble if we don’t make those adjustments.