Indigestion from YUM! Brands(A)

In this dawning era of Good Corporate Governance, YUM! Brands’ ostrich-like response to stakeholder discontent could be considered almost laughably out of sync with the times — if the real-world consequences weren’t so grim.Flashback to May 2003: A shareholder proposal calling for a report on the sustainability of company operations, sponsored by the Center for Reflection, Education and Action (CREA) and co-sponsored by Trillium Asset Management and the United Church of Christ Board of Pensions, wins 43% of votes cast. Granted, if we’d been running for office, that would be quite the whupping. But in a proxy contest, 43% is practically a victory and well above the average support that similar resolutions at other companies received last year. This could be why YUM! refused to disclose the results at the annual meeting, revealing only that the proposal “had been defeated.” In ten years of doing this work, I’ve never heard of a company not releasing preliminary voting figures at a stockholder meeting.In the year since, YUM! has shown no interest in dialogue with CREA despite the organization’s track record in assisting companies struggling to respond to demands that they pay a livable wage and provide decent working conditions. YUM! desperately needs the assistance. Our proposal was originally inspired by the highly visible Taco Bell boycott led by the Coalition of Immokalee Workers (CIW), a community-based worker organization composed largely of immigrants laboring in low-wage jobs throughout the state of Florida. Taco Bell was targeted because it is one of the largest buyers of tomatoes and other produce in the Southeast United States and has refused numerous appeals to lean on its suppliers to increase the workers’ piece rate by one cent per pound picked. (YUM!’s other restaurants are Kentucky Fried Chicken, Pizza Hut, Long John Silver’s, and A&W Restaurants, which together comprise the “world’s largest restaurant system.”) It takes the filling of 120 tomato buckets – that’s two tons — to earn $50 a day. The average yearly income of tomato pickers is $7,500. Overtime pay rates are nonexistent, and let’s not even talk about health insurance, sick leave, pension benefits or the right to organize. Yet one more penny per pound would at least raise workers’ salaries above the poverty level.
The Taco Bell boycott has been endorsed by a long list of labor unions, religious groups (including the National Council of Churches), activists and entertainers. Last November, CIW members Lucas Benitez, Julia Gabriel, and Romeo Ramirez shared the Robert F. Kennedy Human Rights Award. None of this has swayed Taco Bell or YUM!, who continue to pass the buck to suppliers. YUM! must surely feel that it is caught in a bind. On the one hand, if it did lean on its suppliers to raise workers’ wages, it could easily pass on the cost to consumers. (Restaurant patrons rarely if ever eat a pound of tomatoes at one sitting, and if they did, would they be likely to notice or protest a penny surcharge in a state of tomato-induced coma?). Hence, shareholders would never have to feel any pain. But YUM! knows that granting any concessions to its lowest paid workers and dealing with the issues raised by our proposal will open the whole can of worms known as “supply chain responsibility.”
Appreciating how poorly YUM!’s denial of the problem reflects upon corporate management, the Needmor Fund is sponsoring another proposal this year that calls for annual board elections.The company’s stance is unsustainable. Following public outrage over overseas sweatshops, footwear and apparel companies were forced to accept their responsibility for working conditions and wages throughout their supply chains. They are taking on this task as a group, as the fast food industry should do. YUM! could help restore its sullied reputation in a minute if it met the demands of the tomato pickers and convened an industry task force to grapple with the systemic changes that have to be made.
For more informationCoalition of Immokalee Workers: www.ciw-online.org.
Center for Reflection, Education and Action: www.crea-inc.org