Health-Driven Investors Eye Casino Smoking, Non-Sugar Sweeteners
Shareholders are pressing companies from Coca-Cola to Caesars this proxy season on indoor smoking at casinos, the risks of non-sugar sweeteners in soft drinks, and a range of other health issues.
The new slate of investor proposals asks companies to examine how their policies will protect the health of employees and customers, and how failing to do so could harm their bottom lines. Most recently a majority of investors on Tuesday voted down a bid at gaming giant
While health-related shareholder bids aren’t a new phenomenon, the flurry this year reflects broadening investor interest in protecting workers as well as a wider societal focus on health and well-being. The level of support for the proposals varied, but some of the bids secured a relatively strong showing for first-time efforts.
Any result showing double-digit backing can be enough to grab management’s attention, and could pressure companies to make changes. Proposals that receive 5% or more of a shareholder vote can be resubmitted the following year. The threshold goes up to 15% on their second year on the company ballot and 25% for the third year.
The new proposals this year on employee well-being follow a significant amount of investor attention during last year’s proxy season on a variety of workers’ welfare issues, from pay equity to the right to organize a union. Shareholder successes included a labor-related bid at coffee giant
Investor interest in the health of employees and customers is “not going away,” said Michelle Diamond, a partner at WilmerHale.
“I think it’s the beginning of a trend,” she said, adding that the issue is so pertinent because “a healthy and engaged workforce is critical” to a company’s success.
Smoking Risks
As smoking bans rolled out across US workplaces, casinos have remained one of the few holdouts.
In addition to the proposal at Caesars, health advocates asked Bally’s Corp. and
The efforts to curb smoking inside casinos follow heightened concerns about respiratory wellness following shutdowns of casinos during the pandemic, said Bronson Frick, the director of advocacy at the American Nonsmokers’ Rights Foundation, a nonprofit that brought the shareholder bids alongside non-profit Catholic healthcare system Trinity Health. Frick emphasized that smoking bans inside casinos would still give customers the option to smoke on outdoor patios.
The casino proposals pointed to a 2006 report from the US Surgeon General that said there is no safe level of secondhand smoke exposure. Indoor smoke can increase employee health insurance premiums and can add to maintenance costs, the bids said. They also pointed out that workers on casino floors are largely people of color and women.
Workers “struggling to make ends meet are having to make that choice between their paycheck and their health,” Frick said.
He said the proponents are hoping to engage with more companies on smoking policies in the future. “We’re confident that momentum will build as more investors become aware of the cost of second-hand smoke,” Frick said.
Boyd said in its proxy statement before the vote that “adopting a property-wide smokefree policy would have significant competitive implications, as customers who wish to smoke while gaming could consider patronizing a competitor.”
“We have previously experienced such negative impacts in markets subject to smoking bans,” the company added.
“Compliance with local smoking laws ensures that the company remains competitive in all markets in which it operates and is responsive to the unique health mandates in each municipality and state,” Bally said in its proxy statement.
“The company also maintains policies and procedures to accommodate employees who wish to work in a smoke-free environment,” it said.
Caesars defended its policy by noting in its proxy statement that 10 of its casinos are already smoke-free because seven of the states in which it operates prohibit smoking indoors at casinos. The percentage of investor backing was not immediately available after Tuesday’s meeting.
“We believe that completely banning smoking from all our properties where it is not legally required may risk alienating our smoking customers,” the company said, adding that it “takes steps to help protect the health” of its non-smoking customers. The company said it limits areas where people can smoke, noting that smoking isn’t allowed in the bathrooms or restaurants of its Las Vegas and other Nevada properties.
Casino policies allowing smoking may be weighing on employees, however. “Every day we step into our workplace, we’re risking our lives,” said Pete Naccarelli, a casino table games dealer and co-founder of Casino Employees Against Smoking Effects, in a statement. “It’s a stark reality—indoor smoking not only jeopardizes our health as workers but also drives away valuable customers.”
Sweeteners and Healthcare Access
Shareholders also targeted soft-drinks makers
The non-sugar sweetener proposal at Coca-Cola focused on concerns about the health of consumers. That bid was filed by Catholic nonprofit hospital chain CommonSpirit Health, while the Sisters of the Sorrowful Mother International Finance put forward a similar proposal at Pepsi. The investors pointed out that there may be “undesirable effects” from long-term use of sweeteners, like an increased risk of Type 2 diabetes.
Previous proposals focused on the health risks of sugar-filled products rather than those using non-sugar sweeteners.
Coca-Cola said in its proxy statement that “no additional third-party assessment could usefully contribute to the abundant reporting and assessments issued by various food safety bodies and regulatory authorities.” The company added that “it is important that shareowners understand that the company has strong confidence in the science behind the safety of our ingredients.”
Pepsi said in its proxy statement: “Reformulation to reduce added sugars in our beverage products has been a core element of our sustainability agenda since its inception. We take the safety of our products and ingredients extremely seriously.”
About 11% of investors supported the proposals at both Coca-Cola and Pepsi, during annual meetings in mid-May.
Another health-related bid, also at Coca-Cola, asked for a report on the risks from state restrictions on abortion and gender-affirming care. The proposal noted that Coca-Cola has employees in states with abortion restrictions, including Georgia where the business is headquartered. The bid received about 9% of investor support.
While proposals concerning abortion access are not new, the expansion into gender-affirming care is.
Last year’s proposal at Coca-Cola was more narrowly focused on abortion, but the bid at the soft-drinks maker this year also referenced state restrictions on gender-affirming care. Other investors may similarly try to broaden their health-focused proposals to incorporate more topics “as they try and gain more traction,” Diamond said.
Coca-Cola and Pepsi were among the dozen companies that faced proposals last year focused more narrowly on on disclosing the risk abortion restrictions pose to businesses. Those proposals averaged 11.8% shareholder support last year, down from 25.1% in 2022. Support has notably dipped since the Supreme Court’s June 2022 Dobbs v. Jackson Women’s Health Organization decision that put the onus on states to determine whether abortion is legal.
After the Dobbs decision, many companies quickly reassured employees that they would be supported if they needed to travel out of state for healthcare that they can’t access nearby. But the statements were met with legal threats from conservative lawmakers in Texas.
Speaking about this year’s proposal at Coca-Cola, Meredith Benton, founder at Whistle Stop Capital, a consultancy that worked with activist investor group As You Sow on the bid, said they had been hopeful that the business “would take seriously their employees’ needs for effective and timely health care.”
“While we agree with the importance of employee health and wellness, and see the value in advocating for comprehensive healthcare, the proposal suggests that the company undertake an analysis of, and report on, matters associated with broader public healthcare policy,” Coca-Cola said in its proxy statement this year. “The proposal also contains an unsupported assertion that there has been a decline in the quality of our employees’ accessible medical care.”
Companies should consider how to best articulate the positions they take on issues like those raised in the new health bids, or any other broader environmental, social or governance issues, said Patrick Gadson, a partner at Vinson & Elkins—as well as the optics of the approach they choose. And it’s better to get ahead of the issues when possible, Gadson said.
“If you wait until they become zeitgeists, it seems like you’ve been asleep at the switch,” he said.
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