Impact Shares considers paid sick leave (PSL) to represent an important human capital investment critical to investors, as well as a racial and gender equity concern.  Filing a shareholder proposal at Norfolk Southern railways requesting that the company adopt a PSL policy as a standard benefit was the first step in leveraging our position as an ETF issuer representing leading social and environmental advocacy organizations. It carries the expectation that, in so doing, we create changes in company policy toward workers. Much like our general investment strategies, the Impact Shares approach to the PSL issue with Norfolk Southern has been informed by our advocacy partners, specifically the YWCA and the NAACP.

America’s freight railroads, which slashed 30 percent of their workforce over the past six years and now face significant worker retention issues, brought our country to the brink of a national rail strike by refusing to provide PSL and address other working conditions during three years of contract negotiations.  The White House and Congress intervened in an effort to avoid a rail strike, which, given current weaknesses in the U.S. economy, could have cost the country as much as $2 billion per day. 

But the recent derailment in East Palestine, Ohio, has shed new light on Norfolk Southern’s policies and practices. Connecting the dots on this disaster and PSL policies is inevitable but at this point irresponsible without proof. What we have seen, however, is incremental progress being made as Norfolk Southern and many of the rail companies reach some agreement on a PSL policy with its member unions.

This is important. Railway workers help move nearly 40 percent of the country’s freight, including critical commodities. Yet under the Railroad Unemployment Insurance Act, railroad employees are only entitled to sickness benefits after seven days of illness. Many of these workers face an impossible choice when they are sick: to stay home and risk their jobs or go to work and risk their health and the public’s health. Meanwhile, railway companies have reportedly paid out $196 billion in stock buybacks and dividends to shareholders since 2010. Focusing on the short term at the expense of workers poses potential risks to the company and the economy.  As shareholders, we are asking management to take the longer-term view that safeguarding the health and safety of their workers will better position them for the future.

In its response to our proposal, Norfolk Southern cited collective bargaining and the Railway Labor Act as reasons not to include our proposal in the proxy statement. During the filing process our filing partners in civil and human rights organizations provided insights into challenges at railroad companies and labor agreements. The good news is that Norfolk Southern has recently reported reaching agreement with two of the 12 unions representing railroad workers on a new PSL policy. The engagement continues as there is still no PSL policy for the vast majority of railroad workers.

Marvin Owens
Chief Engagement Officer, Impact Shares