Notice of Exempt Solicitation. Definitive Material. (px14a6g)
May 05 2021 - 12:38PM
Edgar (US Regulatory)
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
NOTICE OF EXEMPT SOLICITATION (VOLUNTARY SUBMISSION)
NAME OF REGISTRANT: Republic Services, Inc.
NAME OF PERSON RELYING ON EXEMPTION: International Brotherhood of Teamsters
ADDRESS OF PERSON RELYING ON EXEMPTION: 25 Louisiana Avenue, N.W., Washington D.C. 20001
Written materials are submitted pursuant to Rule 14a-6(g)(1) promulgated under the Securities Exchange Act of 1934:
_____________________________________________________________________________________________________________________________________________________________________
May 2021
Re: Support Integration of ESG Metrics into Executive Pay (Item 4)
Dear Republic Services Shareholder:
At Republic Services, Inc.’s (NYSE: RSG) May 21st shareholders meeting, we urge you to vote FOR Item 4, a resolution calling for a report on how the company plans to integrate ESG metrics into its executive compensation plans.
There is no question that ESG factors are central to the long-term success of Republic Services; the more pressing issue is whether Republic Services, like many of its peers, is establishing robust linkages between its ESG performance and senior executive compensation. The answer is no. Despite over 120 references to ‘sustainability’ and nearly three dozen mentions of ‘safety’ in the proxy statement, not one is as an executive pay metric. In fact, the more Republic Services touts its ESG credentials, the more glaring the disconnect is between what the company says it believes to be important, and what it actually incentivizes executives to achieve. It is well-known in corporate governance that what gets ‘measured’ – and rewarded – gets ‘managed,’ and this is especially critical at the moment for Republic Services: sanitation work is not only among the top most hazardous civilian occupations in the country,1 but arguably one of the most dangerous of the essential work categories amid the pandemic given the additional potential exposure to contaminated waste.
This is not a solicitation to vote your proxy. Please DO NOT send us your proxy card as it will not be voted.
1
1 Refuse and recyclable material collectors had the fifth highest fatal work injury rate among civilian occupations in 2018, according to the Bureau of Labor Statistics, and the sixth highest in 2019.
In
what follows, we take the opportunity to respond in full to Republic Services’
oppositional statement, clarifying that the company’s pay plan in no way
considers ESG factors; that this is at odds with a growing number of the
company’s peers; and that the company’s human capital management practices
during the pandemic, rather than showcasing the company’s sustainability
practices, demonstrates their lack of accountability and rigor.
Teamster affiliated pension and benefit
funds have more than $100 billion invested in the capital markets and are
long-term shareholders in Republic Services.
Republic Services Oppositional Statement
Republic
Services insists that "sustainability is at the core of our culture and
our strategy ….
[and] part of our daily operations.” A laudable statement, indeed, but one
that is commonplace among corporations today. What is missing, however, is a
direct line of sight from these goals to executive compensation. Instead, the company argues that by incorporating ESG
goals into its strategic plan, performance against those goals will show up in
the conventional financial metrics it uses in its executive pay plan, namely
Earnings Per Share and Free Cash Flow in the short-term plan, and Return on
Invested Capital, Relative Total Shareholder Return and Cash Flow Value
Creation (a measure of economic value added) in the performance shares. In
this way, ESG is supposedly everywhere, but is in fact nowhere in particular,
with ESG performance ultimately at risk of being marginalized or drowned out. Moreover,
while the company goes to great lengths to demonstrate how the various
financial metrics interact with one another to capture value-creation, it is
almost impossible to similarly trace out how ESG improvements, say on health
and safety, would be captured and rewarded by the interaction of these complex
financial measures. In contrast, we note almost half of the companies
disclosed in the proxy statement as ‘peers’ integrate some sort of specific ESG
consideration into their pay plan and it is a relatively common practice among
the company’s waste management competitors.2
This is not a solicitation to vote your proxy. Please DO NOT send us your proxy card as it
will not be voted.
2
2 Of the peer companies disclosed in
the proxy statement, Air Products, Canadian National Railway, Canadian Pacific
Railway, CSX Corp, Waste Connections and Stericycle consider ESG factors in
their compensation arrangements. In addition, we note that other waste
management companies, including GFL Environmental, U.S. Ecology, and Covanta
Holdings provide for some sort of ESG linkage to their pay plans.
Second, the company insists that its “ESG commitments
… shaped [its] pandemic response.” Yet, as described in the supporting
statement for this proposal, we are far from convinced that Republic Services has
demonstrated strong performance on health and safety practices tied to the
Covid-19 pandemic. Various media outlets, for instance, including the Fast
Company and Vice Magazine, have reported that employees lacked timely provision
of personal protection equipment-- especially critical given their handling of
potentially contaminated waste and the surge in residential volumes.3 We also find it
baffling, in fact worrying, that the company appears to believe that the $14
million in bonuses it provided to its more than 28,000 employees is an example
of strong human capital management practices. The award represents less than 50% of the $28.3 million in total
compensation paid to the NEOs in 2020 – or circa 2% of the cash returned to
shareholders through repurchases and dividends for the year -- and amounts to
just $500 per worker despite “record-setting operational and financial results”
that “outperform[ed] expectations.”
Summary
With
ESG clearly critical to the long-term success of Republic Services, and with
the integration of ESG metrics into compensation increasingly common among
peers, we believe the requested report would go a long way to advancing the
company’s incentive and accountability structures. Accordingly, we urge your
support for Item 4.
For
more information, please contact Michael Pryce-Jones by email at: mpryce-jones@teamster.org or by telephone at: 202-769-8842.
Sincerely,
Ken
Hall
General
Secretary-Treasurer
KH/cz
This is not a solicitation to vote your proxy. Please DO NOT send us your proxy card as it
will not be voted.
3
3“Garbage collectors are on the
front lines of Covid-19, but without the protection they need,” Fast Company,
May 8, 2020; “Sanitation workers say they are not getting basic protective
equipment during pandemic,” Vice, April 6, 2020.
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