Singling out Sainsbury’s over the living wage may not be that pragmatic

·4 min read
<span>Photograph: Henry Nicholls/Reuters</span>
Photograph: Henry Nicholls/Reuters

That’s part one of Sainsbury’s interesting week out of the way: a trading update that showed a drop in sales amid the squeeze on consumers’ budgets but, critically, also contained a prediction that profits for the financial year will arrive within the previously advertised range of between £630m and £690m. Part two should be more lively because Thursday’s annual meeting will consider, in a roundabout way, how the spoils should be divided fairly.

The campaign group ShareAction has tabled a special resolution that would force Sainsbury’s, against the will of its board, to become an accredited “real living wage” employer. Half the companies in the FTSE 100 index are members of the Living Wage Foundation, which sets voluntary rates above legal minimums. Why can’t an upright supermarket chain that boasts about wanting to “make a difference to our colleagues and communities” also sign up?

Put like that, the proposal is obviously appealing. The supermarket sector is almost the definition of a defensive, stable and profitable core of the economy. It ought to be able to commit to set minimum pay permanently at standards that relate to the real cost of living. In a year in which low-earning supermarket workers will be worse off as a result of inflation, national insurance rises, tax threshold freezes and so on, this feels in theory like an ideal opportunity to take the oath. The campaign has picked its moment well.

Related: Sainsbury’s boss warns UK living costs squeeze will ‘only intensify’

It has also, unfortunately, used an instrument that is too blunt. A shareholder resolution that applies to one company – and one company only – doesn’t work in practice. Simon Roberts, the chief executive of Sainsbury’s, won’t generate popular sympathy on account of his fat-cat pay packet of £3.8m last year (definitely too much), but he makes a fair point about protecting management’s right to manage.

As it happens, Sainsbury’s already pays at least the real living wage to its 171,000 employees. It had to tweak salaries in outer London in response to ShareAction’s campaign to get over the line, but the group now meets the foundation’s £9.90 an hour nationally (versus the £9.50 statutory minimum) and £11.05 in the capital. The board’s objection is to having its hands tied in perpetuity.

Outsourcing pay decisions to an “unaccountable third party”, as Roberts put it, would cede control over a £3.75bn payroll. A foundation-complaint pledge would also have to cover contracted workers – mainly security guards and cleaners – on other firms’ payrolls, even if, said Roberts, “the vast majority” are already paid at least the real living wage. So that’s a big slug of the cost base that would be determined by a body outside Sainsbury’s. If you’re running a company in an industry in which basic pay hovers just above legal minimums, that is not a minor consideration. Another part of the job involves keeping pace with the competition on prices for customers.

The fund manager Schroders, backing the board, made a similar point in its call last week for “nuance” in this debate: the Living Wage Foundation, for all its many household-name signatories, is a supermarket-free zone, it pointed out. It would be rough to shove Sainsbury’s through the door when Asda and Morrisons, owned by private equity, sit beyond the reach of shareholder resolutions, as do German-owned private firms Aldi and Lidl.

Not even cuddly and employee-owned Waitrose is a member of the foundation; it takes the Sainsbury’s-ish stance that it currently pays at least the real living wage but cannot be bound by a future-looking pledge set by outsiders. That feels like the crucial point here. If rivals cannot be made to fall into line, isolating Sainsbury’s isn’t pragmatic. The market leader, Tesco, which has fatter profit margins, would have been a more obvious first target – and more likely to break ranks.

ShareAction has collected some high-profile supporters, not least the enormous Legal & General Investment Management, and deserves credit for ratcheting shopfloor pay up the boardroom agenda. The board of Sainsbury’s has been forced to pay attention. But a shareholder resolution at a single company is still an imperfect weapon for a scrap over low pay that really relates to sector-wide and national issues. The cause is spot on; the mechanism isn’t.

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