Most large, publicly traded companies are keeping quiet rather than disclose workplace safety data in their disclosures to investors, a Bloomberg Law review found.
Only about 20% of the 70 firms listed in the S&P 500 Industrials Sector provided some safety data in their fiscal year 2022 financial health statements—also called 10-K reports—filed with the Securities and Exchange Commission, or advised readers to find information in separate sustainability reports available on company websites.
The hesitancy to detail occupational safety and health programs comes at the same time institutional investors are pressing companies to be more transparent and share information about their workforces, such as training opportunities and diversity.
Among those companies providing numbers were
Both Deere and Grainger reported injury and illness rates that were below the national averages calculated by the US Bureau of Labor Statistics. Grainger also told investors that it requires each of its locations to perform regular safety audits to confirm effective proper safety programs are in place.
Two companies under intense Occupational Safety and Health Administration scrutiny in 2022—
Dollar Tree Safety Record
There is nothing in Dollar Tree’s 10-K report about the approximately 75 inspections that led to citations and proposed fines in fiscal 2022, such as the $364,645 penalty for alleged hazards at one store in Richmond Hill, Ga. The company operates 16,340 Dollar Tree and Family Dollar stores and employs about 207,500 workers across the US and Canada.
Dollar Tree didn’t respond to a request to discuss the 10-K report, but the company stated in its 2022 10-K that it strives “to maintain a safe working environment for our associates with a safety program designed to promote accident prevention.”
Dollar Tree also acknowledged to the SEC its issues stemming from a rat-infested warehouse in Memphis, Tenn., leading to the warehouse’s permanent closure, 400 stores temporarily shutting their doors, and 14 class actions related to the warehouse problems.
Amazon didn’t disclose the four fiscal 2022 inspections by Washington state and federal OSHA of distribution centers that led to citations and demands from the agencies for widespread changes to warehouse operations to prevent workers from suffering muscle and joint strains.
The retail giant told the SEC that “safety is integral to everything we do at Amazon and we continue to invest in safety improvements such as capital improvements, new safety technology, vehicle safety controls, and engineering ergonomic solutions.”
Amazon didn’t respond to a request to discuss the 10-K filing.
Another retail chain that saw extensive OSHA inspections in 2022,
Dollar General is contesting a stockholders’ lawsuit in US District Court for the Middle District of Tennessee alleging the company and its board of directors breached their fiduciary responsibilities by allowing “hazardous working conditions for its employees all while remaining deaf and blind to repeat OSHA violations and concerns.”
Rule May Bring Change
The likelihood that companies will provide hard numbers about safety programs may increase by the end of the Biden administration.
The SEC is drafting a rule on “human capital” disclosures in 10-K reports (RIN:3235-AM88) and could issue a notice of proposed rulemaking in April. The new rule is expected to explain what information companies need to include in 10-Ks when discussing human capital concerns such as safety and diversity.
“The SEC will provide a lot of structure to disclosure,” said Aaron Yoon, an assistant professor at Northwestern University’s Kellogg School of Management who co-authored a study looking at 11 years of ESG—environmental, social, and governance—reports voluntarily issued by S&P 500 companies. Worker safety issues fall under the social category.
An SEC rule that makes safety data easily available should benefit workers as well as investors, said Anne Lofaso, a labor and safety law professor at West Virginia University College of Law in Morgantown, W.V.
“Instead of a race to the bottom, it could create a race to the top,” Lofaso said.
Scott Mascianica, a partner with Holland & Knight LLP in Dallas and co-chair of the firm’s Securities Enforcement Defense Team, said companies are gradually trying to determine what occupational safety and health concerns they need to address in 10-Ks or in sustainability reports that aren’t regulated by the SEC.
“You have the rules that exist on the book, but you have a collection of rules that have been proposed,” Mascianica said. “I think companies are trying to answer the questions of, ‘Well, we may not have to disclose it, but should we? And if we should—where?’”
Some companies may hesitate to voluntarily add safety data to 10-Ks because it would be hard for them to reverse course and exclude that data in later reports, Yoon said.
“Once they choose to disclose it, they’re going to get more scrutiny and they have to improve their practice,” Yoon said. “And they also have to vouch that this is true information.”
Legal Implications
Companies that don’t acknowledge in 10-K reports significant problems that could affect investors expose themselves to SEC scrutiny, Mascianica said.
The former SEC attorney cited the agency’s recent prosecution of video game maker
Activision told investors and the government that it was important to retain key employees, Mascianica said.
But the SEC accused the company of misleading investors about its work environment which would lead to key employees leaving, he said.
The SEC could apply the same principle to a company that touted its worker safety program while not disclosing problems if the issue was likely to affect the stock value.
“It absolutely could be and it is something companies will have to think about,” Mascianica said.
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