Microsoft Shareholders Seek Report on Civil and Human Rights Violations in its Contracts

July 25, 2022

JULY 8, San Francisco, CA – Shareholders representing over $4 billion in assets under management have introduced a shareholder proposal at Microsoft’s (MSFT) annual shareholder meeting, seeking an independent study of the human and civil rights and privacy impacts of its customer’s use of their technology in military contracts. The resolution seeks to determine if the impacts are inconsistent with Microsoft’s policies and principles set forth in its CSR Report and other public disclosures. The lead filer, Boston Common Asset Management, LLC, an investment manager and a leader in global sustainability initiatives, is joined by co-filer Impact Investors, Inc., a nationally registered wealth management firm serving socially responsible investors.

The resolution makes the case that the company’s standing as a top socially responsible corporate stock holding could be jeopardized by the company lacking a human rights policy covering military contracts. This concern comes after Microsoft recently won a large contract with the US Army. Microsoft’s HoloLens product moved from a prototype tested by the U.S. Army to a $21 billion Integrated Visual Augmentation System (IVAS) production contract for a military version to enable enhanced vision using AI-powered technology. The Army intends its close-combat lethality units to use IVAS in warfare to achieve “overmatch” against enemy forces. Additionally, the company has a stated commitment to defense contracting which was further evidenced by the company’s now reassigned award of the 10-year, $10 billion contract for the Joint Enterprise Defense Infrastructure (“JEDI”) with Department of Defense, to provide cloud services to assist with development of AI capabilities to operationalize warfare. Shareholders expect the company to continue to bid on and win large defense contracts.

The resolution notes Microsoft champions the UN Sustainable Development Goals; responsible use of artificial intelligence (“AI”), and privacy as a fundamental human right, citing that it has historically, been the largest recipient of socially responsible mutual fund investments.1 However, Microsoft’s development and sale of its technology for use in warfare and surveillance is now raising flags for responsible investors. Beyond material concern for the company’s reputation, this shareholder resolution calls into question the human and civil rights issues that may be in violation of Microsoft’s policies.

Importantly, the proposal proponents are returning to Microsoft after filing a broader resolution last year and securing a large win for corporate and government accountability. The shareholder coalition worked with the company to begin a human and civil rights assessment with the third-party, Foley Hoag, to evaluate the risks and potential impacts of contracts with the government covering immigration, prisons and police contracts. Microsoft alongside, Thomson Reuters, are the first companies to pursue such an assessment on immigration contracts and Microsoft is the first company to seek such an assessment covering police and prison contracts.

The proposal highlights the ways mixed reality technologies like HoloLens being used for combat or law enforcement, transport users into an altered, virtual experience to act out dangerous and often lethal missions. The resolution cites the gamification of warfare as a human rights concern, making the decision to use lethal force more abstract and less profound.

In addition to incorporating human judgement, the proponents believe restraint and precautionary principles should be employed by Microsoft military users to ensure civilian casualties, and harms and abuses are avoided and minimized.

“As long-term investors in Microsoft, we have increasing concerns of the human and civil rights implications of the use of some of Microsoft’s technology by military and the use of surveillance. We believe that human rights due diligence should be embedded from the product design to the end user application. Not doing so leads to reputational and brand risk for Microsoft,” stated Lauren Compere, Managing Director, Boston Common Asset Management.

About Boston Common Asset Management, LLC

Boston Common Asset Management (BCAM) is a diverse, women-led, sustainable investor and innovator dedicated to the pursuit of financial return and social change. An active, global equity ESG investment manager and a leader in impactful shareowner engagement since its founding in 2003, BCAM is majority women- and employee-owned. BCAM is headquartered in Boston with an office in San Francisco. The company’s investment strategies totaled $5.5 billion in assets as of March 31, 2022.

About Impact Investors, Inc.

Impact Investors, Inc. is an SEC Registered Investment Advisory firm (CRD #289028) specializing in socially responsible investment strategies for families, individuals, fiduciaries and trustees. Impact Investors provides a team-based, wealth management service that integrates their client’s impact objectives and financial goals into an overall wealth management strategy, using deep financial, environmental, social and corporate governance due-diligence, shareholder advocacy, and direct, high impact offerings. Copyright © Impact Investors. All rights reserved

1 – https://qz.com/1803716/microsoft-is-the-biggest-recipient-of-esg-rsi-stock-fund-investment/

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