The Australian Council of Superannuation Investors will lead high-level discussions about governance practices with the management of several ASX-listed franchisor companies following wage scandals at Domino’s and 7-Eleven.
Speaking to InvestorDaily, Australian Council of Superannuation Investors (ACSI) executive manager for governance, engagement and policy Ed John said he has begun talks with other ASX-listed companies following 7-Eleven's wage scandal reported by the ABC's Four Corners and Fairfax in late 2015.
Following revelations about Domino's franchisees underpaying staff in recent weeks, industry fund First Super wrote a letter to fund managers Perpetual, IFM, Allan Gray and Eley Griffiths Group asking them to assess the governance risks of the franchisor business model.
First Super also called on ACSI to make the issue a priority when it makes recommendations to its institutional investor owners about how to vote at listed company annual general meetings.
Mr John confirmed ACSI is engaging with a number of franchisor companies to discuss their governance and ESG policies.
As well allegations against 7-Eleven franchisees by the ABC and Fairfax, questions have been raised about franchisees of Domino's, Caltex, Collin's Foods and Harvey Norman.
The question for ACSI is whether the problems stem from poor governance practices by the franchisors.
"We'll be engaging with companies right across the franchise sector. And really we want to get their concrete responses to the current allegations," Mr John said.
"We're particularly interested to know whether or not franchise models have contributed to the alleged problems within each business. Obviously each business has its own arrangements – [and it will be a matter of] understanding each company individually."
For institutional investors, there is reputational risk to consider as well as the financial fallout, Mr John said.
"There are a lot of allegations out there, but for us, it's important to understand what the governance and oversight issues are – where they have been identified, what steps the company is taking to address them," he said.
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