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

July 15, 2021

FOR IMMEDIATE RELEASE

CONTACT: Susan Perez @ 415-465-8004

JUNE 16, San Francisco, CA – Shareholders representing over $4 billion in assets under management, led by Impact Investors, Inc., a nationally-registered wealth management firm serving socially responsible investors, 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. 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, Impact Investors, Inc. is joined by co-filer, Boston Common Asset Management, LLC, an investment manager and a leader in global sustainability initiatives.

“As socially responsible shareholders, we are concerned about the direction of Microsoft that’s reflected in their contracts with the Department of Defense, the Army, and the Department of Homeland Security,” remarked Shane Yonston, Principal Advisor at Impact Investors. “Microsoft has a reputation for being a corporate exemplar of social responsibility because of its commitment to the environment, human rights, and democratic institutions.”

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.

The resolution’s filers point to other recent stakeholder engagements against companies with controversial government contracts that had adverse impacts for investors, to highlight potential risks that they believe warrant the requested study. For example, companies with contracts with Immigration and Customs Enforcement (ICE)/Department of Homeland Security (DHS) struggled after the Department of Justice announced its Zero Tolerance policy in May of 2018, and asylum seekers were imprisoned and children separated from their families at the border.2 The human and civil rights violations of DHS/ICE are numerous, including their surveillance operations.3

Shareholders are concerned about these human rights violations as well as the association with them, to make Microsoft a target for divestment. With corporate inaction, shareholders believe the #NoTechforICE movement could quickly escalate to a divestment campaign against Microsoft, like the #BackersOfHate and #RealMoneyMoves campaigns, which were successful and painful strategies to get the largest banks to end financing of private prisons. The resolution points out that all targets eventually agreed to cut these ties, after suffering revenue losses along with brand and reputational damages.

Beyond the company’s potential downside risk of a social movement backlash, shareholders are expressing broader humanitarian and systemic risks to the way we engage in peacemaking as a society. 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.

Likewise, proponents of this resolution worry that the cloud integration of all of the Department of Defense (DoD)’s stand-alone servers, and the software applications running on them for real-time decision-making, will minimize human judgement for the sake of improving operational efficiencies, possibly at a major cost. The resolution states, in the Department of Defense (DoD)’s Joint Enterprise Defense Infrastructure (JEDI) contract, the use of Azure for the Pentagon’s cloud computing is not simply back-end infrastructure but will provide and operationalize a new kind of machine-led warfare.

“This operational efficiency would minimize the speed at which data is analyzed and inhibit the use of human judgement from slowing down the process of decision-making,” stated Susan Ozawa Perez, Senior Portfolio Manager at Impact Investors and a Ph.D. economist. Perez recounts a historical moment when Stanislav Petrov of the Soviet Union stopped nuclear war with the United States in 1983, to highlight the importance of such critical human judgement in warfare. After waiting five minutes after receiving the initial detection of a five-missile strike, he confirmed the ground radar had not detected that there were any missiles or strikes. “His slow, deliberate pause, human judgement, and off-protocol decision to seek secondary confirmation, kept the world out of a nuclear war. This is instructive history to consider in mechanizing warfare; making it lightening speed fast and directed through artificial intelligence and algorithms,” stated Perez.

“As long-term investors in Microsoft, we are increasingly concerned over the human and civil rights implications of the use of some of its technology, including effects on immigration and the use of surveillance. We believe human rights due diligence should be embedded from product design to end-user application. Not doing so will result in significant brand risk for Microsoft,” stated Lauren Compere, Managing Director, Boston Common Asset Management.

Summarizing the resolution’s aim, Catherine Woodman, Principal Advisor of Impact Investors concluded, “We were encouraged when Microsoft pulled its use of facial recognition software by police departments due to similar concerns.4 We hope investors and Microsoft will investigate their customer’s use of its technology to address these human rights, civil rights and surveillance and privacy concerns. We believe the company can be a leader in raising its standards for customers and uphold its stated commitments to society at large. The potential ramifications for all stakeholders are too great for them not to.”

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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.

About Boston Common Asset Management, LLC

Boston Common Asset Management (BCAM) is a women-led, majority employee-owned firm dedicated to environmental, social, & governance (ESG) investing. Combining financial & ESG analysis, BCAM identifies innovative companies offering attractive, risk-adjusted returns driven by products or services that generate positive impact. A leader in shareowner engagement, BCAM uses its investor voice to create improvements in policies, processes, & products.


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

2 https://www.splcenter.org/news/2020/06/17/family-separation-under-trump-administration-timeline

3 A list of human rights violations raised by this one policy can be found here:
https://ijrcenter.org/2018/06/27/ten-humanrights-standards-implicated-by-u-s-immigration-policy/

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