Set against a backdrop of stagnant economic growth and societal discontent with the political status quo, global investors and corporations face ever growing risks and challenges. Having initially stabilised the sinking ship in the immediate aftermath of the GFC, governments, regulators and institutions around the world are now turning their attention to the role of business and its role in supporting strong, healthy societies.
Governance – out of the ghetto
To that end, governance and stewardship are moving out of their geeky ghettos into the mainstream. In this week’s round-up we see evidence of global shifts in thinking, new governance codes, investment analyst certification programs incorporating ESG factors, and business leader groups flying the flag for boardroom diversity. But while we see global investors come together to endorse sustainability reporting standards, and CEOs signing up to what could be the first iteration of a national governance code in the USA (the only G8 country without a collectively and independently-owned governance code) it seems that the message isn’t getting across to all corners.
Free speech can get ugly
Mortgage Choice chairman Peter Ritchie’s intemperate outburst after losing the third remuneration on his watch is as disappointing as it is ill-informed. Shooting messengers is easy, whereas high quality engagement takes time, effort and patience. Ritchie of course has an absolute right to free speech, even if we find his opinions disagreeable; however his use of the AGM as a bully pull-pit does the business community no favours. Similarly, board advisors which insulate their clients from the realities of shareholders’ views are doing far more harm than the odd AGM tussle and negative analyst’s note.
Since the passage of Dodd Frank, there has been a concerted campaign which has used part of its $1 billion war chest against better governance, against fundamental shareholder rights and greater accountability, and yes, that includes proxy advisors. It is not a stretch to say that Occupy Wall Street has morphed into Occupy the W0rld-Wide Web. The concerted Distributed Denial of Service (DDoS) attack against the internet ‘switchboard’ Dyn last week has been attributed to the radical transparency group Wikileaks as part of their ongoing campaign against corporate and political sleaze. Tin hat conspiracies against capitalism? To some, perhaps, but when the Financial Stability Board adds global warming and corporate governance standards to its to-do list, we think it’s time for even the most anti-governance board member to admit “this is serious”.
Ultimately, business is risking its licence to operate. And that is bad news for all of us.
Over the past few years the leading shareholder voting research providers have worked individually and collectively to make it clear what they do, for whom and why, culminating with the Best Practice Principles for Shareholder Voting. We can’t make any quoted company or board advisor read the Principles. We can’t make anyone take them seriously, even if we do. The signatories of the Best Practice Principles are not a homogeneous blob. We don’t have the same business models; some make recommendations, some do not, that’s the nature of a free market. What we do all have, however, is a commitment to serving our clients to the best of our ability. What we also have is zero tolerance for censorship, bulling and misrepresentation by powerful vested interests.
When Ritchie disparages governance analysts he disparages the investors who commission our work and the voting decisions they make. By denying the legitimacy of critical analysis he restricts the rights of investment professionals to put the interests of their clients, ordinary investors and savers, at the top of their agenda.
In the interests of long-term sustainable corporate and investment performance, now is not the time to be putting up walls, verbal or otherwise.
@manifestproxy PIRC has never allowed bullying like this! Is this considered corporate ‘best practice’ in Oz or ‘comply or complain’!
— Alan MacDougall (@AlanMacDougall) October 22, 2016