A fascinating blog article from CSR maven Mallen Baker caught my eye last week. I’ve been chewing away on it ever since.
In Time To Redefine Ethical Investment he strikes directly at the root of what’s widely seen as the flaw in today’s business operations: responsibility.
Not the responsibility of managers and executives: the responsibility of investors. Not socially responsible investment, but responsible company ownership.
In among everything else we’ve lost the fact companies are owned by their shareholders. It’s not just an issue of finance; it’s an issue of management and governance as well. Investors are owners.
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Ownership Equals Responsibility
If I own a dog I’m responsible for its behaviour. If I own a house I’m responsible for its upkeep. If I own a company I’m responsible for its authority and influence.
An example of this comes from a quick glance at Alliance Trust, the only FTSE 100 company which is solely focussed upon investment.
Their 2008 Annual Report says that only 5% of their shareholder votes went against the management of the companies they invested in. The reasons given were:
- shareholder dilution, a reasonable concern for an investment organisation
- keeping chairman and chief executive roles separated, a common US/UK bone of contention
- opposing merger plans, no doubt allied to shareholder dilution
There’s nothing specifically wrong with opposing management plans on these grounds or with Alliance Trust’s own stance given the prevailing business environment.
However, should company owners be responsible solely for financial performance, or should investors engage with their possessions’ broader impact?
Responsible Company Ownership
The appliance of sustainability to supply chain logistics has seen companies setting targets up and down their supply chain, engaging both their customers and their suppliers.
The same principle applies to company ownership and management. As Mallen says:
Never mind the handful of activist investors who turn up wielding placards at company AGMs – ethical investment has to be something that describes how businesses in the new age are owned, period.
Like a supply chain, sustainability has to be embraced by a company, its management and its owners.
This is not the socially responsible investment of money following companies’ sustainability credentials. This is pro-active.
This is investors engaging with the companies they own beyond the triple bottom line. This is hands-on.
This is also very scary — it rewrites the whole rationale and regulation of financial markets such as Wall Street and the City of London.
It’s also true. Welcome to a world where money isn’t everything.
Picture Credit: I Cannot Save The Planet by cogdogblog on Flickr under Creative Commons Attribution License.
Lucy is Editor at Corporate Eye
