The
severe financial crisis we are traversing at the moment is highlighting
existing tensions in companies and the constraints suffered by all stakeholders.
Among the various culprits targeted by critics of the financial orientation
adopted by our listed companies, with behaviour such as relocation and job cuts
coming under heavy fire, it is surprising that minority shareholders have (so
far) escaped relatively unscathed: how can these shareholders justify the fact
that they have voted to re-elect the same Board members year after year whilst
criticising or even condemning the strategies adopted by these individuals?
Why?
Because, in the strategies we have adopted as investors, we have generally
prioritised the criterion of financial return. What’s the first question we’re
going to ask our asset manager during the traditional new year performance
review? Are we going to ask him if he has invested in companies that have created
jobs, launched an innovative health product or developed a new service in
response to a demand? No, most of us will ask: how has he performed…financially
speaking. Environmental or social performance is relegated to second place,
even if the matter is raised at all (very rarely, according to the managers
themselves!).
Regarding
certain trends, can we honestly claim we didn’t know? As shareholders, we are
joint owners of the company, and this status carries with it certain duties.
These duties include attending the company’s AGMs or voting by proxy and thereby
exercising our powers as shareholders every year. This task is made easier by
the plethora of information now available on all issues raised by the company’s
stakeholders (employees, NGOs, customers, suppliers, etc.): annual reports, CSR
reports (how many of you have actually read the CSR report of a company in
which you have invested?), sustainable development reports, internet, media,
etc.
As a
minority shareholder, do you not have a duty to be vigilant? Vigilant in
listening to all the stakeholders in order to pinpoint major issues that need
to be brought to the attention of company directors, who are all too often
unaware of the underlying environmental, social and corporate governance (ESG) factors.
Vigilant in attending AGMs or voting by proxy and thus sharing in the life of
the company. Vigilant in investing in funds whose managers clearly state their
voting policies and commitment to supporting their companies’ growth. Vigilant
in being aware of your shareholder responsibility as a minority shareholder and
being ready to challenge the primacy of the financial yield criterion and put it into
perspective in relation to other, non-financial criteria that will enable the
company in which you hold a stake to pursue a long-term strategy of sustainable
development.
This duty
of vigilance inevitably raises the question: why am I investing in a listed
company? If my strategy is purely financial and geared towards achieving
maximum return on investment, should I not be putting my money into financial
instruments (ETF, structured funds, etc.) or hedge funds designed to generate
short-term profits? If, on the other hand, I have adopted a mid/long-term
investment strategy that takes into account all the strategic, financial and
ESG aspects of a company to which I, as a shareholder, feel a certain kind of
attachment, am I going to play my shareholder role conscientiously and take
part in the corporate life of this company?
Can we
restore to equity investing its fundamental purpose to give our listed company
directors the means with which to build strategies of long-term sustainable
development? Can we shrug off our trader’s cloak, reject the short-term gain
strategies whose shortcomings have recently become only too obvious and support
our companies as active minority shareholders? Is this only a dream, or will it
come true in 2012?
Olivier de Guerre
