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