Keeping Shareholders at Arms Length
I participated virtually in the Green Monday conference this week and had pause for thought after hearing each of the panelists respond to a question about the impact of shareholders on sustainability.
Andrew Shapiro of Green Order mentioned the mission driven nature of Facebook. That mission will be maintained in public ownership partly through the class A shares on the market having lower voting power than the class B shares held by a much smaller block of existing shareholders.
Karen Hamilton of Unilever described CEO Paul Polman’s action to cease providing quarterly earnings forecasts because he didn’t see the short termism it engendered amongst investors was helpful to the company.
Charles Middleton of Triodos Bank described how their shares are held in trust by a foundation creating a degree of separation between short term demands of shareholders and the decisions of the bank.
Dr Thomas Becker of BMW described how the majority shareholding in the company is with the original Quandt family, giving them control over the actions of the company and enabling them to maintain a focus on mission.
I see a pattern that suggests a growing perspective that increasing the distance between the individual shareholder and the actions of the company is better for sustainability.
As I have written in the past, I think that stakeholders are fickle – switching our priorities quickly depending on which stakeholder hat we are wearing at that moment. Most shareholders, I believe, tend to take a very narrow perspective of their role. Investments are purely for financial returns. As long as everything is legal, values are something to be applied elsewhere in our lives. Part of the reason being that most investors are so distant from the actions of the company they part own that they feel no responsibility or accountability for them
For a company with a societal or environmental mission I see two possible responses;
One is to narrow the distance and incent shareholders to have a more holistic and engaged interest in the actions of the company in which they share ownership. Integrated reporting follows that view of the world.
The other approach is to increase the distance and keep the shareholder at arms length so they have less say in the decisions made by the management of the company allowing the company to get on with its sustainability mission.
I interpret the responses of the four panelists at Green Monday as supporting the latter view. I wonder if there is room for both approaches to co-exist?