Ownership approaches
In reply to Greg Conners in last week's PW, I'm not sure that
anybody is necessarily entering into an engagement dialogue in order to achieve
an out performance effect.
Rather it is part of an holistic approach to ownership which seeks
to encourage companies to be accountable to their owners for their
acts and omissions, as well as ensuring that management are focused on
sustainable business behaviour. Pensions after all are long-term
liabilities and we need long-term healthy investments to meet the
ballooning pensions bill.
There are many parallels between the introduction of SRI policies and
the post-Cadbury Report environment when pension funds where encouraged to take
ownership of ownership. Many took a lowest common denominator approach to
governance, which itself attracted further political comment and warnings of
legislative intervention. It is however over eight years since the Cadbury
Report and yet still not all schemes either have a policy or actively voting
their shares. Much of this can be attributed to the belief by many that
governance didn't add to the share price and so little or no attention was
paid.
The same could apply again to SRI. But the essence of active and
concerned ownership is that it's also about minimising downside risk. Ask any
fund manager what it looks for in a company before it invests and somewhere in
that list will be quality of management. Any management of quality will know
that governance and SRI issues are here to stay and attention paid to these
issues is indicative of a wider attentiveness in the remainder of the business.
It's now time for the debate to move on and to focus on the
practicalities. Fund managers have a vital role to play in the implementation
of any pension scheme policy, but since ownership cannot be delegated, it needs
trustees to be aware of the issues in order to effectively monitor their
managers.
Sarah Wilson via e-mail
Pensions Week
26 June, 2000
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