Friday, June 12, 2009

Shareholder Engagement: We're here for a long time...

The Responsible Investment Conference in Winnipeg wrapped up Tuesday with a stellar panel discussing shareholder engagement. Asked to identify the top issues of 2009, there was agreement that the advisory vote on executive compensation, say on pay, was a big win for the SRI community. Peter Chapman of SHARE provided a brief timeline, indicating that in the first year say on pay was raised, no one was interested. By the second year, the resolutions garnered over 30% of the votes and this year the results were ‘fantastically strong’, followed by some companies announcing voluntarily that they would offer shareholders a say on pay. Chapman pointed out that this is typical of the shareholder engagement process, that it is a multi year commitment, ”not something you do one year and walk away from”.

Highlighting some of the work their shareholder engagement team did on labour issues in the electronics and apparel industries, Jennifer Coulson from Ethical Funds agreed that engagement takes time. She pointed out that the resolution on the proxy is only a small part of what they do, and often a last resort. Most of the work is done outside the resolution, working with corporations to come up with mutually acceptable solutions and timelines.

Continuing with the theme of long term engagement, Dermot Foley of Inhance Investment Management started off by saying that he used to think of engagement as an opportunity to ‘wrestle a company to the ground’ but now he views it more as a long slow waltz. Certainly some of the issues Inhance is working on with corporate Canada, such as climate change, the tar sands and diversity in senior management, will take a lot of time and work before meaningful changes occur.

Debra Sisti from RiskMetrics asked “What does it mean now that shareholders have a say on pay?” If we want to have the ability to compare and assess compensation, we need more information and better disclosure. In this as in many other areas, the work that socially responsible investors do also crosses into the public policy area.

Why do we continue to address these issues? In his closing comments Gary Hawton, the moderator of the panel and CEO of Meritas Mutual Funds, stated “We have a voice, which for whatever reasons, is listened to. And we have a moral obligation to speak on other’s behalf, our neighbours here, and our global neighbours, whose voices are no less important, but perhaps not as well heard.”

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