Friday, December 7, 2012

Mercer investigates loyalty program for long-term shareholders

Mercer is exploring the concept of loyalty rewards for long-term shareholders over concerns that short-term decision making in the market could be damaging the way corporations are managed. Such rewards could include loyalty dividends, warrants or additional voting rights, Mercer said in a news release.

"With the launch of this project, we are looking to dig deeper into the various proposed solutions to short-termism and determine the possible role that loyalty and related instruments could play," said Jane Ambachtsheer, Mercer's Global Head of Responsible Investment. "There are some interesting precedents, and a range of opinions. Towards the end of this project, we will have a much better sense of whether and how incentives could be utilised by a broader range of issuers, and if not, why not."

Earlier this year, the Generation Foundation published a white paper which included loyalty shares as one of five key actions to accelerate the mainstreaming of sustainability by 2020.

"While we do not have all the answers, we do have some ideas we think may work,
such as incentivizing longer term, engaged ownership," said Peter Knight, Partner at Generation Investment Management and Trustee of the Generation Foundation. "By commissioning Mercer to undertake this consultation, the Generation Foundation wants to see if this idea has merit among key stakeholders.”

Mercer will lead the project with support from Canadian legal firm Stikeman Elliott LLP.

Mercer, Stikeman Elliott and the Generation Foundation will conduct interviews and focus groups to investigate short-termism from various perspectives, discuss possible solutions, and determine the level of interest in, feasibility and practicality of loyalty  instruments.

Mercer has put out a call for interested parties to participate, including topic experts, such as legal practitioners and academics, corporations that have considered or implemented loyalty instruments, investors and other stakeholders.

Findings from the interviews and focus groups will be discussed at a summer 2013 event, after which a report will be publicly available.

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