Corporate governance is neither sexy nor particularly exciting, which would explain why many people don’t give much thought for it. That’s not
to say that there aren’t some people considering the implications of who has a say in what a company does. In fact this issue is of growing
importance mainly due to the fact that corporations that cross borders are becoming less controllable by any one nation’s laws. The result has been
that multi-nationals are becoming known as transnationals – companies of no-nation that cross boundaries. Organisations such as Greenpeace have
realised the power these corporate phenomena wield and have begun to buy shares in them to try and exert influence at AGMs. These actions are
symptomatic of the weakened national powers – to enforce positive environmental changes activists no longer push government, they lobby
shareholders.
The first signs of real, hard, influence are showing. In the UK pension funds are now obliged to reveal what criteria (social, economic,
environmental etc.) they judge investments on. This newfound transparency is the first indication that pension fund consumers (the vast majority of
the working world) and thus fund managers will begin to wield their buying power to influence the behaviour of publicly traded companies.
But which companies you invest in is only a part of the control you can exert as a financial consumer. Owning many types of shares gives you
the right to vote on key issues regarding the company’s future direction. There are caveats, not all kinds of shares and not all kinds of dealing will
allow you to directly vote on matters – but countless do. Yet how many of us who own shares wield this right effectively, if at all?
As a progressively widening cross-section of society gets initiated into the right of share ownership now is the time to organise and vote on
corporate issues with our mind and conscience. But voting isn’t always that easy: You need to be registered before you can get the right paperwork.
Then you need the correct annual reports, voting papers etc. etc. If your dealer nominally owns the shares then getting all these can be rather more
complicated than it need be.
Companies could be more accountable to shareholders on a more regular basis if they adopted electronic voting. The hassle and cost involved in
polling their owners would be significantly reduced and the results would be almost instant. Now this technology alone isn’t going to solve all the
problems – chief executives would need to be tempted into a cultural change from the current situation where they try to avoid putting issues to the
shareholders like the plague. Furthermore there’s no denying the fact that pension funds own huge chunks of shares making them far more powerful
than you or I, however as the ultimate consumers of these funds’ handiwork I believe we have right to exert more influence on them too.
There is hope, what with pension funds having to put their social and green credentials on full display while ordinary shareholders can club
together on issues via the Internet – without ever having to go through the arduous lobbying and direct mail efforts older shareholder actions had to.
I can see a future where the needs of quick business decisions are balanced against accountability and deference to shareholders’ wishes.
This isn’t going to happen overnight, but if publicly owned companies can be tempted into cutting costs through adopting electronic voting for
decisions that already have to go to the shareholders then perhaps the activist community along with the social businesspeople out there can slowly,
but subtly, institute a culture of participation and accountability in our companies’ macho chief executives. Then we might begin to see the
transnational tentacles tamed.
November 2001.
Jason Kitcat 