Wednesday, 16 May 2007

Capital stewardship critics

I recently stumbled across this article on the US labour movement's capital stewardship activity. It's notable that as soon as trade unions get involved in in an organised fashion in investment activity suddenly people on the Right get very twitchy.

The article I have linked to is a good case in point. You can tell the author desperately wants to find the smoking gun proving that the unions' secret agenda is broadly anti-capitalist. The problem is he can't find the evidence. And that's because unions want the companies they invest in to do well, not badly.

If you spend any time looking at the workers' capital movement in practice what really strikes you is how responsible is. Campaigns target genuine issues, often plain vanilla governance concerns that other investors have a problem with. So it annoys the cr*p out of me when some in the governance and SRI world misrepresent the TU agenda, or dismiss issues that unions are trying to bring to other investors' attention. Some UK investors did not cover themselves in glory over First Group last year for instance.

Anyway, back to the article. Having failed to find any serious evidence of scary unions doing things he still manages to conclude with the following sentence:

No matter what definition of fiduciary duty fund managers come to accept, unions will likely continue to play by their own broad definition, one that is likely to politicize public companies. That would be a bad deal for investors, managers, and employees.

As far as I am aware there has been no academic research done into the performance of companies targeted by union investment campaign, so how can he conclude that they would result in "a bad deal"? It's just unsubstantiated propaganda.

Finally isn't it striking that some issues only become political, or 'politicised', when unions oppose them. Bit of a broader point, but the clear assumption on the part of people like the author of this article is that the status quo is somehow apolitical. Presumably on that basis feudalism, slavery, racism, exploitation etc only became 'politicised' when people campaigned against them. That's clearly nonsense, and to suggest that the activities major public companies are not 'political' is equally nonsensical.

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