The success of a company is determined not only by its management but also by the attitudes and activities of its workforce. Institutional investors should therefore have regard to the relationship between management, employees and trade unions in the companies in which they hold shares. This is not merely a matter of passive observation. In appropriate cases they could often with advantage hold discussions with trade union officials to learn their views about the company and to inform them about matters that are of concern to them. The promotion of exchanges of this nature should be to the advantage of all concerned.A very sensible suggestion, from the report of the Committee to Review the Functioning of Financial Institutions, published in... err... June 1980.
Some great stuff in here (hat-tip: Brendan) which I'll no doubt be posting up. Get a load of this:
On occasions when there is a general dissatisfaction with management performance, and where it is felt appropriate to co-ordinate an even broader approach to the board, an [investor representative group] can refer a case to the Institutional Shareholders' Committee (ISC). This was set up by the four institutional investor associations in 1973 at the initiative of the Bank of England and with a terms of reference which require it:
To co-ordinate and extend the existing investor protection activities of institutional investors with a view, where this is judged necessary, to stimulating action by industrial and commercial companies to improve efficiency
...the ISC acts primarily through the creation of case committees, though in practice many of the cases coming to it have been referred back for action [other investor groups] or by individual institutions. Between its formation and the end of 1979 it had dealt with 37 cases, of which seven led to formal case committees and 19 were felt more appropriate for independent action. The remaining 11 had either already gone too far for anything to be done or were resolved in some other way.
So the terms of reference under which the ISC was set up required it to facilitate collaborative engagement. And at an earlier point in its history this is actually what it did in practice. And compare that to what the ISC's terms of reference say now, for example:
· consider whether there are any such matters on which member organisations should co-ordinate their activities or representations to UK Government and regulators; European institutions; and, any other relevant international legislative, regulatory or standard setting bodies; and
· make joint representations on occasion and by mutual agreement.
So its mission has changed broadly from co-ordinating investor engagement with a view to improving performance to co-ordinating the lobbying activities of its member associations.