Sunday, 13 May 2012

The language of shareholder rebellions

One thing I think we can probably all agree on is that "the shareholder spring" is a rather inappropriate label for the events of the last few weeks. Whilst many people are pleased that institutional shareholders seem finally to have decided to exert some pressure on investee companies, it's not really comparable with events in Egypt, Libya, Syria etc. In fact, even the basics aren't the same - investors are exerting rights they have long had, rather than risking anything to obtain new ones. (Indeed some shareholders are resisting govt plans to give them more rights!)

It's also interesting to note the way that reports in the media (and in the industry, I'm as guilty as the next person) struggle to describe the events themselves, which is understandable. First, are these really "revolts" or "rebellions"? Think about it - a vote on a remuneration report, for example, is really a mini referendum. If it is voted down surely that's just a "defeat" rather than a rebellion? We don't talk about an anti-AV rebellion last year do we?

Similarly it's interesting that media coverage isn't settled on whether rebellions are 'suffered' or 'inflicted'. This matters because the choice of language determines who is at the centre of the action - the company or the shareholders. More generally, I think the language of rebellions is used because the business pages are not generally used to institutional shareholders challenging management (by voting against) or talking about it. So although the actions concerned are limited and isolated, they do represent a challenge to the executives running our PLCs. So in a broader sense maybe the language is not as inappropriate as might first appear.

Personally I think it would be better if we could shift the language employed in this debate so that votes against management and public comment were seen as healthy dissent rather than insurgency. After all, the private sector is only likely to play a bigger role in our society in future. PLCs will become even more economically and politically important. I think that in turn means that they should expect to be required to exhibit more accountability. Therefore we shouldn't portray those seeking to hold them accountable as rebels, they are just exerting their rights.

Again, it comes down to the fact that different conceptions of what the shareholder-company relationship is about. To some it's largely transactional, to others it's political (and therefore power matters). Confusingly the different parties use similar language to mean different things. But if we think there is any value in the idea of shareholders acting as a countervailing power within companies it doesn't help if trying to push back is characterised as an extreme outcome.

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