Monday, 7 January 2013

Unrealised expectations of unintended consequences

As is obvious, I'm a big fan of Albert Hirschman (who sadly died just before xmas) and one of my favourite books is the Rhetoric of Reaction, as this is short & punchy take down of 'small c' conservative arguments against reform. One of the points Hirschman made when discussing 'unintended consequences' was that the fixation on them tends to obscure the equally important question of 'unrealised expectations' - things that we expect to happen as a result of a given reform but don't.

As I have bored on in the past, in corporate governance policy debates the threat of unintended consequences (always, by the way, assumed to be negative) is never knowingly undersold. So I thought I would start compiling a list of predicted 'unintended consequences' of a reform that was actually introduced which subsequently never occurred (hence my 'hilarious' title for this blogpost).

Here are three my initial starters -

Reform - July 2000 Amendment to the Pensions Act requiring disclosure of pension fund policy on social and environmental issues.
Predicted unintended consequences - would make trustees the target of single issue campaign groups, would lead to pension funds screening out various types of stocks with a negative impact on the UK economy.
Actual consequences - a few more SRI mandates, though no noticeable increase in screening, more asset managers add corp gov/SRI staff (a positive unintended consequence?), no evidence (none that I am aware of) of funds being targeted because of disclosure of policy

Reform - public disclosure of shareholder voting records (ok, not an out and out 'win' yet, but there's much more data available now)
Predicted unintended consequences - would make asset managers... er... the target of single issue campaign groups, would be a major cost for asset managers
Actual consequences - some media coverage of and trustee interest in actual voting decisions (ie more accountability), negligible impact on costs (based on feedback I have received), more analysis of investor behaviour (ie various surveys)

Reform - annual election of directors
Predicted unintended consequences - would increase short-termism, could lead to entire boards being voted out
Actual consequences - too early to tell? But no examples of whole boards being voted out, and is there any evidence of increased short-termism? 

Any other good ones out there?

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