I blogged a couple of weeks back about the emergence of Trade Union Share Owners, something which I hope represents a potentially important development. Obviously as someone who has worked for and is very sympathetic to the trade unions you might not be surprised that I like the initiative, so I thought I would explain its benefits in a bit more detail.
TUSO has the potential to link corporate governance policy back to the beneficiaries and away from intermediaries. Regardless of what you think about trade unions I am pretty confident that they are much closer to the investing public's views on issues like executive pay. In contrast, asset managers generally sit at one extreme of the spectrum in the exec pay debate - high pay & all it entails is fine because boards are in a "war far talent". And despite being at the far edge, they currently have a lot of (voting) power. So it's great if we have a group that can express views as investors that, instead, mirror those of the real providers of capital.
On the same theme, hopefully this group has the potential to broaden out the governance debate, as it takes place in the governance community. Did I mention I'm not a fan of performance-related pay? I may have, but most investors are still in thrall to the idea. The TUSO policy on this issue takes a much more critical approach. Although it only controls a small amount of assets, hopefully by setting out a different set of policies it can pull that Overton window in a different direction, and legitimise ideas that mainstream UK corporate governance doesn't touch currently.
On this point the role of employees is the most obvious thing to mention, but there are two aspects to this. The first is the way that investors consider employment issues. In my opinion, even the RI community does not do this well currently. This is in marked contrast to their willingness to engage on environmental issues. So hopefully employment issues could appear more often on the engagement agenda. But there's also the question of employee representation IN governance. This is crazy talk in the UK, though barely worthy of comment in other European countries. So will this idea start to seem a bit more thinkable?
But aside from the impact on policy, hopefully there will be some direct practical effects too? The unions don't have much money, though hopefully the range of funds involved can expand, but by having their own voting position they can put pressure on particular companies. In addition, this could have a knock-on effect on other investors. It could give heart to others who want to take a slightly stronger line, and it could expose those who don't.
And in the longer term could TUSO also influenced union members who are reps on other funds? There are a lot of these people out there, yet currently they only get to hear a very narrow version of corporate governance policy.
I've always thought that, regardless of your views on the UK corporate governance regime, with its assumption of shareholder primacy, it's a mistake for the labour movement to not use tools in this system that are available to it. I hope this initiative could be the start of something really interesting.