Salience and priorities in responsible investment

I've written a couple of bits recently to point up what I think is a bit of a lop-sided approach in the responsible investment world. Specifically, in the UK at least (thought I expect elsewhere too), there is a lot more emphasis on environmental and governance issues than 'social' ones. And given my interests, obviously I'm particularly concerned about the lack of focus on employment issues. I want to be constructive about this, but also be clear that there is a disconnect between much RI activity and where beneficiaries are.

Let's take a detour into Capital P Politics for a minute. Lord Ashcroft (yes, him) has become a source of very useful polling. Not only has he undertaken constituency-level polling in addition to national polls, he has also done some really interesting research on salience. This recent piece is worth a read. He makes the point that issues like 'economic competence' or 'leadership' are actually not necessarily as important as our politico commentators assume. If they were the Tories would be home and dry, as they easily lead on them versus Labour. But because these issues do not have the same salience as 'being on the side of people like me' or 'wanting to help ordinary people' where Labour has a lead, the election is still wide open. (Interesting, too, that Labour's advantages are about values/intentions rather than particular policies. Usually lefties are on the wrong side of this - quoting tractor production stats rather than projecting values.)

And there are issues that have very little salience at all. On these ones you can have a significant lead and it won't really affect the punters' views at all. This is exactly where Labour is with the environment. It has a clear advantage over the Tories on this issue, and has held this advantage over the last two years. But its salience with voters is well below average.

This, to me, shows why it was an obvious move for David Cameron to get rid of the 'green crap' to try and respond to Labour's policy on energy prices. They don't really risk anything given the low salience of the environment, but potentially gain by being able to say "we'll bring bills down" by getting rid of green taxes and thus cutting away at Labour's lead on 'wanting to help ordinary people'.

Actually you see something very similar in the polling that the NAPF undertook of pension scheme members I blogged previously. When asked what they thought asset managers should focus on it was pretty much bread & butter topics - the financial performance of the companies and the pay and conditions of employees were the top two. Environmental issues weren't even close. Again, low salience. (Of course, some will argue that actually a lot of the activity the RI sector undertakes IS focused on the financial performance of companies. But I think, if we're honest, we know this is a limited explanation for a lot of it.) But if we look at the activity undertaken in the RI world these positions are reversed. Environmental issues, climate change in particular, dominate whereas pay and conditions of employees is a long way down the list.

I can't help feeling that this is part of the reason that RI still feels like a bit of an add-on rather than an integral part of what pension funds do. Scheme members probably think it's broadly a good thing that people engage with companies over climate change, but it's not something many see themselves having a personal interest in. And because of its low salience at best it's pretty irrelevant in terms of building beneficiary support for RI activity (making it easy for opponents to scrap the investment industry's "green crap"). At worst there could be a significant gap between what pension scheme members want and what the RI sector undertakes on their behalf. It could look a bit like the legitimacy problem politicians now face.

I think it would be useful for all us in this field if there were a tighter link between what beneficiaries seem to want, and the activity undertaken on their behalf. Reorienting RI a bit so that bread and butter issues are given more prominence could do a lot to bolster credibility, and make it harder for opponents to challange. But then I would say that, wouldn't I?

PS. if I were working at an asset manager I would be looking at some of this polling a little bit nervously. There has already been a bidding war between the parties on pension charges. There is also growing interest in hidden investment costs. It's easy to see how a "lower costs"/"value for money" campaign could quickly gain ground, rooted in some simple values (like sticking up for scheme members), and I've little doubt that is something punters would be interested in.  

Ruling the Void

Ruling the Void, a posthumous sort of finished book by Peter Mair, is one of the most interesting things I have read recently. It covers similar issues to Colin Crouch's Post-Democracy but with a) some analysis of electoral behaviour to underpin the argument and b) a focus on the EU as an example. If you don't know about it, the book is basically about the hollowing out of Western democracies, with declining political participation and loyalty leading to more volatility on the one hand but less accountability on the other.

Particularly interesting to me area the comments about the state becoming primarily a regulator rather than an instrument of politics. This is exacerbated by the tendency of governments to seek to demonstrate the ideology-free nature of their offer by appointing third parties to develop and oversee policy. In practice this means that often only corporate interests get a look in since only they have the resources to devote to such work. Therefore, in my opinion, you should shudder when someone suggests that we need to "take the politics out of" a given issue, as this will likely mean hand it over to industry interests to do as they see fit with little accountability.

Anyhow, well worth a read. Below are a few good snippets.

[P]ublic policy is no longer so often decided by the party, or even under its direct control. Instead, with the rise of the regulatory state, decisions are increasingly passed to non-partisan bodies that operate at arms length from party leaders... [T]he officials who work within these delegated bodies are less often recruited directly through the party organisation, and are increasingly held accountable by means of judiciary and regulatory controls. And since this broad network of agencies forms an ever larger part of a dispersed and pluriform executive, operating both nationally and supra nationally, the very notion of of accountability being exercised through parties, or of the executive being held accountable to voters (as distinct from citizens or stakeholders) becomes problematic.

....

[T]raditional politics in seen less and less as something that belongs to the citizens or to the society, and more and more as something done by politicians. There is a world of citizens - or a host of particular worlds of them - and a world of politicians and parties, and the interaction between them steadily decreases. Citizens change from participants into spectators, while the elites win more and more space in which to pursue their own particular interests.

....

[I]t is possible to speak of a growing divide in European party systems between parties which claim to represent, but don't deliver, and those which deliver but are no longer seen to represent.   

Neo-liberalism

This is a few months old, but well worth a read - an interview with Will Davies (parts 1 and 2). Some choice quotes below that I particularly like/ agree with.

Ultimately what neoliberalism is doing is paradoxical.  It is asserting the political legitimacy of certain anti-political forms of technocracy, measurements and economics.  But when those forms of technocracy, measurements, economics and so on reach some massive crisis, as they have done in recent years, then the paradox becomes visible because the only things that can happen is for the state to use all its power to prop everything up and in a sense assert it all back into being.   And so the illusion that we can have a capitalism without power, without politics, and without sovereign bodies, comes crashing down – a project of power comes again to the fore.

xxxx

[O]nce the state’s job is measuring outcomes and measuring efficiency, the legitimacy of the state looks very different from if its job is seen in a much more normative, legal-constitutional way of imposing a particular market order....
[T]here is an emptying out of the capacity of judges, lawyers and regulators to mobilise arguments on the grounds of principle.  And this is deeply problematic because right now we live in a situation where most people would like to reduce the powers of banks and the main way in which that could be done is through regulation.  But the problem is that the banks are now involved in activities which are so complex and require such expertise, that they can always turn around to the regulator and say: you don’t know or understand what we are doing as well as we do and if you were to intervene that would have a drastic impact on certain economic indicators – growth or whatever.  And the regulator has no counter-argument to that.  What’s interesting about neoliberalism, I think, which has brought us to a state of crisis which we seem unable to get out of, is that it has gutted the very bodies which might traditionally have had the authority to restore certain areas of our economy to a state of legitimacy.  It has made it impossible for anyone to come along and claim that certain practices are simply illegitimate, because the only argument about legitimacy with any force is one based on economic evidence. 

ESG - where are the workers?

There's an interesting PRI report just published on investor engagement on public policy. It is worth a read. But I thought I'd carry out a little experiment to see the relative emphasis put on different issues as measured by mentions.

Here's the scores on the doors -

Sustainable+sustainability - 56 (37+19)
Climate - 53
Environment - 34
Governance - 31
Social - 19

Employee - 5 (of which 3 are part of the name of an investment institution)

Employment - 2

Union - 2 (including 1 in 'European Union')

Inequality - 1
Labour - 1
Worker - 0

To be clear, this is not a criticism of this particular report, it's a general point, and this is a very simplistic measure. But I wonder if anyone in this world would be surprised? Personally I think it's pretty indicative of where the RI community is at currently. The people whose money is being organised, and used to engage with corporates, don't get much of a look in. Attention is very much focused on environmental issues, and climate change in particular.

Tony Blair / David Brent

Somehow this -

Blair is frustrated that, for many Britons, Iraq effectively disqualifies him from contributing to this debate. He predicts, however, that this will change: ‘At some point … people will come to see that this is indeed a complicated and difficult argument and [that] this is something … I’ve spent not just my time in office but … the last seven years studying. I’m out in the Middle East twice a month, I’m seeing it first-hand. So when people say, “Oh, well don’t listen to him because of Iraq”, well, precisely because I’ve gone through these experiences it may just be that it’s worth at least listening to my reflections on them.’

Reminds me of this -

"What upsets me about the job? Wasted talent. People could come to me, and they could go, 'Excuse me, David, but you've been in the business twelve years. Can you just spare us a moment to tell us how to run a team, how to keep them task-orientated as well as happy?' But they don't. That's the tragedy." 

"As shareholders...."

A few years ago I was sitting in a meeting about a proposed corporate governance campaign when one of the younger people in the room began a sentence with the words "As shareholders, we...."

It really jarred with me at the time, and still does, so I thought I'd try and articulate why this is. Part of it was probably just an age thing. I guess it always feels a bit odd to hear someone quite young seek to present themselves as the voice of an institution, financial or otherwise.

But I think that merely served to make it more obvious how problematic it is to invoke the identity of "shareholders" in support of particular objectives. There are a couple of ways of looking at this. First, what is the location of the "shareholders"? Is it the share register, where usually the asset manager is the primary name, or do we need to look behind that to a beneficial owner (an asset owner)? Or is it even further back, say in the membership of a pension fund?

The politics here are interesting. It's obviously the beneficial owner or beneficiary that has the economic interest in the shares held. But both corporates and much of the finance sector are much happier viewing the asset manager - the intermediary - as the 'shareholder'. Of course partly this reflects the reality that asset owners delegate, but it's striking that some people seem to like it that way, and oppose reforms that might allow beneficial holders to behave more like shareholders.

Second, even within investment institutions there's a question over where the "shareholder" identity is located. Many people in the RI field understandably worry about ESG-focused staff being separated from the "investment process". But then that suggests, again, that the "real" identity of the "shareholder" is a mainstream asset manager. This looks like prototype theory in action, as applied to corporate ownership - mainstream asset managers are for many people the best example of "shareholder-ness". (And in return, many of us trying to change things are happier labelling the asset owner as the 'real shareholder'.)

But that isn't the end of it. A further identity problem arises if we consider the gap between the behaviour of the 'best example' of a "shareholder" and public policy expectations. In the policy world, "shareholders" should "act like owners" and therefore they need the tools to undertake this activity. Yet, as I've blogged many times before, in reality many mainstream asset managers have actually opposed the extension of shareholder powers. Similarly, both the current and previous administrations have prodded "shareholders" to undertake the kind of activity (value-focused engagement) that is supposed to be in their own interest.

This has the interesting effect of the state trying to create a new shareholder identity, as expressed in certain behaviour, because the actual behaviour of these 'best examples' of "shareholders" isn't close enough to how the state thinks financial market participants should behave. So there is an idealised notion of what "shareholder-ness" should be, to which actually existing shareholders are being encouraged to adhere.

On reflection, both the identity of "shareholders", and the property of "shareholder-ness" are a lot more up for grabs than you might imagine.

Socialising responsible investment

Responsible investment is a bit lopsided really isn't it? When you look at the commitment to the analysis of, and engagement over, 'ESG' issues it's pretty clear that the 'S' is somewhat silent.

Corporate governance (or, at least, a distilled group of shareholder-friendly CG principles) is almost completely mainstream now, and most asset managers take it somewhat seriously. Meanwhile the range of environmental initiatives which institutional investors are involved in is pretty impressive - IIGC, INCR, Climate Bonds, Carbon Disclosure Project, plus specialist service provides like Trucost, Climate Change Capital etc etc. It is quite clear then that asset owners - and trustees - are able to mobilise the capital under their stewardship, and they have done so in support of both 'E' and 'G' issues.

But social issues, and particularly employment/labour issues, lag a long way behind. What is more if you raise 'labour issues' in a responsible investment context most people are probably going to expect that you want to talk about supply chains and/or developing countries.

There is a strange disconnect here. After all, much of the capital that the RI community wants to mobilise exists because of collective bargaining a few decades back, and the governance of many asset owners includes employee representatives, often nominated by unions. What's more there is some evidence that beneficiaries care more about bread and butter issues like pay and conditions than they do about climate change or executive pay. And the Law Commission report on fiduciary tells us we're allowed to take account of beneficiaries' views when addressing ESG issues.

Overall, the priorities of the RI community can look a bit 'well-meaning, well-off green/liberal'. It's great that a lot of good work is being done, but the issues on which there is focus seem a bit out of step with beneficiaries. And, to be fair, this isn't helped by the fact that unions haven't always been proactive in trying to shape the RI agenda, so maybe we shouldn't be surprised that our issues are so low on the agenda. Equally, if we aren't trying to support our trustees and give them confidence to ensure labour concerns are taken seriously they may be more comfortable trying to do a bit of good by supporting 'mainstream' RI.

So it strikes me that there is some work to be done here to make sure the 'S' in ESG isn't forgotten, and to ensure that the RI world remains close to beneficiaries. For our part, unions could be better about getting our issues across to investors in a digestible format, in speaking up for beneficiaries (many of whom would benefit from more attention on issues like low pay, zero hours etc) and in supporting our trustees. Perhaps the RI community in turn could make a conscious effort to address the weakness on 'S' issues, and give a bit more time to considering what employee representatives have to say.

Two workers' capital snippets

1. A major international trade union statement on pension funds and tax avoidance has been published today. It is available on the TUAC website here. It has also been covered by the FT.

2. There is a very useful briefing for investors on human capital risk in the construction sector in Qatar that had been produced by the Committee on Workers' Capital available here.

Labour pains

I saw two speeches recently that contained points that I reckon are worth repeating. First, I was lucky enough to see James Galbraith speak about inequality at a recent conference. I won't rehash his argument, but one thing that stuck with me was his criticism of the idea that "a rising tide floats all boats". Aside from the fact that this may be questionable in its own right (e.g. if you look at real wages of the lower paid in recent years), he said the implication was that we don't have do anything in order to become better off. He argued that, if we want to address inequality, then this is time to return to struggle. If we want change we will have to organise and fight for it.

Second, I saw Adair Turner speak at an Equality Trust event, and he made some interesting comments about technological change. Part of what he said was essentially rehearsing the 'rise of the robots' argument, and the fact that a whole range of jobs are threatened, including middle class professions like accounting. But he also gave a qualified defence of luddites. He said that while it was true that overall and over time we benefit from technological advance, the economic damage done to specific groups of people could be quite long-lasting. Certainly long enough for people to not recover their economic position within their lifetime.

These things resonate a lot with me now I'm back working in the labour movement again. They help show (me) that economic and political processes are long in duration. They take serious effort to change, and there can indeed be good reasons for seeking to address the short-term pain they generate even if they have benefits over the long term. People don't experience life at the level of increases of GDP, or aggregate benefits from technological change. I think if we want to see real change again in the future it's going to require serious effort, not just expecting others (politicians mainly) to deliver it. And this has implications for politics as well as unions.

Thinking back to my time at the TUC, I remember a comment that John Monks made about many in the Labour Party seeing the unions as a bit like the uncool relatives at a party. The implication was that the political part of the movement was at the cutting edge, the industrial part stuck in the past. And there continues to be plenty of criticism along these lines from to the party to the unions.

But when I look at UK politics right now, I wonder who really has the bigger problem. Unions here have to run to stand still. Membership is not going up, and is still considerably weaker in the private than the public sector. But the industrial wing of the labour movement seems to me to have a much clearer sense of what its purpose is, and, for the first time since I've been seriously interested in politics, looks in better shape than Labour.

The debate about inequality, which both Galbraith and Turner were focusing on, gives us a few clues. Most analyses accept that the decline of organised labour is at least a part of the explanation for increased inequality. But the unions and the Labour Party may draw different conclusions from this. For some in Labour, a weak position for organised labour may be just what modern capitalism looks like. They may feel the tools to address inequality lie elsewhere (transfers, education/skills) and/or they may feel that there isn't a whole lot anyone can do about it.

For unions this trend is an existential threat - we need to reverse that decline in order to survive. This means rebuilding membership, convincing millions of people who have no experience of unions that they can do better if they become part of the movement. Of most importance is to demonstrate to people, not just tell them, that unions can deliver real change. To me this points to an organising agenda, and to relearning some old lessons. But it does at least give unions a very clear sense of what they need to be doing.

I'm not sure the same is true of the Labour Party. There are multiple signs that it faces significant trouble. The defection of white working class voters to UKIP, the defection of Scottish voters to the SNP, the possible defection of left-wing voters to the Greens. I can't shake the feeling that a lack of sense of purpose is the common theme. I actually think Ed Miliband probably has a good idea of what he thinks Labour should be doing, but feels unable to articulate it because he's not convinced the public will bite. So we end up with a really mixed message, not helped by the fact that Ed has failed to connect with voters.

Perhaps this is a passing storm, but when you look at centre-left parties across Europe things look grim.  This challenge to Labour isn't made any easier by the fact that the echo chamber of professional political commentary seems desperate to find the answer in the 'centre ground'.

Exhibit A:

Labour under Miliband are pitching leftwards with the introduction of a mansion tax. Homes where I am from in Liverpool, or in Harlow, Stafford or South Ribble, are not going to be worth more than the £2m threshold, but – as some Blairite Labour MPs are acknowledging – the tax sends an anti-aspirational message to those who dream of working hard to climb the property ladder.

This is language is alien to me and I doubt I am alone. I want my family to do well, but how many actual living human beings "dream of working hard to climb the property ladder"? Isn't it much more likely that most people simply want a decent home for their family, rather than a £2m one? Don't most people want this in exchange for spending a reasonable amount of time working, but also having enough time left to have a decent family life (rather than "dream about working hard")? And how many of them plan their lives in relation to a tax threshold relating to property values that they are very unlikely to ever breach? If "Blairite MPs" worry about this being "anti aspirational" I think that says a great deal about the problem that Labour has. These people simply don't represent the interests of the average punter, so what are they doing there?

Something isn't right.

Work is the blight of the blogging classes

A couple of quick links, while I continue to struggle to find time to blog:


1. There is a great TUC report on executive pay vs average employee pay here (PDF). The press release is here.

2. Interesting report in The Independent from a week or so back on how poor safety threatens real financial risks for Menzies Aviation (part of John Menzies).

The problem with infrastructure

There was a very interesting piece about the Pensions Infrastructure Platform in the FT the other day. This was originally seen as the Government's great wheeze to try and tap up pension funds to invest in infrastructure projects.

It's fair to say that the labour movement views this kind of initiative with a mixture of interest and trepidation. On the positive side, there may be opportunities for pension funds to invest in greenfield projects that both deliver decent financial returns and societal benefits. If this was tied up with commitments to good jobs on such projects this would clearly be a desirable outcome.

On the downside, unions have a number of questions/fears. Would such investments really deliver financially, and thus be in scheme members' interests? Is this a better option than the state borrowing at low cost to fund such projects (and potentially create good public sector jobs)? Will the money actually go into new projects, or will funds end up mainly invested in the secondary market for existing projects, including PFI deals?

Well, the experience of the PIP so far seems to bear out a lot of those concerns. In particular it is only picking up existing PFI contracts in the secondary market. As the FT article makes clear, this is a very long way away from the original vision and you have to question what the point actually is, since that kind of investment is already available (lower fees are part of the answer I guess). All in all it seems to confirm some of the more negative views.

quasi-Trot nonsense

Below is one of the silliest things I've seen a senior Labour person say for some time. In response to this bit of Ed Miliband's speech:

‘One Nation Labour has changed from New Labour – businesses have a responsibility to pay their taxes, respect their customers and treat their workers fairly.’

John McTernan wrote (for Progress):

It is a malicious, ultra-left, quasi-Trot smearing of the best British government of my lifetime.

I can understand some people on the right of Labour don't like Ed advancing a marginally more critical view of business, but there is no need to turn into the Daily Mail about it. "ultra-left" and "quasi-Trot"? Seriously? I think Trots, God bless 'em, have slightly different views on solving issues like the power of energy companies than creating a more competitive market.

If John McTernan finds that bit of a speech to be "ultra-left" what will he make of the clear call for class war advanced in this part of an article by Miliband in the Staggers:

The sense of disempowerment can be economic, in workplaces that lack the collective power of trade unions and where employee satisfaction and opportunity are limited. .....In truth, the “Third Way” discussions of the 1990s were too weak in addressing issues of economic power, in the workplace and elsewhere. 

That's David Miliband, of course.

Inequality, ownership and control

I've blogged recently about some of the ideas Roy Hattersley proposed in respect of the governance and ownership of business. In my opinion this deserves revisiting both because the proposals are still valid and because of the way he argues for them. They also closely coincide with my own views, which have emerged after a fair bit of time trying to do lefty stuff in the field of governance and ownership.

Funnily enough, it seems like there is something is in the air. A week or so back the latest Fabian Review came out, and it came with the latest of their great series of pamphlets. It is by Kate Pickett and Richard Wilkinson, better known as the authors of The Spirit Level and titled A Convenient Truth. As the title suggests, the pamphlet talks about the threat from climate change and, as you might expect, the negative effects of inequality are an important part of the story. What you might be surprised by is what they focus on as reform proposals. The core idea is the democratisation of business (industrial democracy if you like) and the proposals that flow from it include the extension of employee ownership and employee representation in corporate governance.

Actually they did talk about this in The Spirit Level too, but it's part of the book that has seemed (to me anyway) overlooked to to date. Not any more though, here the extension of employee ownership and voice at work are the main event, and this advanced as a way to tackle inequality. This, of course, slots in well with the idea of focusing on predistribution, or as they put it:

Our response should be to build effective democratic constraints permanently into the economic system. We need to develop policies to extend democracy into the economic sphere in ways which are consistent with, but modify the effects of, the market. 

I think you could build a consensus around this kind of stuff (note the IPPR put out a great report covering very similar ground). It's always struck me as incongruous (and a weak point for the Right) that in an era when we're encouraged as citizens, users of public services and consumers to take more power into our own hands that the workplace is off limits. I think the Left could make this argument. On the capital P political level governance reform and encouraging employee ownership doesn't cost money. And these proposals can be advocated appealing to various desirable outcomes - sharing wealth, spreading power and improving employee morale/productivity.

My one big gripe about this discussion in general is the absence of a role for unions in the mix too (though the Fabian pamphlet does highlight the correlation between inequality and declining union power). Again, if you want to try and tackle inequality without having to get the state to do all the heavy lifting then encouraging stronger unions is the most obvious way to achieve this. This would also help underpin the other reforms from within the workforce.

Nonetheless, interesting and encouraging stuff.

Unison applies capital strategy in Care UK dispute

I've blogged previously about the Care UK dispute. Given the company and its private equity owner Bridgepoint Capital's reluctance to behaviour like the responsible employers they claim to be, it's a smart move by Unison to go to the pension funds. Bridgepoint has some major public sector pension funds in both the US and UK as investors, I wonder how impressed they are? News of this dispute has spread globally, it will probably get a mention in Canada this week where the PRI has its annual conference (Bridgepoint being a PRI signatory).

Anyway, the piece in The Independent on this is well worth reading.

Why voting against directors matters

A couple of excerpts from Power Without Property by Adolf Berle

Concentrated economic power, whether held by private organisations and directed by their chiefs, or by the State and its chiefs, raises at once the question of "legitimacy".
Why be concerned with "legitimacy"? What difference does it make? Power comes to rest in the hands of specific groups; why not accept the fact, dealing with it merely as a fact? The answer is deeply rooted in immemorial custom and human experience. Power is a fact; but it also a fact that the human mind apparently cannot be wholly or permanently inhibited from asking certain questions. Why should this man, or this group, hold power - instead of some other, possibly more attractive, individual or group? The human animal has always endeavoured to answer his own question: power lies there because the holder is entitled to it by some test or standard. This carries a necessary corollary: the holder can be deprived of it if demonstration is made that there is no title or right in his possession of it.
....
[A]t present... the men vested with economic power - because they hold a position in a corporate or other economic organisation - got it by a method which the community recognises: through prescribed or accepted process or ritual. Boards of directors of large corporations are recognised as representing the stockholders because they have received the votes of holders of a sufficient number of shares to elect. The ritual of their election is ordinarily casting of a ballot for them, at a stockholders' meeting held for that purpose. It is not an impressive ritual... This is a far cry from the ritual coronation of a king, claiming power by inheritance and the grace of God, and assuming it in an abbey or cathedral by dramatic ceremony. Yet the rationale of the stockholders' meeting and of the coronation is the same. In both cases the ceremony is intended to affirm that this man or this group legitimately holds powder under accepted conditions. It is designed to induce (as indeed it does) general acceptance that the power has been well and truly located in the specific individual or individuals involved.

Whatever blah asset managers come out with to explain why we shouldn't read too much into voting decisions, ultimately if you vote for a director you reaffirm in public their right to power. Looking at Sports Direct, for example, the company has strong grounds for arguing that - by reference to the legitimising function of the AGM - the current board has no need of change. If you voted for the re-election of the current board don't be surprised if you get more of this kind of thing.

Different interests in executive pay

There was a sorta, kinda interesting piece about executive pay in City AM the other day. Interesting in that it clarifies where mainstream corp gov thinking has got to, and that, in my view, it demonstrates some of the continuing confusion and/or obfuscation embedded in it.

Essentially the argument is that a really basic approach to executive pay (Level 1) is to try and fix it (as in a fixed ratio), cap it or tax it. A slightly more sophisticated approach (Level 2), it is argued, is to muck about with incentives. But what really sophisticated pay reformers (Level 3) should be looking at is long-term delivery of awards. So the big idea proposed is longer term vesting of awards.

As the article says: "Level 3 thinking thus focuses on the structure of pay."

As I say, I think this is actually where the corp gov mainstream is at - for example, it's basically the line that Fidelity has been pursuing. The focus on "career shares" is in a similar place. The core assumptions are: the most important issue is structure not scale, performance-related reward is an inherently good thing and long-term awards incentivise long-term performance.

So far, so obvious. And I disagree with all of it.

The thing I particularly want to focus on is the idea that reforming things like vesting is more sophisticated, and that other ideas (examples given in the article include fixed pay ratios and higher taxes) miss the 'real' issues in executive pay. The intro of the article makes this sort of argument -

EXECUTIVE pay is a high-profile topic which almost everyone has an opinion about, and many believe the entire system is broken. But despite being well-intentioned, many suggested reforms may not be targeting the elements of pay that are most critical for shareholder value and society.
Much of the debate is on what I call a Level 1 issue – the level of pay. The European Commission is contemplating a binding vote on the ratio of chief executive pay to median employee pay; proposals to raise taxes – most prominently made by Thomas Piketty – are a response to seemingly excessive pay levels.
While both measures address income inequality, it’s unclear that they would do much to improve firm value. Levels of chief executive pay, while very high compared to median employee pay, are very small compared to firm value. For example, pay of £5m is only 0.05 per cent of a £10bn firm. That’s not to say it’s not important – a firm can’t be blasé about £5m – but that other dimensions may be more important.

In response, I think this fundamentally misunderstands what the debate around executive pay actually involves. The simple reality is that different groups want different things and, in my opinion, it's hard to achieve all of them. It may be that - within the area of executive pay policy - there aren't proposals that reduce inequality AND increase firm value, or at least that have much impact on both. We may have to choose between them, or choose where we want to put most emphasis. It may well be true that wealth taxes, pay ratios and the like won't increase firm value (there may be better ways to achieve the same ends too, but that's another issue). But equally in the proposals that are put forward by the corporate governance mainstream I see nothing that will reduce income inequality, or even seeks to. I think it would take some work to claim that long-term vesting is going to have an impact on it, for example.

Therefore to assert, as many continue to do, that the 'real question' in executive pay is structure, not scale, is not sophistication, it's a failure or refusal to listen to and acknowledge other voices. If I have a particular concern about income inequality then it's simply false to claim the 'real issue' in executive pay is structure (or, in the article above, to claim that other dimensions than scale matter more). Not to me it isn't.

In fact, in essence, aren't those those who argue that the 'real issue' in executive pay is structure simply asserting the interests of one set of stakeholders - shareholders, but in reality principally asset managers - over others? If other stakeholders have a different view - like that the pay gap is more important than performance linkage - this does not necessarily mean that they are missing the big picture, they simply have different priorities. So to argue that the thing to focus on is structure boils down to saying that the interests of those who want such a focus should win out.

As I've blogged before, much of the corp gov/RI community is obsessive about 'win win' outcomes - what might also be called painless reforms. There is also a tendency to see dissent and disagreement as something to be avoided if at all possible. Well, one area where you can get a bit of consensus - at least between big business and big finance - is that we should be focusing on reforming the structure of pay, and less on absolute levels. By mainstream corporate governance standards, because both the CBI and asset managers can reach agreement in this territory, it is self-evident that this is where sophisticated reforms lie. (I also share Roger Bootle's view that saying focus on structure is a smart way to change the conversation, and shift it away from scale.)

It's more likely, in my view, that where it's easy to find a consensus on executive pay that's because not much is being challenged. The CBI, for example, are quite happy to bang on about 'rewards for failure' because in the narrow sense they mean it (big pay-offs to departing directors of failed/failing businesses) there aren't that many cases and you'd have to be a real corporate shill to defend them. However, go even slightly further down the same track - clawback - and you find much less support. I think the reason it is possible to reach consensus on 'sophisticated' reforms to exec pay like greater performance linkage and long-term vesting is because everyone knows the fundamentals don't really get touched. If anything I'd expect exec pay to rise a bit to offset the fact that recipients will further discount awards that are now even further in the future.

The consensus is possible because the corp gov mainstream is only trying to iron things out between directors and asset managers. Hence issues about pay disparity within firms, and rising inequality don't get a look in. If they did, consensus would be a lot harder to achieve, if at all.

Many people in corp gov dislike these issues 'becoming politicised' (as if they were not inherently political issues), usually meaning it's a bad thing that politicians and policymakers are getting interested and/or drawn in. But at least politicians are used to dealing with conflicting interests and trying to reach a compromise between them. They are used to situations in which for one objective to be achieved, or one interest to be served, another is thwarted. Sometimes everyone is left unhappy, and you just have to settle on the least worst set out outcomes. But at least compromise isn't bought at the price of simply deciding asserting the primacy of one set of interests. The sophisticated consensus envisaged in Level 3 thinking is only achievable because so much else is left off the table, and other interests ignored.

To return to the idea of levels of thinking about executive, to me Level 1 thinking is demonstrated by the argument that the structure of executive incentives should be the limit of corporate governance policy. To me greater sophistication, Level 2 and up if you like, involves acknowledging that different stakeholder interests in this debate do not always overlap, and therefore we may need to make trade-offs, perhaps significant ones. This should be the start of the discussion, not something that we try and gloss over for the sake of a sterile consensus.

Sports Direct, hits and misses

Yesterday was the AGM of Sports Direct, one of the more 'colourful' UK public companies. It has recently been attacked for a poor approach to pay at both ends of the scale.

The company has been defeated several times in attempts to introduce an incentive scheme for Mike Ashley, hugely annoying shareholders not called Mike Ashley in the process. A scheme was passed - with a 40% vote against - earlier in the summer, though Ashley subsequently declined to participate in it. Many shareholders - and representative bodies like the NAPF, ABI and IoD - have argued that the pay issue reveals that there are real governance failings at the company. In short, Mike Ashley acts like it's his company alone, and the board don't stand up to him.

Meanwhile Sports Direct has also come under attack for its use of zero hours contracts. It is believed to be the employer with the largest number of workers employed on these terms, and the contracts also make it hard for staff to do other jobs to make up the hours. Hats off to Share Action for making the trip  up to Shirebrook to raise this issue at the AGM. And it looks like Sports Direct's problems are expanding on this issue.

The voting results from the AGM tell their own story. Just looking at the headline stats, the remuneration policy attracted the largest vote against - about 12%. But when when you strip out Mike Ashley's controlling stake it's a very large vote (40%+) against - the Telegraph think a majority of non Mike Ashleys voted against, though that looks wrong to me.

Much less impressive, however, is the vote against the chair, Keith Hellawell which looks to be about 20% of the non-Ashley vote. There has been extensive criticism, both public and private, of the Sports Direct board. A strong vote here would have been an important signal that governance needs to be improved. But, yet again, the focus has been kept on pay, surely the symptom not the problem in this case. It remains the case that asset managers - unlike a number of asset owners - don't use their legal rights to challenge incumbent directors even where there are serious concerns.

No doubt some will claim, as they always do, they are putting pressure on privately and that we shouldn't read too much into the votes. Well, in a situation where we have a cowed board and a domineering controlling shareholder I think that is a strategy that is doomed to fail (and perhaps those adopting it are well aware of this). There is still a big gap between public declarations about stewardship and what happens in practice at problem companies. If you are a pension fund trustee, I would urge you to find out how your asset manager voted on this one.

PS. This example also reminds me of why folks using the example of controlling shareholders to argue against requiring a 75% threshold to pass rem policy really missed the bigger picture. Cases like Sports Direct are surely going to be more common.

Bits and pieces

1. SHARE's annual key votes survey has been launched. More info here.

2. Mr Gray has a great blog on the Care UK dispute, and has had a closer look at Bridgepoint Capital.

3. Good column by Aditya Chakrabortty on why some US cleaners are much better paid than their UK equivalents. Go on, have a guess.

Disruption - good and bad

Perhaps we shouldn't be surprised, but in response to Leveson, global media businesses that develop intimately close relationships with senior political figures with a view to advancing their commercial interests have largely successfully managed to cast themselves as insurgent outsiders. There's plenty of rhetoric out there about how the press must be free to stand up to the establishment, and how the proposals of the Leveson are a slippery slope to a state-controlled press.

In my opinion, there's something rather pathetic about representatives of the Mail, or News Corp, or whatever, presenting themselves as challenging 'the establishment' when they are so closely bound to it. Nonetheless, since they control their own content, the coverage of Leveson etc is institutionally biased, in the same way you wouldn't expect the British Bankers Association to produce reports on socially useless finance.

The line that is pumped out is that while they might occasionally get things wrong, our free press is unruly and disruptive, and this is a good thing (which of course it is). This means that we tamper with the existing model of self-regulation at our peril. What is more, it is a positive virtue of the industry that it is refusing to bow to Parliament's will. Again the contrast with, say, banking is interesting. Actually bankers also say regulators shouldn't meddle in what they don't/can't understand, but their lobbyists also know that they simply can't get away (for now) with openly defying the will of policymakers.

The press has gone as far as to set up a regulatory body that is designed from the outset to NOT comply with some of the recommendations of the Leveson Inquiry. Once more, this is characterised as a good thing. Once you start trying to make a judgement about how accountable the press should be you have already crossed the Rubicon, we are sternly warned.

Compare all this with what the Tories are looking at doing in terms of strike ballots. Again you will see the language of "disruption" employed. But here it is A Bad Thing with the explicit intention being to minimise needless disruption. Here it is perfectly OK for the state to curtail the ability of citizens to challenge power when it comes to threats to their pay or working conditions. What is more, this is usually argued in terms of the greater good of a successful economy. The freedom to withdraw your labour without punishment is something that can be traded off against GDP.

In a previous era, it was taken for granted that, whilst they could be disruptive, trade unions were important in balancing power in the workplace. What's more unions and their members were often in the forefront of democratic struggles - as they are today. In contrast, now disruption at work, regardless of what provokes it, is seen as inherently undesirable. 

Let's make no mistake where it leads your average punter. If their employer tries to push through unpleasant changes, like a pay freeze, it will be harder for union members to resist. But at least they will be able to comfort themselves with the knowledge that they can still read Fraser Nelson telling them that Rupert Murdoch is the real victim of overpowerful government.

Disruption - it's all about who is doing it, isn't it?

Tony Judt

The quote I was referring to earlier from Ill Fares The Land:

“Societies are complex and contain conflicting interests. To assert otherwise – to deny distinctions of class or wealth or influence – is just a way to promote one set of interests over another. This proposition used to be self-evident; today we are encouraged to dismiss it as an incendiary encouragement to class hatred.”

"win win" versus fighting talk

There's a really irritating para I found in a McKinsey paper on long-termism that serves as a good/bad example of the obsession with 'win win' outcomes in stewardship/ownership land.

in truth there was never any inherent tension between creating value and serving the interests of employees, suppliers, customers, creditors, and communities, and proponents of value maximization have always insisted that it is long-term value that has to be maximized.

This sort of argument is made all the time in the corp gov/responsible investment world. Essentially the claim is that, if we just raise our gaze and look to the long term, all those apparent tensions between different interests both within the firm and in its relation to wider society dissolve away. I hate this with a passion.

First of all I think it's a preposterous claim. It suggests that all the conflicts between labour and capital over hundreds of years are simply a failure to think long term. What is more, the solution to these problems (which might look pretty large to those without management consulting experience) has been stumbled upon on by looking at the behaviour of institutional investors. All those millions of people working in the labour movement, or the green movement, or in business for that matter, could have saved all that time and effort by looking to the long term and learning a bit about pensions. No, it's rubbish. To quote Jim Royle, "never any inherent tension" my arse.

Secondly, despite the desire to present this as the modern, humanised face of capitalism it actually represents a rather oppressive view of society. There is a apparently an over-arching objective - long-term value creation - to which all of us can sign up without there being any 'tension' between our interests. If you don't get it, if you still feel there is a tension, that's because you haven't correctly identified your "long-term" interests. You're suffering from a sort of false consciousness if you like. This, to me, is suffocating as well as wrong. If a government, rather than a management consultant, asserted that all citizens' interests could be met under the same objective, if they would just realise it, alarm bells would start sounding. Why is it any more acceptable to claim this in the business/financial world?

There's a very good line at the end of Tony Judt's Ill Fares The Land where he says that it used to be taken for granted that their were competing claims in society that need to be mediated, but to assert this now is taken to be antagonistic. It feels very true in the microcosm of CG/RI.

I'll come back to this one later.

Follow the money at Care UK

As many people will be aware, a group of care workers in Doncaster are involved in a pretty serious fight with Care UK. These are frontline staff who were transferred across to the private sector and are seeking a meaningful pay rise, with a minimum starting rate of the national living wage of £7.65 an hour. The company has refused to consider a pay rise, so the workers have recently decided to continue to striking in support of that demand.

As always, follow the money, as Unison have done. Care UK is actually owned by a private equity firm called Bridgepoint Capital (whose advisers include Alan Milburn). Bridgepoint has some info on its website about ESG issues, but so far it seems that the strikers have been rebuffed in their approach to the company when they've tried to speak to Bridgepoint directly.

Of course, Bridgepoint won't have bought Care UK with its own money, behind them will be limited partners such as pension funds and other institutional investors. It would be interesting to see if they are aware of what is going on at Care UK, and the stance being taken.

This also reminds me of some interesting comments from Jon Moulton a few years ago. It does look like private equity firms struggle to behave as responsible owners in the care sector. Perhaps Bridgepoint will prove us wrong by doing the decent thing and ensuring that frontline staff get the pay they deserve?

Levellers, Agitators and Diggers

I love secondhand books. On a recent trip I stumbled on a secondhand book sale in the late afternoon where they were desperate to get rid of as many books as possible. I got three books for 20p. One of them was Britain's First Socialists: The Levellers, Agitators and Diggers of the English Revolution by Fenner Brockway.

It's a great overview of some of the ideas that emerged during this time, and the political and military context in which they sprung from. It also includes a few pages of paintings of some of the key figures, and pictures of important places, plus some front covers of some of the key pamphlets. 

I was quite interested to see that some of the Levellers were early advocates of Irish independence, the abolition of the death penalty for most crimes, interest rate caps and so on, alongside more obvious political reforms like  universal male suffrage (excluding Royalists, servants and, of course, women), equality before the law etc. 

Also grimly amusing to see the content of the Treason Act passed by the Rump Parliament, and clearly intended to target the Levellers. Under this you could be charged with treason - a crime carrying the death penalty - for (amongst other things) arguing that the government was tyrannical. 

I would have definitely paid more than 7p for all this!

I thought I'd post up some good snippets of original texts and speeches. The following bits are from Levellers and supporters. I'll post some from the Diggers when I've finished that section.

Thomas Rainsborough

The poorest he that is in England hath a life to live, as the greatest he; and therefore, truly, Sir, I think it's clear that every man that is to live under a government ought first by his own consent to put himself under that government; and I do think that the poorest man in England is not at all bound in a strict sense to that government that he hath not had a voice to put himself under. 

Henry Marten

Ye have, by corruption in government, by unjust and unequal laws, by fraud, cosenage, tyranny and oppression, gotten most of the land of this distressed and enslaved nation into your ravenous claws. Ye have by monopolies, usurers and combinations engrossed all the wealth, monies and houses into your possessions; yea and enclosed our commons in most counties.

William Walwyn

The King, Parliament, great men in the City and the Army have made you but the stairs by which they have mounted to honour, wealth and power. The only quarrel that hath been and at present is but this, namely whose slaves the people shall be.  

Prosegur

There's a pretty worrying development at Prosegur, reported by UNI here. Unfortunately this unprovoked physical attack on a union leader is part of a pattern of threats. UNI has already complained to the Spanish government about the company's repeated breaches of the OECD Guidelines for Multinational Enterprises in several Latin American countries. This development surely strengthens that case.

One for Prosegur's minority shareholders to have a look at too?

Shareholder rights are bad for business?

Another interesting piece in the FT today. He's really turned away from shareholder primacy. What interests me most about this is his emphasis on the position of employees and acceptance that they have a legitimate claim for representation in governance.

while shareholders do indeed bear risks in their role as the insurers of solvency, they are not the only stakeholders to do so. A host of others are also exposed to risks against which they cannot be fully protected by contract: long-term workers; long-term suppliers; and, not least, the jurisdictions in which companies operate. Moreover, shareholders, unlike others, and particularly employees, can hedge their risks by diversifying their portfolios. A worker cannot normally work for many companies at the same time and nobody can hedge employee income by owning shares in other people,

End of the line for the Institutional Shareholder Committee / Institutional Investor Committee

So that's it. The Institutional Investor Committee (IIC) has been wound up.

August 2014

Following the merger of the Investment Affairs division of the Association of British Insurers (ABI) and the Investment Management Association (IMA) on the 30 June 2014, the National Association of Pension Funds (NAPF) and the IMA have agreed to dissolve the Institutional Investor Committee.

Where there is a shared agenda, the IMA and the NAPF will continue to work together and advocate in the best interests of their members, in particular with respect to policy issues which impact institutional investors and their stewardship of investee companies.

The spur for this is principally the recent merger between the ABI's investment department and the IMA (a change that also seems to have played a part in Legal n General quitting the ABI). This left the IIC with just two members - the IMA and NAPF - and, as a friend in the business points out, a committee of two can just meet for coffee.

To be clear about what was just wound up, under the terms of reference agreed last year the IIC was focused on policy, and giving the trade bodies a collective voice on issues of common interest, rather than shareholder engagement. At that point the IIC stopping sharing same goals that the Institutional Shareholders Committee (ISC) had been set up to pursue. But given that last week's announcement is the end of the line in terms of organisational continuity, this seems like a good opportunity to look back on its history.

Set up at the instigation of the Bank of England under the Heath government, the original ISC was intended to do pretty much exactly what the Investor Forum has planned. The idea was to help co-ordinate and maximise the impact of the existing investor protection committees run by the investor trade bodies. The ISC was originally comprised of the NAPF plus the associations (then separate) representing unit trusts and investment trusts. The ABI's forerunner wasn't a member at launch, though it joined reasonably soon afterwards. The forerunner to the IMA didn't join until much later (I think the 1990s?).

The role of the ISC was to focus engagement (as we call it now) on under-performing companies. This is much closer to the role of the Investor Forum than I think people may realise. This is for the simple reason that 'corporate governance' didn't really exist - as topic of engagement - at the time. This was all about seeking to stimulate better economic performance through the shareholder-company relationship, rather than achieving policy or structural changes to embed shareholder interests.

It is also clear that the ISC fell short in this task. Even by the time the Wilson Committee reported in 1980 it was fairly obvious that there wasn't much life in the ISC, with a limited number of cases passed on to it and, of these, an even smaller number (7) the subject of actual action. I think it was pretty inactive by the 1980s.

In the 1980s and 1990s the ISC swung one way and then another. There was an attempt to reconstitute it along the lines originally envisaged, and a paid director general was appointed. The then chair also suggested that the ISC might even occasionally employ an external consultant to give shareholders an external resource to underpin proposals for change in strategy. But it appears this new approach wasn't popular in the industry and was quickly abandoned.

From then on, the ISC seems to have focused on policy (as in promoting investor interests) and lobbying. There is probably some interesting paperwork around from this era. I blogged previously about Roy Hattersley's comments about investor protection committee policy positions on employee share ownership and profit sharing. I also stumbled across an ISC policy paper where the important role played by employees in the success of company is made explicit, though this is largely just an echo of the previous wording of the then Companies Act:

DUTY TO EMPLOYEES
7.1 The Companies Act 1985 states inter-alia that "the matters to which the directors of a company are to have regard in the performance of their functions include the interests of the company's employees in general, as well as the interests of its members".

7.2 The ISC considers it important that this onus placed on directors by the Companies Act should not be overlooked. Directors should appreciate the significance of the role played in a company's progress by its workforce and should always consider the interests of all those involved in working together to improve their company's performance.  

It's worth noting the changed terms of reference for the ISC. Whereas it had originally been focused on stimulating the performance of investee companies, it shifted to lobbying in support of common policy positions held by the trade bodies.

· 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.

I first came across the ISC in early 2000s, when the investment management industry was pushing back against the recommendations of the Myners Review in respect of shareholder activism (there was even some discussion at this point of their being a legal requirement to intervene in failing investee companies). The compromise position was a revamped set of principles about the responsibilities of shareholders. It was intended that these could be written into mandate agreements in order that trustees could asset managers accountable for their implementation.

I did some trustee training at the TUC around this time focusing on the ISC principles, and I think a few schemes even included a reference to them in their statement of investment principles. But as an initiative it failed (or succeeded, if the intent of some parties was for nothing to change). I don't think anyone would seriously claim that the ISC principles had a noticeable impact on the relationship between companies and their shareholders. This is despite it being the industry's own response to an important element of a major public policy review addressing its effectiveness.

The ISC also came into the frame when there was pressure for asset manager transparency, specifically disclosure of shareholder voting records. Labour took a reserve power which would enable it to make such disclosure mandatory, with the intention of nudging asset managers into voluntary compliance. The ISC in turn put out a position paper on the issue which, through gritted teeth, said that public disclosure was "desirable" but that it should be up to the manager whether to disclose or not, and what to disclose (as in full record, or just votes against, or stats). If managers did not disclose they were supposed to explain why not.

At the risk of blowing my own trumpet, I think I know this issue better than most people in corp gov land. There was a small increase in the number of managers disclosing some voting data, but I can honestly say I only ever saw one statement on one non-disclosing asset manager's website explaining why they didn't make votes public. The large majority of asset managers neither complied nor explained. It was another initiative with the ISC imprint that had a negligible impact.

But what really damaged the ISC, in my opinion, was the financial crisis. Given the failure of banks, and the enormous losses suffered, it was surprising that the ISC didn't say anything publicly about what was going on. This was also pretty clear indicator of how far the ISC had shifted from an organisation intended to defend investor interests in failing companies. The ISC did put out a revised paper on the role of investors, largely at the instigation of the ABI I think. But even then there was horse trading between the trade body members. Certain proposals in the original draft - like making it easier to file shareholder resolutions and the annual election of directors - were knocked out. Given that the latter reform was introduced in any case by the FRC, it shows you that even at that point (just months after the bank recapitalisations) there was pressure not to go "too far". In the long run, the revised ISC principles became a code, and that in turn was taken over by the FRC to become the Stewardship Code.

In 2010 the ISC announced the formation of the Institutional Investor Council which was to both promote the Stewardship Code an facilitate shareholder engagement. This looked like a return to the ISC's historic mission. But in reality nothing much seems to have happened. Just over a year later the IIC was relaunched again, this time as the Institutional Investor Committee and minus both a member (the AIC) and any commitment to stewardship.

The Kay Review dealt the death blow to the ISC/IIC by promoting an investors forum, separate from the trade bodies, to facilitate shareholder engagement. That, of course, is now established. In response, the IIC's own terms of reference were later revised again to rule out any role in co-ordinating engagement activity, and instead to focus it on policy. And, to come full circle, the merger of the ABI investment department with the IMA then made that role superfluous too.

A few quick thoughts as someone who has watched the ISC/IIC as an interested, critical and outside observer. In my opinion, in the period in which I became aware of it, the ISC/IIC did not have a noticeable impact on actual shareholder engagement, and pulled its punches on policy related to it. I have occasionally asked colleagues if they ever came across the ISC/IIC as a body co-ordinating engagement and they have said no. On the policy side, I think the nature of the ISC/IIC (a collective of trade bodies) made it more likely to take small c conservative positions.

Of more relevance to current events, the history of the ISC suggests that it struggled to ever work as a co-ordinating body for engagement. And this was true even when it had backing of the Bank of England, and when institutional share ownership in the UK was both more concentrated and largely domestic in nature. From my reading of it, the ISC reoriented to focus on policy because that's largely what the industry wanted. In addition, the emergence of shareholder-friendly corporate governance reform proposals (e.g. independent non-execs, incentive pay to 'align interests') as objectives to be sought at investee companies as a substitute for direct intervention probably made a policy focus a reasonable/defensible alternative.

To me it looks like the Investor Forum is generally trying to achieve the same things as the ISC in its original version. On the plus side, shareholder engagement is more accepted as an element of the asset management business these days, and there are initiatives (Stewardship Code, UNPRI) that that prod managers to be more active. The Forum also has a greater distance from the trade bodies. On the other hand, institutional ownership is more fragmented (at least geographically), and the asset management is now a much bigger business and the people that run it know where the money really comes from. And, in defence of the trade bodies it is their members that determine how far they can go - as critical as I have been of the IMA on some policy issues in the past, I doubt many members are pushing for a more radical line.

I would also highlight that in the history of the ISC there are several occasions where there was quite a lot of rhetoric, but little happened (the ISC principles, framework on voting disclosure, first iteration of the IIC). Perhaps this was partly deliberate - promising action in order to avoid more direct political intervention, or perhaps it reflected that those involved couldn't move the industry as far as they expected to. Either way it's a bit of a recurring theme to keep in mind.

So the over-riding question, really, is how much you think the asset management industry has changed. If managers now believe being a responsible owner is both effective and conducive to being a successful business (or at least not in conflict with it) then it should be able to achieve more than the ISC. It not, then it isn't obvious why things should be significantly different this time.