Tuesday, 26 February 2019

Tech bros and 'win win'

Another couple of snippets from Winners Take All. This first quote is from a tech writer called Greg Ferenstein who interviewed lots of technology founders and tried to distil their ideas into a *cough* philosophy.
"The basis of old government is the notion of a zero-sum relationship between different classes - economic classes, between citizens and government, between the United States and other countries. If you assume that inherent conflict, you worry about disparities in wealth. You want labour unions to protect workers from corporations. You want a smaller government to get out of the way of business. If you don't make that assumption, and you believe that every institution needs to do well, and they all work with each other, you don't want unions or regulations or sovereignty or any of the other things that protect people from each other.
"Most politics and most institutions are built on a zero-sum relationship between some people in the group. This ideology is unique - and the reason I call it Optimism is because of the belief that everyone can get along. Or everyone has, to be more specific, overlapping preferences."
I could not have articulated the "win-win" mindset better myself. If we're all on the same side all the time, why do we need unions or regulations?

Secondly here is a tweet from a Silicon Valley venture capitalist called Paul Graham that is quoted in the book:
"Any industry that still has unions has potential energy that could be released by start-ups"

Monday, 25 February 2019

Winners Take All

This is a really interesting book (based on the first third, anyway) looking at philanthrocapitalism. It's a long-overdue critique of the super-wealthy, such tech bros and venture capitalists who fund them,  and their efforts to tackle social problems through "win win" business-led initiatives. I'm really enjoying it.

Here's an early excerpt to give you an idea of what it covers. 
All around us, the winners in our highly inequitable status quo declare themselves partisans of change. They know the problem, and they want to be part of the solution. Actually, they want to lead the search for solutions. They believe that their solutions deserve to be at the forefront of social change. They may join or support movements initiated by ordinary people looking to fix aspects of their society. More often, though, these elites start initiatives of their own, taking on social change as though it were just another stock in their portfolio or corporation to restructure. Because they are in charge of these attempts at social change, the attempts naturally reflect their biases.
The initiatives mostly aren't democratic, nor do they reflect collective problem-solving or universal solutions. Rather, they favour the use of the private sector and its charitable spoils, the market way of looking at things, and the bypassing of government. They reflect a highly influential view that the winners of an unjust status quo - and the tools and mentalities and values that helped them win - are the secret to addressing the injustices. Those at greatest risk of being resented in an age of inequality are thereby recast as our saviours from an age of inequality.  

Saturday, 23 February 2019

Stakeholder governance... in banks

Hat-tip to Responsible Investor for a fascinating news story about Dutch bank De Volksbank considering giving stakeholders such as employees and customers a vote at their AGM alongside shareholders. This is framed in terms of shift away from shareholder value / primacy to a "shared value principle".

The background to this is that De Volksbank is state-owned, having been in public ownership since the forerunner SNS Bank failed a few years back, and is expected to be privatised.

An interesting aspect of the article is the response from Eumedion: “We are sceptical whether an agency model with multiple principals will improve accountability and transparency. It may also increase complexity in decision-making by the so-called stakeholders meeting. Paralysis may be the consequence.” 

I personally think the ESG world needs to encourage more experimentation of the type being considered, but hey. Asserting that a multi-stakeholder approach is cumbersome and complex is an old defence of shareholder primacy, and feels out of step with where the governance debate is currently (see, for example, Keith Skeoch's views in the previous).

It also reminds me of the approach some investors took towards another Dutch company - DSM - back in 2007 when it tried to do something different by trying to introduce loyalty dividends. And in the end they killed it. Let's hope there will be a bit more tolerance this time.

It should also make people in the UK think about RBS. If Theresa May is serious about wanting to see more stakeholder representation in the corporate governance of PLCs, why not start where the state can make it happen? Surely it's time to walk the talk?

Wednesday, 20 February 2019

Asset managers and stakeholders

There's a proliferation of comment pieces from asset managers lately seeking to demonstrate that they "get it" when it comes to lack of trust in business and finance. A lot of these simply re-tread the same ground, with more exhortations to more stewardship and engagement.

As I regularly blog, I think this is too 1990s, and the future of corp gov will have to be more "multi-stakeholder" (hate the term, but you know what I mean). I think the interesting place to be now is figuring out how we get from the largely investor-centred model we have now to something different, and what we take (and junk) from what we have now.

This piece from Standard Life Aberdeen chief executive is possibly a sign that some asset managers are thinking a bit more widely. Although it does end with the usual call for "more stewardship and engagement" the middle of the article sets out views I would struggle to argue with.

Such as:


And:


These are early days, but we're going to see more of this and at some point we will see some meaningful changes. I keep blogging about workers on boards because - not for the first time - mainstream UK corp gov seems to content to ignore what is going on and keep repeating its historical arguments against. This is continuing even as worker directors are starting to be appointed to boards in the UK!

The impact of all this on public policy should be interesting. The last 20 odd years of corporate governance reform have repeatedly sought to use greater shareholder empowerment and corporate disclosure to tackle issues relating to business conduct. But now we have major shareholders stating that building an approach around equity ownership (which does not equal ownership of the company issuing equity) has flaws. That's going to call for something different.

Tuesday, 19 February 2019

Labour pains

I can't find anything positive in the news that seven MPs have left Labour and will now stand against it. Although I disagree with the politics of most of the seven, if you believe that cognitive diversity has value you have to think that Labour becoming a narrower church is a bad thing. And no-one with a brain (which, sadly, apparently rules out some people on the Left) can listen to Luciana Berger and not take it seriously. Yesterday was a bad day.

But what actually depresses me is the potential this group has to close down politics again. When you look at many of the people who are enthusiastic about the split, and you read the initial statement of intent, it is clear that this is not "new politics" at all. The framing is 1990s "radical centre" type stuff. And it's clear that many of those involved with this and other similar initiatives do not want to break with the past, they want to return to it. It seems that they see the problem being that politics in its 1990s/noughties version has been displaced, and needs to be reinstated.

I really would not get out of bed for that. I've not enjoyed the last decade of UK politics much, but one sliver of hope has been the willingness of people on the Left to start asking some proper questions about political economy again. Too much of this has been backward-looking. But willingness to at least discuss issues again, and test out ideas that are to Left of where people expect Labour to be as well as to the Right, is what has generated so much enthusiasm. In contrast, voices from the Right of Labour have been continually stuck on "you can't do that". I bet that alone explains a lot of Corbyn's support.

In contrast, my expectation is that the Independent Group, especially if it is bolstered by Tory defectors, will seek to position itself as being mindlessly "pro business" and, in my experience, this type of approach is the way to kill new ideas at birth. Nothing of significance on corporate governance or ownership policy has come from business or financial lobby groups in recent years. Rather any public policy interventions from them have repeatedly aimed behind where interesting ideas are in order to slow down and stifle reform.

No doubt "socially responsible" business lobbyists will be crawling over the Independent Group already with interesting ideas that, coincidentally, will push the pendulum back towards the status quo. (And given the group's stated desire to be "evidence-based" rather than "ideological" you have to think that status quo bias is already alive and well).

I fear that politics - at least in my back yard - may get more boring.

Sunday, 17 February 2019

Asset managers and worker directors

The more I've been digging around for info on workers on boards, the more interesting things I find. For example, I had heard a rumour a while back that ATOS was thinking about appointing a UK employee director. And it turns out that they did. In fact they have two employee directors, one of whom is from the UK (scroll down here).


This is part of the shift amongst French companies to appoint employee shareholder representatives. When I dug into the ATOS example, I discovered that at the same AGM where the UK director was appointed another employee shareholder rep was rejected.


When I Googled around a bit I found NEST's voting disclosure which showed that UBS had voted against this proposed director.



That, of course, got me thinking about other employee representatives. And in NEST's disclosure you can see that it's not just UBS doing this, and it's not just happening at French companies.



That last example is a Polish company, and looking at its AGM results you can see that there were not insignificant votes against one of the employee reps.


I don't know anything about any of these companies, so there may be important factors behind these votes. But it shows you that these issues can get pretty sharp.

Saturday, 16 February 2019

Workers on boards round-up 2

As I've blogged quite a lot recently, I think the ground is shifting with regards to the UK corporate governance model. Specifically, the issue of employee and other stakeholder representation is being debated increasingly frequently.

Although there is still a lot of resistance to worker directors in particular I think it's pretty clear what the direction of travel is. At the start of 2018 there was only one PLC - FirstGroup - with an employee director. By the end of 2019 I reckon there will be at least four. Slow change so far, but I can only see things moving in one direction from here.

Anyway, I thought it would be useful to pull together some bits I've spotted over the past few weeks on this topic.

1. An FT piece looking at employee involvement in governance as part of tackling executive pay.

2. YouGov polling showing workers on boards is supported by about two-thirds of the population in the UK (and by similar margins in other countries, including the US). Other left-wing policies also poll well.

3. A Slate piece on Elizabeth Warren's bill that would introduce worker directors on the boards of US companies.

4. A similar bill from Senator Tammy Baldwin (which also seeks to eliminate stock buybacks). Baldwin's bill calls for a third of the board to be workers, versus 40% in Warren's bill.

5. Google employees seeking a worker director on its board.

6. Polling from the US last April which found workers on boards to be the most popular of 5 progressive policies, supported by more than half of the 3,300 people polled. The detail of the polling shows registered Republicans were the only group where a plurality (not a majority) opposed the idea, and then only just.

7. A piece from Ryan Bourne from before xmas opposing workers on boards.

8. News from December that Capita is recruiting for employee directors (potentially two).

9. A piece from Australia about union attempts to get Labour to commit to workers on boards.

10. Another UK PLC, McKay Securities, nominating an existing NED as a employee representative director.

Previous round-up here.

Wednesday, 13 February 2019

Executive pensions & UK corp gov

Well over a decade ago, when I worked at the TUC, we started carrying out a survey of directors' pensions entitlements in the FTSE100. This was because we were aware that many directors still had DB pensions when these schemes were being closed for staff, and that exec schemes had preferential terms (accrual rates of 1/30th were common). As directors shifted into DC schemes, or started taking cash in lieu of a pension, it was clear that the rates available to them (often 20% or 25% of salary) were way above typical employer contributions to workforce DC schemes. As a result also argued that directors should be in the same schemes as their workforce and on the same terms.

Since then there have been various attempts to nudge companies to a) disclose more and b) adopt a fairer approach. Back in 2010 LAPFF and NAPF (as was) called for greater disclosure of directors pensions. A few asset managers now have a line in their policies on remuneration that directors shouldn't get preferential treatment.

The UK Corporate Governance Code now includes this (weak) blurb:


And more recently the Investment Association said that from this year it would "red top" companies offering differential provision. This is after years of telling companies that they should do this:


It's obviously a good thing that it is now recognised that giving directors another bung via pension contributions whilst keeping a lid on them for the workforce is not a good luck. But the reality is that it has taken a decade to get this far, that the Code is still very weak on this point, and we've still only got to the point where some shareholders might take a tougher voting stance (which they could have done at any time in the past decade). Even now we are not at the stage of corporates changing their approach.

It shows that left to its own devices the existing compact between corporates and asset managers takes a very long time to deliver limited change. Mainstream UK corp gov is a giant blob that stifles and slows any change. I'm not convinced many existing players have the orientation or capacity to challenge it.


Thursday, 7 February 2019

Inequality, depression, unions

Today someone mentioned Angus Deaton and it reminded me of this interview with him in the FT which I always meant to blog about. It's two years old now, and took place just after Trump's victory, but there are several bits that really resonate with me.




The last bit really interests me. I'm obviously an advocate for unions, and despair of the way that the decline of unionisation has scarred society. Many people (rightly) talk about inequality in regard to this, but I'm also interested in this issue - that Deaton hits on - of the removal of representation. 

I think a much underestimated value of unions is that they give workers the ability to challenge, to argue back, to assert some agency. In these days of the consensual anaesthesia, where conflict and contestation is characterised as undesirable, and democracy and deliberation as inefficient, you can see why those who want to keep a lid on things and/or "depoliticise" them (by taking issues out realms where they might be debated) don't like unions. Now we characterise workers taking action - arguing back, working to rule and (rarely) striking - as a pain in the arse, even while we celebrate those further up the foodchain for exhibiting the same kind of approach (think about the Theresa May "bloody difficult woman" stuff).

I think this is a shabby state of affairs. In addition, as Deaton suggests, I think the destruction of the sense that you can argue back, or assert yourself, or have someone fight for you, must come at a psychological cost, especially when coupled with the decline in jobs where traditionally workers have had some agency. I also wonder about the effect that this has on democratic norms. The rise of unions paralleled growing demands for political enfranchisement. Ordinary people were familiar with being able to choose representation. If we no longer expect to be able to choose to have effective representation where most of us spend most of our adult lives (at work) do we fall out of the habit of seeking/expecting representation at all?

Like many of us, Deaton sees all this as an element of the Trump and Brexit revolts. Tying it together with his comments that Labour / Democrat leaders no longer look/sound like their voters, it also reminds me of this passage from Wolfgang Streek. I'm 100% a Remainer, but I can understand the desire to through a spanner in the works.

   

Wednesday, 6 February 2019

George Orwell's pay ratio

This, from The Lion and the Unicorn, popped into my head the other day:
II. Incomes. Limitation of incomes implies the fixing of a minimum wage, which implies a managed internal currency based simply on the amount of consumption-goods available. And this again implies a stricter rationing-scheme than is now in operation. It is no use at this stage of the world’s history to suggest that all human beings should have exactly equal incomes. It has been shown over and over again that without some kind of money reward there is no incentive to undertake certain jobs. On the other hand the money reward need not be very large. In practice it is impossible that earnings should be limited quite as rigidly as I have suggested. There will always be anomalies and evasions. But there is no reason why ten to one should not be the maximum normal variation. And within those limits some sense of equality is possible. A man with £3 a week and a man with £1,500 a year can feel themselves fellow-creatures, which the Duke of Westminster and the sleepers on the Embankment benches cannot.

If we were to update this today, £300 quid a week, or a bit over £15k, is basically minimum wage as an annual salary, and would suggest a maximum (under a 10:1 ratio) of £150k-ish. I bet many people in my corner of the world would consider that absolutely barking, and I bet many people I know in the real world would consider it really quite generous.

Tuesday, 5 February 2019

Shareholders vs Ryanair: Gone-derman

I think that's called a win:
Having agreed this group strategy as the best way to grow Ryanair, Sun, Lauda and other possible airline brands, Michael O'Leary has agreed a new 5 year contract as Group CEO, which secures his services for the group until at least July 2024. His agreement to commit for a 5 year period is welcome, and will give certainty to our shareholders and allow him to guide the individual CEO's of Ryanair, Laudamotion and Ryanair Sun. 
The Board had previously committed to setting out its succession plan before the Sept. 2019 AGM. In that regard, David Bonderman (Chairman) and Kyran McLaughlin (SID) have agreed to lead the Board for 1 more year until summer 2020, but neither of them wishes to go forward or be considered for re-election at the September 2020 AGM. In order to ensure a smooth succession, Stan McCarthy who joined the Board in May 2017, has agreed to take up the position of Deputy Chairman from April 2019, and will transition to Chairman of the Board in summer 2020. Stan will bring his enormous international experience (as a former CEO of Kerry Group Plc) and leadership skills to the development of Ryanair Holdings over the coming years, although a legend like David Bonderman will be a very hard act to follow.