To affirm the perpetuity of contest is not to celebrate a world without points of stabilisation; it is to affirm the reality of perpetual contest, even within an ordered setting, and to identify the affirmative dimensions of contestation. It is to see that the always imperfect closure of political space tends to engender remainders and that, if those remainders are not engaged, they may return to haunt and destabilise the very closures that deny their existence. It is to treat rights and law as part of political contest rather than as the instruments of its closure.
Monday, 22 July 2019
Continuous contestation
I like this (from this):
Friday, 19 July 2019
Dividend trades and voting
Obviously, I've not been blogging much lately, but something I've been spending a bit of time looking at is dividend arbitrage. In it its most well-known version, this is the practice of shifting stock around the ex dividend in order minimise tax payable. There is a variety of different trades, and at one end of the spectrum some of them are the subject of legal cases. (great piece on Macquarie's involvement here).
What all of them involve is stock lending. I recommend having a read of this paper from Richard Davies IR, which opened my eyes to the scale of lending that is going on in the UK. 20% to 30% of stock is going out on loan around the ex dividend dates of major UK PLCs, which immediately makes me think about the potential governance impact.
It's very hard to pin down who is involved. But one thing that can happen with large movements in stock is that they trigger regulatory announcements because voting rights thresholds are crossed. These are are the TR1 notices, which appear with the title "Holding(s) in company" if you look on sites like Investegate.
So one of the things I did was look at TR1 notices issued around the ex dividend dates of a few companies. And I can see some, Blackrock in particular seems to be triggering them on a regular basis. These appear to show a shift in allocation of voting rights a few days before the ex dividend date and back again a few days after it.
Where it gets particularly interesting is when the ex dividend date is close to the AGM. If this shuffling of stock involves lending some to another party then there *might* be an impact on voting turnout if shares aren't returned in time to vote. I have identified cases where voting turnout has gone down (very significantly in one of them) when the ex dividend date has been close to the AGM date.
I can't say for certain if the stock-lending is a) linked to a dividend trade or b) resulting in lower voting turnout. But it's a bit of a coincidence.
What all of them involve is stock lending. I recommend having a read of this paper from Richard Davies IR, which opened my eyes to the scale of lending that is going on in the UK. 20% to 30% of stock is going out on loan around the ex dividend dates of major UK PLCs, which immediately makes me think about the potential governance impact.
It's very hard to pin down who is involved. But one thing that can happen with large movements in stock is that they trigger regulatory announcements because voting rights thresholds are crossed. These are are the TR1 notices, which appear with the title "Holding(s) in company" if you look on sites like Investegate.
So one of the things I did was look at TR1 notices issued around the ex dividend dates of a few companies. And I can see some, Blackrock in particular seems to be triggering them on a regular basis. These appear to show a shift in allocation of voting rights a few days before the ex dividend date and back again a few days after it.
Where it gets particularly interesting is when the ex dividend date is close to the AGM. If this shuffling of stock involves lending some to another party then there *might* be an impact on voting turnout if shares aren't returned in time to vote. I have identified cases where voting turnout has gone down (very significantly in one of them) when the ex dividend date has been close to the AGM date.
I can't say for certain if the stock-lending is a) linked to a dividend trade or b) resulting in lower voting turnout. But it's a bit of a coincidence.
Thursday, 18 July 2019
Out of touch, out of mind
Something I've been thinking about a bit lately is how disconnected responsible investment is from the rest of the world. There is a tidal wave of marketing for ESG products and services currently storming through the financial services industry, yet it still feels distant from society.
I've also been re-reading a lot of Zygmunt Bauman and realise just how well he articulates a number of issues that trouble me. So I thought I'd try and combine the two - the excerpts quoted are from Globalisation: The Human Consequences, which is over 20 years old and well worth a read.
To start with a specific example, I spent a lot of time looking at Ryanair over the last few years. I have had countless meetings, calls etc with investors and advisory services over the period. At the same time it was obvious that the company was going through a very difficult time in respect of labour relations.
Yet, despite this, the amount of proactive contact from investors seeking to understand what was going on was limited. I can think of a couple of asset managers that were more on the ball, plus a couple of research/advisory houses. Arguably the most interested (and certainly the most knowledgable) were mainstream sellside analysts who were purely focused on potential financial impact, rather than ESG factors.
I also know there was significant engagement (some of it collaborative) going on between some shareholders and the company, including on labour issues, but without including the company's workforce itself. I come at this with a very specific background, but I find it hard to comprehend that anyone can think they are engaging meaningfully with a company about workforce issues without also at least trying to talk to members of that workforce.
This suggests to me a conception of engagement within the investment industry which involves senior people on the corporate side talking to specialists from asset managers. My gut feeling is that this is likely to lead to a very one-sided view of issues. For example, an investor might read a media report about employee complaints about precarious work at a given company, they might engage with the company and get the response that "it's complicated than that, and many workers like the flexibility" and basically be happy with that.
To take one specific example, I came across an interview (published before the labour crisis hit) where someone from Robeco claimed that Ryanair's employment model was a good thing for younger workers. Yet the nature of employment contracts was one of the animating issues amongst striking cabin crew just a year or so later.
Cue Bauman:
A related aspect of the RI industry that makes it feel detached from society is its global nature. The increasing consolidation of the asset management industry (which we can only expect to continue, especially with the growth of passive management) means that the organisations that responsible for policing these issues are the UK outposts of global giants. Asset managers increasingly advertise their global reach, including in engagement on ESG issues. There is also an international conference circuit (PRI, ICGN etc) that quite a few ESG people are part of. This points to an emerging globalised class of ESG specialists.
Yet beneficiaries remain resolutely stuck at a local level. On the one hand, most people have no expectation of international travel as part of their job. Asset managers jet across the world to speak on panels about stakeholder engagement and human capital management. That 'human capital' itself, however, cannot attend or have representation.
On the other hand, the way that globalisation affects employment is likely interpreted in a very different way. The relocation a job to a different country might present an exciting career opportunity to someone in finance, whereas it means a P45 to someone in a call centre or on a production line.
Bauman again:
Bauman makes repeated reference to the fact that one factor - capital - has no spatial limits. (Indeed attempts to impose any, to limit mobility or liquidity, are guaranteed to generate the strongest rebuke from the finance sector.)
Finally, the recent expansion and development of the RI industry has increased both complexity and obfuscation. In the current environment there is almost no way for a non-specialist to make sense of who the 'good guys' are. Every manager can offer you an ESG product, even if most people have no expectation of understanding how it differs from any others, or whether it really makes a difference. Some firms/services (Morningstar etc) seek to 'rate' them, but these ratings must in turn be based on a view of what matters - and how many ordinary punters will ever seek to understand fund ratings methodology?
The net result is likely to be (as with financial services in general) that a lack of understanding on the client side results in an unaccountable sector that is able to set its own terms. We expect these firms to act as 'stewards' of companies but without any realistic expectation that they can themselves be held accountable. Does this sound unrealistic? Three words: Woodford Investment Management. Look how long it took for even sophisticated clients to realise something was wrong and kick up a fuss. Some in the system who ought to be relied upon by the unsophisticated did not even have the incentives to make a noise. Something similar seems very likely to happen in RI land at some point.
More when I can summon up the energy...
I've also been re-reading a lot of Zygmunt Bauman and realise just how well he articulates a number of issues that trouble me. So I thought I'd try and combine the two - the excerpts quoted are from Globalisation: The Human Consequences, which is over 20 years old and well worth a read.
To start with a specific example, I spent a lot of time looking at Ryanair over the last few years. I have had countless meetings, calls etc with investors and advisory services over the period. At the same time it was obvious that the company was going through a very difficult time in respect of labour relations.
Yet, despite this, the amount of proactive contact from investors seeking to understand what was going on was limited. I can think of a couple of asset managers that were more on the ball, plus a couple of research/advisory houses. Arguably the most interested (and certainly the most knowledgable) were mainstream sellside analysts who were purely focused on potential financial impact, rather than ESG factors.
I also know there was significant engagement (some of it collaborative) going on between some shareholders and the company, including on labour issues, but without including the company's workforce itself. I come at this with a very specific background, but I find it hard to comprehend that anyone can think they are engaging meaningfully with a company about workforce issues without also at least trying to talk to members of that workforce.
This suggests to me a conception of engagement within the investment industry which involves senior people on the corporate side talking to specialists from asset managers. My gut feeling is that this is likely to lead to a very one-sided view of issues. For example, an investor might read a media report about employee complaints about precarious work at a given company, they might engage with the company and get the response that "it's complicated than that, and many workers like the flexibility" and basically be happy with that.
To take one specific example, I came across an interview (published before the labour crisis hit) where someone from Robeco claimed that Ryanair's employment model was a good thing for younger workers. Yet the nature of employment contracts was one of the animating issues amongst striking cabin crew just a year or so later.
Cue Bauman:
"What looks, however, like flexibility on the demand side, rebounds on all those cast on the supply side as hard, cruel, impregnable an unassailable fate: jobs come and go, they vanish as soon as they appeared, they are cut in pieces and withdrawn without notice while the rules of the hiring/firing game change without warning - and there is little the job-holders and job-seekers may do to stop the see-saw. And so to meet the standards of flexibility set for those who make and unmake the rules - to be 'flexible' in the eyes of investors - the plight of 'suppliers of labour' must be as rigid and inflexible as possible - indeed the very contrary of 'flexible': their freedom to choose, to accept or refuse, let alone to impose their own rules on the game, must be cut to the bare bone."If your views about the state of industrial relations at Ryanair, and the likely impact of strikes, were formed principally on the basis of engagement with the company I think you'll have had an uncomfortable 2018. In fact there was money to be made betting against the company's narrative during the period, and to my knowledge at least one hedge fund successfully did so.
A related aspect of the RI industry that makes it feel detached from society is its global nature. The increasing consolidation of the asset management industry (which we can only expect to continue, especially with the growth of passive management) means that the organisations that responsible for policing these issues are the UK outposts of global giants. Asset managers increasingly advertise their global reach, including in engagement on ESG issues. There is also an international conference circuit (PRI, ICGN etc) that quite a few ESG people are part of. This points to an emerging globalised class of ESG specialists.
Yet beneficiaries remain resolutely stuck at a local level. On the one hand, most people have no expectation of international travel as part of their job. Asset managers jet across the world to speak on panels about stakeholder engagement and human capital management. That 'human capital' itself, however, cannot attend or have representation.
On the other hand, the way that globalisation affects employment is likely interpreted in a very different way. The relocation a job to a different country might present an exciting career opportunity to someone in finance, whereas it means a P45 to someone in a call centre or on a production line.
Bauman again:
"The fashionable term 'nomads', applied indiscriminately to all contemporaries of the postmodern era, is grossly misleading, as it gloss over the profound differences which represent the two types of experience and render all similarity between them formal and superficial.Just to be clear, I'm a Remainer, I live in London and really enjoy living in a global city. But I also feel the pull of the 'local' and as such some of what I see in the field in which I work troubles me.
As a matter of fact, the worlds sedimented on the two poles, at the top and bottom of the emergent hierarchy of mobility, differ sharply; they also become increasingly incommunicado to each other. For the first world, the world of the globally mobile, the space has lost its constraining quality and is easily traversed in both its 'real' and 'virtual' renditions. For the second world, the world of the 'locally tied', of those barred from moving and thus bound to passively bear whatever change may be visited on the locality they are tied to, the real space is fast closing up."
Bauman makes repeated reference to the fact that one factor - capital - has no spatial limits. (Indeed attempts to impose any, to limit mobility or liquidity, are guaranteed to generate the strongest rebuke from the finance sector.)
Among all [those] who have a say in the running of the company, only 'people who invest' - the shareholders - are in no way space-tied; they can buy any share at any stock exchange and through any broker, and the geographical nearness or distance of the company will be in all probability the least important consideration in their decision to buy or sell.In principle there is nothing space-determined in the dispersion of the shareholders. They are the sole factor genuinely free from spatial determination. And it is to them and them only, that the company 'belongs'. [well, not really, but...] It is up to them therefore to move the company wherever they spy out or anticipate a chance of higher dividends, leaving to all others - locally bound as they are - the task of wound-licking, damage-repair and waste-disposal. Whoever is free to run away from locality, is free to run away from the consequences. These are the most important spoils of victorious space war.We have to be clear now that it is 'our' own pension funds, increasingly shorn of member control or representation ('good' governance in this world means technocratic efficiency, not democratic accountability) that are often in the mix. 'Your' pension fund may have been built up over a few generations from the deferred wages of workers from your area, but don't have any expectation that it is accountable to you. Even when it is active on ESG issues it is likely to be in pursuit of objectives that align little with the interests of workers in the local area, whose labour created the assets that are being utilised.
Finally, the recent expansion and development of the RI industry has increased both complexity and obfuscation. In the current environment there is almost no way for a non-specialist to make sense of who the 'good guys' are. Every manager can offer you an ESG product, even if most people have no expectation of understanding how it differs from any others, or whether it really makes a difference. Some firms/services (Morningstar etc) seek to 'rate' them, but these ratings must in turn be based on a view of what matters - and how many ordinary punters will ever seek to understand fund ratings methodology?
The net result is likely to be (as with financial services in general) that a lack of understanding on the client side results in an unaccountable sector that is able to set its own terms. We expect these firms to act as 'stewards' of companies but without any realistic expectation that they can themselves be held accountable. Does this sound unrealistic? Three words: Woodford Investment Management. Look how long it took for even sophisticated clients to realise something was wrong and kick up a fuss. Some in the system who ought to be relied upon by the unsophisticated did not even have the incentives to make a noise. Something similar seems very likely to happen in RI land at some point.
More when I can summon up the energy...
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