Stakeholder capitalism, not missionary capitalism

This is an unusual book. I struggle to place it politically, since it both strongly advocates both reasserting the voice of the working class in politics and society, alongside quite conservative positions on issues like immigration. According to Wikipedia Michael Lind is a former neoconservative and an advocate of 'democratic nationalism', which doesn't immediately appeal to me.

It's more of a polemic than an analysis. But there are bits of it that I feel hit the target, even if that might just be because the caricatures are resonant more than anything else. For example:

Many of today's so-called community organisations are not so much grass roots as AstroTurf (an artificial grass. A contemporary "community activist" is likely to be a university graduate and likely as well to be rich or supported by affluent overclass parents, because of the reliance of non-profits on unpaid interns and staffers with low salaries. Success in the non-profit sector frequently depends not on mobilising ordinary citizens but on getting grants from the program officers of a small number of billionaire-endowed foundations in a few big cities, many of them named for old or new business tycoons, like Ford, Rockefeller, Gates, and Bloomberg. Such "community activists" have more in common with nineteenth-century missionaries sent out to save the "natives" from themselves than with the members of local communities who headed local chapters of national volunteer federations of the past.

I think there is a lot of truth in this, and the point applies more widely (Angus Deaton made a similar point).

This reminds me of things I see in my corner of the world in relation to the way employment issues are dealt with by investors. This is still very much approached in a 'top-down' and instrumental way. Employee engagement is now seen as A Good Thing, but because it can be instrumental to creating value for investors. Further, employee engagement is something done *to* workers *by* managers. And, therefore, engagement over employment issues is something that 'responsible' investors do with senior executives that may, or may not, benefit workers.

I think this is in part why many investors struggle with unions, and have seen labour issues as more 'political' than others (there are other reasons too - some investors literally just hate unions and are explicit that they want to keep labour costs down). Effective unions are about the empowerment of workers through self-organisation, not getting someone else to act on workers' behalf. A category error a lot of people in my field make is to understand the 'union' as the full-time officers rather than the actual union of workers. Unions are not NGOs working on behalf of workers, they are they workers themselves.

Where investors often get twitchy is when workers start making demands, because this is seen as a challenge to management. It gets particularly sharp in the corporate governance discussion where it's pretty obvious most investors don't want employee representation on boards (though they've got a bit more subtle about how they position themselves on this issue).

It's ultimately a question about power. Do we want workers to exercise it themselves, and therefore think about ways to accommodate this within the firm/corporate governance/engagement etc, or are we content with corporate and investors having it, with the hope that some missionaries amongst them will intervene on behalf of the workforce?

Concentration, alignment and pre-distribution

Like most people, I'm not really clear at what stage we are in the Covid-19 outbreak. Confused briefing to the papers (and a new strap line that doesn't include "Stay Home") suggests to me that in general the government *is* easing the lockdown de facto, even if it isn't saying much publicly. But conversely almost everything I hear through work points to continued disruption for months or years ahead.

With that in mind, it's worth thinking about some of the things from this highly unusual period that might endure. Waking up to the absence of noise, and walking around seeing very little traffic, has been a revelation in London. But I suspect that travel levels will creep back up, which is rather sad. And in any case, I'm going to stick to my knitting and cover a few things I know a little about.

Concentration

Concentration - both in ownership and within sectors - is something I think could be a lasting effect of the crisis. On ownership first, I think the big asset managers, and particularly the passive managers, will emerge stronger from this crisis.

I've been following asset management for over 20 years, and throughout that time I've heard the argument made that it's during a downturn that you really want active management, rather than just tracking the index down. It's never been borne out by events, and throughout the past couple of decades all that is happened is that assets have shifted from active to passive. I think this crisis will only add to that trend.

There's an interesting piece in the FT on this topic here which points out that the concentration of assets with a handful of investment groups had surged since the start of 2020. The largest 1% of investors now account for 63% of total industry assets.

There are couple of noteworthy comments in the article below:

Mr Miller said that concentration was also accelerating at fund level, with investors channelling more money into large, low-cost, predominantly passive funds. “We’ve seen investors buck the idea that active managers can outperform in a downturn,” he said.  

and

Mr Miller warned that the concentration of assets in the hands of fewer decision makers could increase baseline market volatility in future. He added: “It could also make the heads of the largest asset managers incredibly powerful influencers of the global economy as they can exert serious pressure on their portfolio companies.”

I don't currently see anything that is likely to change this. We can see ongoing consolidation within the industry and the continuing active to passive shift. On one level this is fine. I don't have much faith in active management, and the sheer number of active funds on sale seems ridiculous.

However, the concentration of power in the hands of a small number of players is significant. Some people in my world must think this is a good thing, since the separation of ownership (let's leave this aside for now!) and control is supposed to be the flaw in the public company that corporate governance and stewardship seeks to mitigate. But it doesn't feel like a victory does it?

The fact that this concentration is being driven in large part by investors going passive raises other questions. For example, at what point does that fact that much of the money invested in the market is not making active buy/sell decisions start to distort it? I remember first hearing this argument in the late 1990s when the point seemed fanciful, but we are now at the point where more money is being managed passively than actively.

Also, if asset managers have a position in a company simply because it is in a given index why should their views on ESG issues be more desirable than those of the underlying beneficiaries? Part of the story of responsible investment in the early years was that it was going to democratise the finance sector, and let those whose money was fuelling it have a greater say. But in practice what is happening is that large passive managers are agglomerating that power for themselves. My personal view is that the fact that it's investment professionals who call the shots in part explains why RI has such a wealthy liberal feel to it. But that's for another day...

Industry concentration

The other side of the concentration question relates to market structure. There are a number of elements to this. First, it's inevitable that this crisis will kill businesses that were already weak, in turn they might be picked over by other firms which survive and might be able to pick up bargains in the current climate.

Second, there are certain sectors that seem likely to be particularly affected. I read a piece on The Nation (which I can't find now!) looking at the impact on shopping streets in the US. The argument was that smaller independents would lose out to larger chains. Certainly it seems a safe bet that Amazon emerges stronger at the end of this. But it will surely go beyond this. Airlines looked ripe for more consolidation in any case as a number had failed or looked like they were going to.

Third, competition policy seems likely to be relaxed, even if not explicitly. For example, the CMA in the UK recently issued guidance on its stance in response to Covid-19. It essentially said that its position was unchanged. However the CMA's existing position was that it would take into account the financial viability of the company potentially being acquired. If there was a risk of business failure it might allow a takeover. Well, in the current environment there must be more cases where businesses are at risk of collapse, ergo it seems likely that more acquisitions that might otherwise have failed to gain clearance are approved. I don't want to oversell this point, but it's worth bearing in mind.

Incidentally, while I was looking for a separate article I found this piece from Aviva Investors which covers a number of the points I make above in more detail, and adds a few more.

Ownership + industry concentration to stay?

The combination of ownership and industry concentration was already attracting attention in public policy land. If the present crisis does reinforce both trends the issues that this raises become sharper. But I'm not sure that governments are going to want to unpick any of this or feel compelled to do so.

I've always felt that making anti-trust / pro-competition policy a centrepiece of a political programme feels a bit too abstract, despite the legitimacy of the points this would be intended to address. How many people get out of bed to campaign for 'challenger banks' for example? And who are the allies that they can count on. Arguably a capitalism dominated by a handful of big firms in each sector is better for reinvigorated bargaining by labour if that were ever to occur.

So on balance I think we are shifting to greater concentration and I don't think too many people will be motivated to do much about it.

Executive pay: aligned with who? 

Onto more pure governance turf, I think changes to executive pay so far in the crisis deserve a look. As many people will be aware, the most common response from companies has been to cut base salaries for directors, with cuts around 20% of salary typical. The symbolism is pretty clear - many workers are furloughed on 80% of their normal salary, so the execs get paid 80% of their normal salary, or something similar. In some cases directors are also giving up or deferring bonuses, and in a smaller number of cases LTIP awards. Overall these types of changes have been generally seen as a good thing.

A question to consider here is how easy it will be to return to normal. For example, if an executive has taken a 20% pay cut during the furlough, is it ok to put the salary back to 'normal' once furloughing is over? What if the company has reduced its headcount? What happens when a bunch of companies push executive salaries back up? I can imagine some resistance to putting pay back to 'normal' levels.

Also, imagine in contrast if a company emphasised that it felt it was important for executives to continue to have considerable variable pay with a substantial equity component in order to ensure that their interests were aligned with those of shareholders. Even if they went to say that aligning directors' interests with shareholders would deliver value for all stakeholders (blah blah blah) it wouldn't feel right in the current environment.

But why not? If public companies are supposed to be run in the interests of shareholders, and this is justified on the basis that there is no conflict between different stakeholder interests and therefore those other stakeholders benefit from such a focus, why shouldn't directors continue to prioritise shareholders? Why are they aligning their pay with their employees rather than their investors?

The common sense answer is that companies understand that this is a moment at which it is important to prioritise employee safety. You could manufacture an argument that not doing this would be damaging to brands, and thus to profitability, and thus it's actually in the interests of shareholders to put employees first, for now. However I don't think anyone really believes that. But it does again raise the question of whether different interests are in conflict and, if they are, whose should come first.

Shareholder primacy paused

I've written elsewhere that I think shareholder primacy has been paused for the time being. For certain companies this is more obvious than others. For example, in a number of markets banks and insurers have been told to stop dividends, buybacks and payment of bonuses. Similarly in some countries those companies that are receiving state support are barred from such activity. In the first case, regulators seem to have adopted this stance to ensure that financial institutions are well capitalised, in the second it's more a question of ensuring that taxpayers are not subsidising investors.

Again, if there were no conflicts of interests this doesn't seem like it should be necessary. For example, banks would cancel dividends and buybacks because they knew they needed to do so to preserve capital and in doing so ensure they were delivering long-term value to shareholders.  Actually, it seems that the UK's banks were not planning to scrap dividends before they were told to, and Standard Chartered was carrying on with its buyback right up the last moment. Does this mean that the PRA was wrong to tell them to stop?

An obvious retort is that this in an extraordinary situation and such moves might be politically necessary if not necessarily economically efficient. By which I mean simply that banks paying huge dividends and bonuses during a time of high unemployment might cause other, bigger problems. But is this only the case during a crisis, or is this just the moment at which we can see more clearly where the tensions are?

There was already increasing discussion of the merits of shareholder primacy before the pandemic hit. I think a shift back to arguing - explicitly - in favour of the model looks unlikely, though we might see lots of tortured arguments along the lines that actually lower dividends and no buybacks are good for shareholders. Therefore this might be another aspect of changed governance that endures.

Stakeholder alignment and pre-distribution 

Finally, here's something I'm hoping for. I am glad to see Ed Miliband back in a frontline role, and shadow business feels like the ideal place. When we was Labour leader he toyed with the idea of pre-distribution even if there wasn't much flesh on the bones. Maybe now is the time to revisit it. Thinking again about changes to executive pay, a model of stakeholder alignment would surely put a much greater emphasis on profit-sharing and similar models whereby the entire workforce gains when the business succeeds.

It's always struck me as bizarre that there is more interest in putting 'employee engagement' targets into incentive schemes for executives than ensuring employees are engaged. Rather than paying A in a way that might incentivise them to ensure that B is engaged, why not just focus on how B is paid?

Once more, things were already moving in this kind of direction. For example, disclosure of pay ratios really wasn't driven by investor interests, and the data that is being disclosed is going to be used by a much wider set of stakeholders. So this does feel like an area where more is likely to happen. I know some people are already thinking about these kinds of issues, so let's encourage it. Let's make stakeholder alignment an objective in pay discussions from here on.

Finally, this in turn points to a different way of thinking about engagement. As I've written before I think a model which focuses on interactions between senior corporate staff and senior investment staff is flawed. This is the approach which spits out ideas like putting employee engagement KPIs in LTIPs because the conception is that is the strata that matters, and that is where the action happens, even if the bulk of the company is not involved. But again more later...

Crisis pressure points

Clearly there are areas where the Covid-19 shutdown is going to have a bigger impact than others.

I won't bother rehashing stories about what's happening to retailers etc. but there are a few things that I think are worth clocking from the past week. The PRA letter to UK banks may actually have been a bigger deal than first thought. The FT reports that the banks were set to ignore its requests to exercise restraint on dividends and buybacks (on the latter Standard Chartered was still going right up till the end of March). I found this the most interesting bit:

Mr Woods’ intention was for the banks to make the announcement without public direction from the BoE, but leaders at four of the five lenders balked at the plan, the people said. RBS, which is majority owned by the taxpayer, was the only one willing to comply. “We all had exactly the same view,” said an executive at one of the four refusenik banks. “Just being asked to do it was not enough. We would have chosen to go ahead in paying the dividend and told the [BoE], ‘thanks very much for your input but we disagree’.” Another person briefed on the talks said: “Making the BoE force our hands was the only way of protecting ourselves from a shareholder revolt. If we had done it of our own volition then we would have faced legal challenges.”

Follow the direction of travel, and the PRA has also written out to insurers asking them to think of doing likewise:

When UK insurers’ boards are considering any distributions to shareholders or making decisions on variable remuneration, we expect them to pay close attention to the need to protect policyholders and maintain safety and soundness, and in so doing to ensure that their firm can play its full part in supporting the real economy throughout the economic disruption arising from Covid-19.

Meanwhile the European body EIOPA has gone much further and told insurers to stop making distributions to shareholders and consider variable pay

EIOPA urges that at the current juncture (re)insurers temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. This suspension should be reviewed as the financial and economic impact of the COVID-19 starts to become clearer.Taking into account the need to preserve an efficient and prudent allocation of capital within insurance groups and the proper functioning of the Single Market, EIOPA urges that this prudent approach is applied by all (re)insurance groups at the consolidated level and also regarding significant intra-group dividend distributions or similar transactions, whenever these may materially influence the solvency or liquidity position of the group or of one of the undertakings involved. The materiality of this impact should be monitored jointly by the group and solo supervisors.This prudent approach should also be applicable to the variable remuneration policies. It is expected that (re)insurers review their current remuneration policies, practices and rewards and ensure that they reflect prudent capital planning and are consistent with, and reflective of, the current economic situation. In such context, the variable part of remuneration policies should be set at a conservative level and should be considered for postponement.(Re)insurers that consider themselves legally required to pay-out dividends or large amounts of variable remuneration should explain the underlying reasons to their National Competent Authority.

From initial signals it looks like UK insurers may conclude that they do not need to change their approach. Legal & General issued an RNS statement on Friday afternoon confirming its intention to pay a dividend:

The Board of Legal & General plc has given careful consideration to the PRA's letter of 31 March.
The Board continues to pay close attention to the need to protect its customers and employees at this difficult time. The Board has carefully considered the need to act prudently in maintaining safety and soundness, and in so doing ensure that Legal & General plays its full part in supporting the real economy. It also recognises the importance of dividend income to many institutional and retail shareholders, particularly in the current environment.

As things stand this is fair enough, the PRA has asked insurers to consider their approach, L&G says it has and intends to go ahead with dividends. It will inevitably, however, carry another message given that the company's asset management arm is one of the biggest investors in UK companies.

What's interesting is that both banks and insurers have nodded to the interests of shareholders as a reason to carry on despite regulatory flags. In the case of the banks this has resulted in them being overruled by regulators, essentially cancelling shareholder primacy for the time being. What happens next with the insurers is unclear, especially give EIOPA's intervention.

This issue might even spread to asset managers. Amundi has already proposed suspending its 2019 dividend with DWS apparently likely to follow suit. Both are owned by European banks, which might explain it. But then a number of asset managers are owned by insurance companies too. There may be a bit of a domino effect here. And if investors start pulling their own dividends and buybacks, the pressure for investee companies to do likewise increases. Equity income funds beware!

Finally, worth also watching what is going on with utilities. Here's an interesting bit from the Sunday Times:

A second story in the paper looks at similar requests for leniency from energy companies, with one saying that: "Underlying it is a fact of the modern energy market: margins are wafer-thin."

This talk of wafer-thin margins reminds me of train operating companies. I remember the CEO of National Express explaining this is why they pulled out of UK rail - they just couldn't compete with state-owned (or partially owned) operators.

There's obviously a very delicate balance between trying to avoid monopoly rents and having private operators involved. It feels like an especially tough sell that this is a good model if it needs bailing out by the state when there is trouble ('trouble' a bit of an understatement here in current circumstances...) There is potential for there to be some big shifts in policy here.

(PS. To make a brief political point, there has been a lot of discussion of the merits of Labour being committed to public ownership of utilities. There is a small (basically Blairite) bit of the party that seems to dislike public ownership per se, but a more common tactical argument is that it might be poor prioritisation a) it's a lot of money b) is that really where you want to spend it and c) will the voters think you for it. But *if* utilities need bailing out during this crisis, it might be the Conservatives who end up paying the price (both financial and political) for any extension of public ownership. In this instance tactical arguments against melt away, and I can't imagine anyone Left of the Conservatives arguing for rapid re-privatisation. These are just a few sketchy thoughts that I'll try and develop a bit.)

Capitalism: down with the sickness

I'm just a humble labour & corpgov wonk, so most of the time the kinds of things that interest me are buried in the business pages. But it feels like, as with the financial crisis, questions about who controls businesses and how, and in whose interests, they should be run are going to become big political issues once more.

As I've made clear previously I have *zero* knowledge of Covid-19 beyond what anyone else can read. All I can speak with any sense about is how I see it impacting the areas that I do know about. So here are a few quick thoughts about the direction of travel.

First up, we should expect a very sharp turn away from normal expectations across the market. Dividends are already being suspended by many companies as they admit they can't accurately forecast what will happen in the months ahead. Buybacks are not going to have a good crisis, and many are being suspended. Some boards have already announced that directors are cutting their own pay, more will surely follow. At work we've been trying to get companies to embrace common sense on this.

Second, some companies will get it badly wrong, and this may do them serious damage. EasyJet is taking a lot of flak for proceeding with a £174m dividend payment even as it seeks state support (it claims it is compelled to make the payment, which is something I need to check out). Ryanair spent millions on a share buyback during March even as it cancelled hundreds of flights. One report I read yesterday said it is cutting staff pay by 50% (O'Leary is taking the same pay cut, but he doesn't really need the money does he?). Getting this stuff wrong in an environment where 'license to operate' is very much in the state's hands may have long-term implications. Directors will get booted out, companies' reputations will be in tatters. It could be terminal in some cases.

Third, there will be even more pressure for a shift to a more stakeholder-oriented governance model. This argument has gained a lot of ground over the past few years, so as the Covid-19 crisis hits it's one of the ideas that are "lying around", as Milton Friedman put it. You can see already in proposals from people in both the UK and the US that a change in the nature of businesses most directly affected is already being put forward. I can imagine a consensus forming very quickly that bailed-out companies must protect employment, cut executive pay (and no bonuses, LTIPs etc, obvs), stop dividends and buybacks and (maybe?) bring employee representatives into the boardroom. This would be a very clear shift away from operating in the interests of shareholders, even 'enlightened' shareholder value. And it would be very hard to unpick afterwards. What happens to bailed out companies may well start to affect those further away from the epicentre.

Fourth, I think (and hope) the crisis will lead to demands to change our employment model. All the 'flexibility' in zero hours contracts and gig work has been exposed as coming with huge downside risk for employees. But it also makes capitalism vulnerable. Workers without sick pay aren't going to self isolate. It's a lot of lower paid workers whose jobs can't be done from a laptop at home who going to keep things moving. In contrast many of us will reflect that we have bullshit jobs. Nothing is inevitable about a change, but I hope that, once we come out of the other side, unions build on some of the excellent work they have done so far and push for a new employment settlement.

Fifth, surely we're going to change our views on which organisations should and should not be privately owned. I have no idea where the line will end up being drawn but it won't be in the same place it is now.

Finally, the experience of a prolonged health crisis might serve to reset the discussion about pay. We're already seeing medical staff risking, and in some cases losing, their lives to protect us all. They, like most of us, do their job without any expectation of getting any bonus for it. So what makes executive directors so special? If the complex pay model we have for public companies - with all its targets, vesting dates, endless pages of reporting, and wasted investor research and engagement time - is part of a governance model that itself is out of date, let's junk it for good.

PS - https://www.youtube.com/watch?v=09LTT0xwdfw

In defence of the Behavioural Insights Team

I've seen something a bit odd on twitter over the past few days - people from various bits of the Left having a dig at the involvement of the Behavioural Insights Team (BIT) in the government's response to the Coronavirus outbreak. I've no dog in this fight, but what I've found particularly odd is the way this criticism has bled into a general attack on using 'behavioural science' to inform policy.

I know zero about epidemiology, so have nothing of value to say whatsoever about whether the BIT should be involved or not (that doesn't seem to stop a lot of people having an opinion though...). But I do bristle a bit when I see people on the Left attack the idea of looking at things like social psychology and behavioural economics when formulating policy. I also find it jarring when people who apparently have no science background describe this as 'pseudoscience'.

To be clear, there are important critiques of a lot of this kind of stuff. There is a big question mark over the replicability of some 'findings'. Stuart Ritchie has a decent thread on this topic here. And I'm happy to defer to people who have the expertise to say that there is no meaningful role for the BIT. But it's a big jump from this to the 'pseudoscience' sort of attack I see on Twitter, and apparent distaste for the BIT on the part of some people on the Left. I think this is a bit mistaken, so I thought I'd set out a few points in defence of this kind of work.

First, one line of attack is that the BIT is a gimmicky outfit that should have died with David Cameron's gimmicky government. But actually behavioural economics had an impact on policy even under Tony Blair. If you go back to the Pensions Commission's first report there's a section on what behavioural economics says that could inform savings design. This had a direct influence on decisions like auto-enrolment.

It also had an impact on the design of NEST. For example, one of the papers on Personal Accounts (what the NEST scheme was called initially) cited various bits of behavioural economics research in the discussion about default design and number of fund choices.

Now some people on the Left don't like auto-enrolment or NEST, so for such people this is irrelevant. But if you think it's a good policy (and one developed and initiated by a Labour government) then you should at least be aware of the role that behavioural economics played in framing it. This stuff is not 'Tory' or 'Cameroon'.

Secondly, on a related point, there seems to be a bit of confusion about what the big idea is. I think that's because there isn't one. FWIW from what I've seen/read I don't really think there is a 'theory' that sits behind the work of the BIT. If you read David Halpern's book on the work of the BIT it boils down to some pretty basic principles, rather than some overarching theory. This is a page from it where he summarises the key ones:

A lot of the work of the BIT seems to be applying these kinds of principles combined with randomised testing. Big wows, as I think the young people say. "Make it easy for people to do things you want them to do" doesn't strike me as a particularly ideological position. If there's a decent attack to be made on this, surely it's more that this is 'common sense' and actually probably just good sales and marketing tricks. I think I'd still take issue with that, but at least I'd feel it at least comes somewhere near the target, as opposed to suggestions that there is some malevolent right-wing anti-regulation agenda at play.

Another reasonable attack on this kind of work is perhaps that it seems to promise technocratic 'solutions' to political problems. I can remember someone making the point when Nudge came out that it was trying to take the politics out of politics, which does feel sorta kinda fair.

But I wonder if that's mixing up policy design/implementation with policy objectives a bit. Take that 'make things easy' point, it could be used to design policy interventions with wildly different political objectives. In terms of savings design it has influenced the decision to change the default from opt in to out out. But you can reverse the point - make things harder if you don't want people to do them. Which is what I thought the Conservatives might have been doing by removing payroll deduction of union subs. (I was wrong, or, at least, my FOI did not return anything!)

Which leads onto my third and main point - I don't really get why the Left would want to attack this kind of stuff anyway? It can be used for purposes we like or don't like, but we could say that about comms, or other elements of policy delivery. But some of it surely reinforces Left positions. I first came across behavioural finance when I started reading more about financial markets (Robert Shiller etc). And it was obvious to me then that this literature was problematic to those who argue that markets are efficient. Similarly behavioural economics suggests lots of ways in which markets do not operate in the way that stylised accounts of them suggest. Going further, it was reading around this kind of stuff that lead me to critiques of performance-related pay - something a lot of people on the Left are uncomfortable with.

This is not to say that behavioural finance / economics is 'left wing'. Richard Thaler and Cass Sunstein used the godawful term 'libertarian paternalism' to describe their approach (though again that tells us something, as they were attacked for using evidence of market inefficiencies as a way to propose paternalistic policies). But I don't see the value in not looking at what we can learn from this stuff.

To establish that when X happens people do Y, and not Z, does not mean you must adopt a certain policy, or that you should rely on non-regulatory interventions. All that it means is that if you have a certain policy objective it's useful to take account of this stuff to design your interventions. I find that basically uncontroversial. It doesn't mean don't look at other information to form decisions, or that you must reject certain types of intervention.

I am sure that some of the interventions that are 'behaviourally informed' will fail, and that some of the 'findings' that underpin them will be disproved. That's all fine. When the facts change and all that. Equally some of it will prove to be robust and simply become 'economics', or whatever else. Some people seem to have forgotten how much has already entered the mainstream. (Let she who is without a copy of Thinking Fast And Slow cast the first diss). I am also sure that people will be able to find things that David Halpern and/or the BIT have said/done that people on the Left (including me) would find objectionable.

I'd just urge some caution. What are we really arguing with? If it's actually the policy objective I think we're missing the point. If it's the science I'm happy to let the academics fight it out and tell me what I should think once they are done. I just fear a baby/bathwater outcome.

Fluttery votes

Here's the list of Paddy Power Betfair (now Flutter) major shareholders disclosed in last year's annual report. Capital Group is reported as having 5.9%, or 4.6m shares at 5 March 2019. Of these almost 3.9% are accounted for by the EuroPacific fund.

Here's an excerpt from the EuroPacific fund's NPX form that covered the 2019 AGM. The only resolution it said it voted against was resolution 2, to approve the dividend.

And here's an excerpt from Paddy Power Betfair's AGM voting results for the May 2019 meeting showing the vote against the resolution to approve the dividend.

The small print in the annual report says that the EuroPacific Fund delegates voting rights to Capital Research and Management. Does that mean that it voted For the dividend resolution, or didn't vote? Either way surely the NPX disclosure is pretty meaningless.

Against transparency!

The more time I spend looking at disclosures from investors, the less sense a lot of it makes to me. I've blogged quite a bit about meaningless Stewardship Code reporting, with dozens of hedge / boutique funds using exactly the same blurb. We are about to be hit by a wave of SRDII reporting that I think will repeat the same pattern.
I really question whether there is any point to all this reporting. I doubt most of these funds will ever aspire to be active 'stewards' of companies, and that's fine, most people that invest with them understand that. I am also sceptical that anyone reads the stewardship blurbs produced by managers or uses them to base asset allocation decisions on.
There's obviously a mini industry in producing compliance statements, which is probably going to matched over time by people within consulting or auditing firms who will assess them. So to the extent that there is interaction between people over the content of these disclosures it will be between people who write blurb and people who read blurb. It will not be between people who have capital to invest and people who are paid to invest capital, which would seem to be what we were all aiming at when the Stewardship Code came in ten years ago.
So if a lot of disclosure is meaningless, it goes largely unread, the only people who pay attention to it are compliance people (and compliance service providers) and consultants, and the firms who are making the disclosures are unlikely to change anyway, what's the point? It just seems to be imposing a cost.