That's not what happened and it's not my fault anyway! An exploration of management attitudes towards SRI‐shareholder engagement

Abstract

This paper explores semi‐formal interactions between SRI‐investors that take the governance route rather than deploy a best‐in‐class logic or exclusionary screening. On the basis of a stakeholder typology of the investor and of the chosen topic of interaction, namely compliance with the core ILO labour conventions, the paper formulates 10 expectations about management reactions to the concerns raised by investors. These expectations cover responsiveness, acknowledgment of positions and general attitude. The expectations are then related to the factual discourse by management responding to such concerns raised by investors. Based on data obtained from the Portfolio21‐correspondence, which is a joint initiative of European investors, it is found that management is very willing to discuss cases but at the same time denies the truth‐value of the allegations. Here, the problem of information asymmetry comes to the fore.

The relative importance of ethics, environmental, social and governance criteria

“…Empirical evidence suggests that institutional investors globally are beginning to recognise the power they have to influence corporate decision-making (Vanderkerckhove et al, 2007;Becht et al, 2010;Poulsen et al, 2010). The situation is, however, very different in South Africa (Viviers et al, 2009:1;Winfield, 2011).…”

The effectiveness of socially responsible investment: a review

“…Until now, little research has been carried out on engagement activities and their effect on the social and environmental performance of companies (Vandekerckhove et al 2007). Engagement is particularly difficult to investigate, as it largely takes place behind closed doors and little data are available, in contrast to shareholder meetings where proposals and voting results are public.…”

“…For many institutional investors, engagement offers an opportunity to discuss ethical concerns without making their concerns public through a shareholder proposal. This private communication diminishes the possible negative effects on share prices (Vandekerckhove et al 2007) and keeps the option open of filing a proposal at the next shareholders meeting if the engagement is not effective (Sparkes and Cowton 2004). Most companies are responsive to engagement activities.…”

“…Most companies are responsive to engagement activities. From 18 companies addressed by Portfolio 21, a joint initiative of continental institutional investors, 13 responded adequately to the concerns raised (Vandekerckhove et al 2007). …”

Carrot and Stick? The Role of Financial Market Intermediaries in Corporate Social Performance

“…First, in their dialogue with corporate management shareholders often frame their concerns regarding poor CSP in terms of reputational risk and potential impact on long term financial performance (Gond & Piani, 2013). Second, there is an emphasis on building trust in the dialogue with corporate management, with antagonistic tactics generally being eschewed (Vandekerckhove, Leys & Van Braeckel, 2007;McLaren, 2004). Third, the goals of the dialogue may simply be information exchange on the issue of concern or include more extensive influencing of corporate policies or reporting that are drawn up in response (Gond & Piani, 2013;Gifford, 2010).…”