Tuesday, June 2, 2015

Where No One Has Gone Before...

Getting worldwide ownership to cooperate on an issue might seem like an effort in herding cats: everyone is going to do their own thing. The thing is, nobody is really doing their own thing. What we have is an uncoordinated body of ownership that blindly follows management.

Yes, that’s right: ownership is following management. 

Instead, we need active owners who hold management and the entire company to account. When we’re told that cutting corners or pushing costs off onto society is done in our interests – to bolster our returns – we’re being told that someone else can pick up the costs because all that matters is the bottom line. But wait a minute! Aren’t we part of society? Isn’t it our taxes that pay for environmental cleanup? Our communities that suffer when wages are low or corporations don’t pay taxes? Our neighbors who are sick when they work with noxious chemicals?

Ownership in large corporations is so diffuse that, essentially, we’re all owners when you come right down to it. Especially when shares are owned and managed through large institutional funds and retirement plans. You, me and many people we know own stocks in corporations all over the world. These are the very corporations we complain about when we boycott or protest or when we lament the decline of American jobs. We own those companies and it’s time we reconcile our ownership with what we want as a society.

There is a solution. It may not be a one-stop shop and it will take work but there is a formula to ensure accountability and put the responsibility for corporate business back on the corporation. All constituencies – corporations, government, institutional owners, managers, trustees and every one of us -- need to co-operate on developing a system of integrated reporting – holistic accounting – so that corporations have no incentive to pursue societally destructive practices. The costs of pollutions, health issues, roads, education – whatever is caused by business, whatever is needed by business must figure into the bottom line. We have to revolutionize accounting and all corporations should be held accountable. Then all shareholders and customers can stop being enablers of conduct that they personally deplore.

Yes, this requires regulation and enforcement and if necessary, a very big stick wielded by government. But it also requires action, demand and vigilance on the part of shareholders. All shareholders.

 

June 2, 2015 in stewardship , shareholder activism , accountability , ownership  |  0 comments  | 

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Copyright 2017 by Robert A. G. Monks