BBC CAPITAL: This year, you’ve taken steps to get the Penny Brigade idea off the ground. You want 15 to 20 advocates for good company behaviour to provide setting-up costs for a watchdog foundation, right? You have personally pledged 1% of your net worth, or roughly $50,000, in each of the next three years. What are your next steps?
NADER: We want shareholders to pledge one penny per share of stock they own — to raise an army of 500 people, one for each company in the S&P 500…
I’m going to be writing a letter to about 15 people, including Arthur Levitt (former Securities and Exchange Committee chairman), Robert AG Monks, (activist and founder of the global consultancy Institutional Shareholder Services), and John Bogle (founder of the Vanguard Group, the world’s largest mutual fund company) and some leading lawyers in the area who have won class action lawsuits. We want to raise $10 million to start.
Leading Boards, which provides a web based “board portal” for boards of directors and their committees, posted a blog on Opening the boardroom to employees.
Most of the countries in the European Economic Area have some sort of employee representation at the board level. This representation can be divided into 3 groups:
- Employee representation only in state-owned or privatized companies – Ireland, Poland, Greece, Spain and Portugal.
- Representation once the company has reached a certain amount of employees – Austria, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Luxembourg, the Netherlands, Norway, Slovakia, Slovenia and Sweden. The number of employees requiring representatives on the board ranges from 25 in Sweden to 5000 in France.
- No board representation – Belgium, Bulgaria, Cyprus, Estonia, Italy, Latvia, Lithuania, Malta, Romania and the UK.Concerning these companies, there are no official laws but some boards have chosen, voluntarily, to integrate employees into the boardroom.
I’ve seen plenty of evidence that having a significant stake in the business and increased participation in deicison-maiking by employees leads to greater growth and profits but I don’t know of any current examples of publicly traded companies in North America with employees on the board. If you run across such cases, please let me know.
The Guardian reports Pension fund ‘owners’ need to become better backseat drivers.
To recognise this and build momentum, investors in the UK will mark Ownership Day – an initiative launched by UKSIF dedicated to raising awareness of its benefits. Active ownership is growing in popularity, but not fast enough…
YouGov research carried out for Ownership Day found that 48% of adults want investors to ensure that executive pay, including bonuses, is not excessive. And almost two in five people believed that environmental, social and governance issues such as climate change can affect the long-term value of investments.
The Guardian goes on to say that “active ownership… can produce financial returns to help pension funds,” citing examples such as CalPERS and Aviva. Ownership Day has come and gone in the UK.
However, I’m more interested in research conducted by funds concerning the wishes of their members/investors. What proportion of investors at BlackRock, CalPERS, or CalSTRS are concerned about executive pay, environmental, social and governance issues? I’m convinced active ownership can be much stronger if funds know their investors and members better. If you run across surveys of members/investors by funds, please let me know.
Smart beta’s popularity among institutional investors has grown substantially in the past couple of years — and experts believe that will continue in 2014 and beyond, says Pensions&Investments. (Managers see smart beta pickup among institutional investors)
However, ‘smart beta’ is defined by the user — low-volatility, valuation-tilted, valuation, momentum, dividend or anything but cap-weighted indexes. I’m more interested in funds that make use of corporate governance factors, such as the GIG Swan Index Series based on the GMI Ratings Accounting and Governance Risk (AGR) or anyone using their Forensic Alpha Model®. Know of examples? Please let me know.