by Jan Wagner
There will be no real “shareholder spring” until influential investors like the Gates Foundation, endowment funds like Harvard and Yale, and the world’s biggest index funds begin engaging with investees on governance issues, according to Bob Monks, one of world’s best known corporate governance advocates. Monks was speaking during last Thursday’s ESG Europe 2012 conference in Amsterdam that was organised by Responsible Investor (RI).
In an interview with Hugh Wheelan, Managing Editor at RI, Monks said: “If we represent the whole spectrum of ownership, we can require that our agenda be listened to. But as long as there are serious omissions, it will be very difficult to gain the legitimacy to require companies to change.” Regarding the omissions, Monks said they were corporate pension funds that did not “fulfil their legal obligation as trustees” as well as mutual funds and foundations whose names were associated with leadership and respect, but who were doing little or nothing on corporate governance: “The Gates Foundation is spending billions of dollars trying to solve problems. Why can’t they join us and be doubly effective?” he said. Asked if he had an explanation, Monks said: “The fact of the matter is that many people in fine places don’t like confrontation. They got it made and they don’t want to make waves.”
Monks also called for an end to non-binding shareholder votes. He said: “We become very proud of ourselves when resolutions are passed to separate the chairman from the board as was done at Exxon, or a majority vote against unjustified executive pay as happened at Citigroup. But these votes are only in advisory in nature. We have to move from a world where we ask for things to a world where we actually change things (with the votes).”
At the conference, Monks said more engagement among institutional investors would ensure better stock performance and, hence, restore “the credibility of common stock as a competitive investment.” He noted, for example, that because shareholders had not held firms to account in the last 15 years, a US government bond had outperformed the S&P 500. In the early 1980s, Monks founded the proxy voting firm Institutional Investor Services (ISS). In 1991, he co-founded Lens Asset Management that sought to improve the performance of the firms it invested in through engagement on governance issues. He currently sits on the board of GMI Ratings, the ESG and financial research company.