Buhlmann's Corner

Everything will be fine

What? Is the world not good, must it be made better? After all, shareholders pay attention to responsibility, to sustainability – say their institutional representatives. They put their assets under pressure to show transparency and avoid conflicts of interest. There are no women on the supervisory board? That’ll be fixed in a jiffy, if the law wants. There’ll no bio-accident in 2011? So far at least, all are still best-in-class.

Over 250 investors with over 15 trillion U.S. dollars follow the Principles of Responsible Investment and their great deeds. The best reports about that are from Robeco, the loudest talking from Hermes, and the Retirees’ Reserve Funds are proud of their deeds too. Why then are they not to be seen at AGMs in Rome, Madrid or Hamburg? The shareholders’ meeting is the shareholders’ Parliament, isn’t it? But today it happens in the backroom. So they are “urged, shamed and more” by NGOs and by the committed, and as always, globally and based on written goals. OK, that’s better than a vacuum, but transparency is something else.

What do the others do? Those not among the 259 signatories of these principles? Generally, they buy themselves off, preferably from as monopolistic as possible service providers or their local colleagues, and cast their vote in a virtual mailbox. That’s their responsibility accomplished, or at least checked off. And what happens behind the mailbox? In principle nothing, but it is a fun area for skilled consultants, for a fee, to cobble together the appropriate AGM majorities – all the more complex, the more cross-border obstacles have to be overcome. But not a single investor notices – that’s not what they’re paying for, after all, but for peace of mind and shed responsibility.

In local practice, the brave new world looks more colourful. There, service providers paid by the other side, the issuers, are preferentially welcome. So it’s gratifying that we can discuss OBO/NOBO (rather than broker voting or tactical voting or whatever) with the SEC – at least that’s something no-risk we’ll have done. The tangible responsibility we can leave to the others. After all, the colleagues are right when they say that for the chance to make mistakes in the supervision and control of assets they don’t want to have to pay into the bargain. And if the mistakes get big enough, then you can call them too big to fail. It was so nice last time round, and even worked with a government guarantee – so everything will be fine.