Published: 30/11/2014
In the most part Australian companies are no longer evaluated just on their financial performance. If corporate responsibility is also about minimising negative and maximising positive environmental and social impacts then shareholder engagement is a key avenue to making this happen. Shareholders (including large institutional investors as well as individuals) and prospective investors are increasingly interested in how companies are conducting their businesses and the impact their dealings have on the environment and community. Although there are currently no legislated requirements in Australia for companies to prepare and publish sustainability reports, we are starting to see some companies incorporating corporate social responsibility reporting in their annual reports. However there is still room for improvement in the quality and rigour of the information reported and we would like to see companies being more explicit about which social and environmental issues they see as being most relevant and material to their business. Such issues might include corporate governance and executive pay, carbon emissions, human rights, use of corporate funds for lobbying or political purposes or disclosure of environmental and social impacts.
Whilst there are numerous stakeholders such as non-government organisations and community groups advocating for various issues, shareholders hold the power to push the issues. Whilst individual shareholders are entitled to vote, a collective shareholder vote is even stronger. In the last year we have been pleased to see formalisation of organisations that help bring together like-minded shareholders to share ideas and expectations on how corporations should act and behave. One such organisation with whom we have organised shareholder action is the Australasian Centre for Corporate Responsibility (ACCR). When armed with collective shareholder votes, the ACCR are better able to command attention and influence corporate practices. In instances when dialogue alone is not effective, alternative measures may include requesting the company circulate a statement to all its shareholders about the issue or alternatively requesting a resolution be put forward at its Annual General Meeting. These measures also inadvertently draw media attention to the issue, raising further public awareness, which can be material to outcomes especially where companies show resistance.
Some of ACCR’s recent proposed resolutions include Santos withdrawing from the Narrabri Gas Project and amendment of Woolworth’s constitution to limit the extent of involvement in electronic gaming machines. They are currently in the middle of a campaign advocating that banks disclose their carbon emissions as a result of their lending practices. A notable break through has been achieved with the Chair of the CBA acknowledging for the first time that climate change was one of the big issues that the bank faced. As founding members of the Ethical Advisers Co-op (EAC), we have welcomed a partnership in the last year between the EAC and the ACCR which facilitates our clients’ involvement in shareholder engagement by signing over of shareholder proxy votes to ACCR for individual campaigns.