I spend a lot of time talking to fund managers about the way they engage with the companies in which they invest. They all tell me the same thing: corporate engagement is very important. Vital, even.
They can only make long term investments on our behalf if they know and trust the management and if they have faith in the management’s corporate governance. So they spend a lot of time meeting, talking, engaging…
I like to think that this is more true now than it was, say, ten years ago and that we are at the beginning of a period in which we can rely on the biggest of the fund management groups to act more as the long-term company owners they are, rather than just as stockmarket profiteers. So I was disappointed to read a letter to the FT from Duncan Reed of Condign Board Consulting this week.
In it, he claims that “one of the most common complaints from boards and their directors is that invitations to meet or at least speak to shareholders commonly go ignored or at the very best there is a tiny take-up rate. The overtures of chairmen and senior independent directors are spurned, let alone those of rank and file non-executive directors.”
When crisis hits, big shareholders trip over themselves to make contact (usually about remuneration or M&A) but “for real stewardship to be exercised, these shareholders should ideally be investing their time, as well as their money”, not just when warning lights are flashing, but “over the long term”.
Reed is of course entirely right – and of course it is that long-term stewardship that is part of what we think we are paying for when we stump up the fees for active fund management.
Fund managers, it really is time to raise your game.