Corporate citizenship in a civil economy

Many companies around the world have discovered they can benefit financially from integrating environmental, social and governance (ESG) targets in their daily operations and strategy. At the same time institutional investors are more aware of their role as responsible shareholders after the devastation left by the credit crisis.

One size won't fit all

When measuring sustainability, one size won’t fit all. That’s one of the conclusions of a recent Corporate Responsibility symposium organized in Amsterdam by the Green Place on the application of Environmental, Social and Governance (ESG) sustainability criteria to investments.

Long termism and quarterly reports fit well together

Since January 1, 2016 listed companies are no longer required by law to publish quarterly financial figures. According to legislators, quarterly figures might put too much focus on the short term. Of the 50 largest Dutch listed companies so far only Aalberts Industries and Wereldhave have made use of the option offered by the new legislation. The size of Q1 2016 reports for these companies varied from one page at Sligro Food Group up to 73 pages at ABN AMRO, where the State is still the majority shareholder. Does this result indicate that Dutch listed companies are indeed focused on the short term - or do Dutch listed companies believe that it is beneficial to inform the capital markets about the financial situation at regular, fixed intervals? I believe the latter is closer to the truth.

Bring them on!; Public support from investors mounts for bringing leases on-balance


On 24 October 2013, the Capital Markets Advisory Committee (CMAC) took an unprecedented step to send a formal recommendation to the International Accounting Standards Board (IASB) on its efforts to put lease obligations on-balance. The CMAC is an independent global think-tank of investors that advises the IASB. The recommendation contains a unanimous statement of support for the IASB and FASB’s proposals on lessee accounting. The CMAC also explicitly advises against a ‘disclosures-only’ solution. Such disclosure-only solution would produce financial statements that are, for most investors, an inferior starting point for their financial analysis. Besides, a disclosure-only solution would not reduce costs for preparers because it would not remove the need for the costly gathering of information.

A disclosure only solution for leases is comparable with ordering lasagne, and instead of getting lasagne, you are supposed to be happy with the individual ingredients being served… thanks, but no thanks.

Dutch Change of Control Gain Capping Rule Ineffective


More than three years after its submission, the Dutch Senate is still in debate about the so-called Claw Back Bill. This Bill is partly inspired by an excessive acquisition bonus, received by Jan Bennink in 2007. The same Jan Bennink recently demonstrated at D.E Master Blenders 1753 that the purpose of "his Bill" could easily be circumvented. The part of the Bill to prevent excessive acquisition bonuses has thus become pure symbolic politics. It would be better to delete that part or strongly to tighten it (in such a way as the proposed Swiss rules under which all payments related to a successful takeover, merger or acquisition to executives will be prohibited). Ineffective legislation will only lead to more social unrest. 

It's time for alignment of ESG agendas


The path towards integrating environmental, social and governance (ESG) aspects in the agenda of institutional investors and companies seems to be complex and confusing. We believe the main reason for this is that, so far, institutional investors and companies alike are struggling to accept ESG as a driver for long-term value creation. Many still seem to regard ESG as a moral obligation; resulting in box ticking, not in higher quality investments.

In many countries, including the Netherlands, focus on ESG is considered to be an integral part of business, as well as a responsibility for investors. It is included in several corporate governance codes and investor codes, such as the UK’s Stewardship Code. In the Netherlands Eumedion, the representative of institutional investors, has issued best practices on engaged shareholdership, stipulating for example for ESG to be integrated into engagement with listed companies. It’s time pension funds and other institutional investors calibrate their compass.