April 5, 2019

Investor Relations Magazine – Think Tank Criticizes Activist Influence as Having ‘Negative’ Impact on Shareholder Value

By Andrew Holt

Policy wonk blames ESG, regulations, special interest groups and proxy firms

A leading New York policy wonk has criticized the shareholding and activist process in the US, with a particular condemnation of ESG issues and the influence of special interest groups, in testimony given to a Senate committee hearing this week.

James Copland, director of legal policy at the New York-based conservative think tank the Manhattan Institute for Policy Research, listed a number of issues to the Senate Committee on Banking, Housing and Urban Affairs that are having a negative impact on shareholder value.

First, he questioned the focus on ESG factors that has emerged in the investor arena, thanks in part to BlackRock CEO Larry Fink’s infamous letter. ‘His letter nevertheless provoked controversy because it weighed in on one side of a debate that has raged on for a century – and, in one reading, embraced what has generally been the minority view, at least in terms of legal responsibilities,’ said Copland.

Social investing

On the issue of investor-related ESG, Copland suggested it could be being forced on the investment world. ‘Recognizing that an institutional fund manager’s social-investing goal may be appropriate for the informed investor who embraces that goal does not imply that such a social-investing goal is appropriate for institutional asset managers that do not clearly announce to investors their social purpose.

‘And it does not imply that such a social investing goal should be imported more generally into our investment, securities and corporate laws, nor that such laws should enable actors pursuing such goals to impose them on corporate managers.’

Given State Street Global Advisers’ Fearless Girl campaign and BlackRock’s commitment to prioritizing talking with companies about gender balance on boards, as well as climate risk, Copland asked: ‘Had institutional investors suddenly decided their previous reluctance to embrace social and environmental causes had been misguided – and that these issues were now key factors in maximizing share return? The answer is almost surely no, however fund families spin their efforts through public relations releases.’

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