Social Factor round-up
Railpen and workforce reporting, indexers and Barclays, infrastructure investment and populists
A quick plug for Railpen’s work on workforce topics. I was very happy to work with them for a few months this year both on workforce directors and company reporting on workforce issues. Both of these are areas where I would expect to see more action in years ahead.
Railpen has recently sent a joint letter with the PLSA and CIPD to the UK’s largest listed companies encouraging them to review and improve where necessary their reporting on their workforce. The letter encourages a focus on four key areas: workforce composition, employee relations and wellbeing, reward and recognition, and skills and capabilities.
You can read more about the letter here. I’d also encourage people to have a look at the reports Railpen and others have previously issued on workforce reporting. I know there is general ‘disclosure fatigue’ out there, but given the amount of money companies spend on their workforce I think we should collectively be pushing for reporting that at least enables us to identify from accounts core facts such as who the workforce are, where they are, how they are employed, how much they get paid and how long they stay.
It’s 20 years (!) since the Accounting for People taskforce in the UK suggested better reporting on HCM issues, we should be doing much better than we are.
There was a really interesting development last week in the legal action by investors against Barclays, see Reuters report here. This is the key bit:
Barclays applied in July for more than half of the case – representing some 330 million pounds of its total value – to be thrown out, which Judge Thomas Leech allowed on Friday. The bank's lawyer Helen Davies argued that it was essential in a shareholder lawsuit that claimants had relied on information published by a listed company. This meant, she argued, that claims by investors who said they relied only on Barclays' share value or listed status could not continue.
This is a big deal for… err… index-trackers, right? (And quants I guess - if they ever get involved in this kind of litigation.) I think the argument is that a passive manager does not rely on published information, since it will buy Barclays stock, or whatever else. because its a stock meets certain index criteria.
This will obviously get appealed, but imagine if it stood. Indexers are the largest shareholders in thousands of companies. If they were locked out of compensation in such cases that would really change the terms of shareholder litigation and reduce their stewardship options. Fundamentally, it would create two classes of investors.
UPDATE: there is a useful legal analysis of the ruling here. Here’s the conclusion:
At present, it would appear that passive investors' claims are limited to the relatively narrow conditions of genuine dishonest delay claims or under the parallel prospectus liability regime under section 90 FSMA (which has a more challenging, negligence liability threshold).
That is highly significant for the landscape for shareholder class actions under s90A / Schedule 10A FSMA claims where, to date, passive investors often comprise a healthy portion of the claimant group's total loss value - a key factor for funders' assessment of a claim. Given this, the decision is highly likely to be appealed. That outcome may represent a watershed moment for investors' / funders' appetite for these cases
There’s a very interesting report out by IFM Investors and the PLSA on getting pension fund capital to be practically deployed in projects that support decarbonisation. Given IFM’s background as an infrastructure investment specialist and one owned that is owned by pension funds this reads a bit differently (in a good way!) to other reports of this type. Definitely worth a read, the PDF is here.
While I’ve been poking around in pension fund investment in infrastructure and the politics around it, I came across what Reform (the radical Right party here) put in its manifesto ahead of the election earlier this year. I think this falls into the ‘economically left’ category:
Tighter Regulation and New Ownership Model for Critical National Infrastructure
The British taxpayer needs to be in control of Britain’s utilities. Launch a new model that brings 50% of each utility into public ownership. The other 50% would be owned by UK pension funds, benefiting from new expertise and better management. We will ensure standing charges are capped to help low users and pensioners.
Review Pension Provision
The current pension system is riddled with complexity, huge cost and poor returns leading to less uptake. Countries like Australia do savings and pensions much better and cheaper than we do and from a much younger age.
It is very very broad brush stuff, and whether they stick with this kind of positioning is an open question. But ‘state as co-investor alongside (UK) institutional investors’ is (I think) a variation on things done elsewhere, not completely mad and would probably land well with the public if positioned as ‘taking back control of our infrastructure’.
I doubt there are many votes to be had in infrastructure investment policy, but as part of an overall package this looks quite smart. I can imagine some of my family members nodding in agreement with this I’m afraid.