The majority of Canadian institutional investors say they don’t think shareholders should take precedent over all other stakeholders, including employees, at a given company, according to a new survey by Daniel J. Edelman Holdings Inc.
It found 91 per cent of respondents said maximizing profits in the interest of shareholders can no longer be the primary purpose of a corporation. Instead, companies have to balance the interests of shareholders with employees, customers, suppliers and local communities, with an eye towards lowering the risk of activism on part of multiple streams of stakeholders.
Most investors (81 per cent) said companies with so-called activist employees are less attractive prospects for investment, while almost as many (79 per cent) said companies aren’t prepared for increasingly common activism among employees.
Further, 90 per cent of Canadian institutional investors said they require companies to show they attract and retain the very best and brightest talent.
“Canadian institutional investors are looking at how companies treat every one of their key stakeholder groups to measure the attractiveness of their investment value proposals,” said David Ryan, executive vice-president of corporate and financial communications at Edelman, in the press release. “A healthy corporate culture, strong talent retention, customer service and community impact are looked at just as closely as financial [key performance indicators]. It is apparent that companies need to nurture all of their stakeholder groups equally to drive long-term success.”
Meanwhile, shareholder activism remains robust. The majority (86 per cent) of Canadian institutional investors said they’re ready to support a reputable activist shareholder if the changes proposed are required at the investee company. The same number believed their firm’s actions can have meaningful influence on a company’s operating performance, while 79 per cent said they’d like to be more activist in their approach.
However, when it comes to environmental, social and governance issues, many institutional investors remain unconvinced, with just 34 per cent of respondents identifying a positive correlation between ESG disclosure and optimal company performance. However, 60 per cent said they’ve increased their allocations to companies that excel on key ESG areas.
Further, 60 per cent said they participate in shareholder votes more often when it’s in favour of a new board member they feel will increase a company’s attention to ESG issues, while half said they vote more often on issues that support ESG-related policy initiatives.