March 2013, ICSA (Institute of Chartered Secretaries and Administrators)
The relationship between companies and their investors lies at the heart of our capitalist system. When it is working well, common cause is taken on the journey through the risks and opportunities offered to the company by our erratic world economy, thus offering some stability in planning the company’s strategy. There is good evidence that such stewardship is rewarding for the investor, and the company also benefits. The relationship can, however, be trivial, with the company’s shares being traded solely on their spot value. At its worst, good companies, through ignorance, can have much-needed support withdrawn at difficult or even potentially rewarding times. Investors, for whatever reason, can fail to use the governance tools they have been given when companies behave badly.
In the UK, these tools are considerable. Companies, for their part, also have a role to play in improving the quality of the interaction with their owners, and being responsive to investors’ concerns. We can do better, but as this guidance points out, the current system can work well when companies and/or investors try hard to make it work.
The most important point – as stressed in the guidance – is for both parties to have the right attitude in committing to continual improvement of a relationship based upon truth and trust, with an open two-way exchange. To strengthen the quality of the dialogue,
at a time remote from the results announcements, we have suggested that there is a conversation on the things that really matter in creating and destroying value, that is on strategy, risk and long-term comparative performance. Continue reading…