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CEO-level US business lobby group critical of investors with “social agendas”

Business Roundtable also warns against pursuit of ‘non-material’ issues

The Business Roundtable, the association of top US CEOs, has slammed investors with “social agendas”.

It also warned that shareholders should be prepared to assume “some accountability” for the long-term interests of investee companies when making decisions that affect strategy or company decision-making.

In its updated Principles of Corporate Governance 2016, which outline eight tenets to shape a given company’s approach to good governance, the Washington-based body says shareholders must accept that improved access to the boardroom cannot come without “a corresponding increase in shareholder responsibility”.

The Business Roundtable’s membership includes CEOs and leaders from some of the US’s biggest corporates, including Larry Fink, Chairman and CEO of BlackRock, and is led by an executive committee of 26 executives including JPMorgan’s Jamie Dimon and Bank of America CEO Brian Moynihan. It represents firms with some $7trn in annual revenues. It is headed by John Engler, the former three-term governor of Michigan.

The introduction to the group’s Principles adds that shareholders who wish to influence corporate behaviour should publicly disclose their identities and the nature of their ownership, even when securities laws may not require disclosure.

It also suggests that though some shareholders may use the services of proxy advisors, including vote recommendations and representation at AGMs, they should “not be a substitute for individualized decision making” that takes a wider range of factors into account.John Hayes, Chair of the Roundtable’s Committee on Corporate Governance, has previously been a vocal supporter of proposed legislation to get proxy firms regulated by the SEC.

The document continues: “We sense that there is a rising belief that shareholders cannot seek additional empowerment without assuming some accountability for the goal of long-term value creation for all shareholders. Moreover, we believe that shareholders should not use their investments in US public companies for purposes that are not in keeping with the purposes of for-profit public enterprises, including but not limited to the advancement of personal or social agendas unrelated and/or immaterial to the company’s business strategy.”

The lobby group rails against recent rulings by the SEC and Congress that mandate listed US companies to report on conflict minerals and payments to foreign governments for resource extraction, among other issues. It adds that such information “may be relevant in a social context but has little relevance to material information that a shareholder would need to make an investment decision”.

The principles that govern shareholder interactions later clarify that the shareholder proposal process should not be used to “pursue social or political agendas that are largely unrelated and/or immaterial to the company’s business, even if permitted by the proxy rules”. Link