A generally favorable Reuters story on Mary Schapiro’s progress as SEC chair ends on what is, to me, a very sad note:
[Redoubtable Columbia Law Professor John] Coffee said changing the SEC’s culture was a little like changing the culture of the Roman Catholic Church. “A new pope can come in, but the curia is still there and the cardinals still have their set traditions.”
Most comments on the January 21 US Supreme Court decision in Citizens United v. Federal Election Commission (1) have focused on the effects of direct contributions by corporations to candidates. Are such contributions invitations to corruption, or exercises of protected speech by persons associated in corporations?
But for those concerned about corporate governance or corporate accountability in any of its forms, Citizens United has a context and implications that go well beyond elections and freedom of speech. These challenge fundamentally the notion of corporate social responsibility (CSR) and socially responsible investing (SRI).
Last weekend, Haitian microlender Fonkoze served its customers in a manner worthy of a James Bond movie. While Haiti’s commercial banks remained closed after the January 12 earthquake, Fonkoze reopened 34 of its 42 branches, disbursing both deposited funds and remittances from abroad. Last week, to ensure a steady supply of currency in Haiti, Fonkoze transferred $2 million in cash from its US account to a Florida Air Force Base.
On Saturday morning, after a C-17 cargo plane brought the money to Port-au-Prince, helicopters delivered it – hidden in office supply boxes – to ten drop points, from which Fonkoze employees restocked their branch locations.
Tuesday night, Louis Auchincloss died at 92. Widely lauded as a chronicler of the WASP aristocracy, I think he is much better categorized as a novelist of ethics.
As someone who grew up in a family of lawyers, Auchincloss’s stories of the dilemmas of a private lawyer resonated. I well remember the evening I stumbled on Tales of Manhattan (1967). I read it in one sitting. The Injustice Collectors (1950) followed a few days later.
In the aftermath of the global financial crisis, many investors have grown concerned about standards of corporate governance. In fall of 2009, the European Commission released a study of corporate governance monitoring and enforcement practices in its member states. The study was undertaken by RiskMetrics Group in collaboration with BusinessEurope, ecoDA and their affiliates, and Landwell & Associates and their affiliates.
In most EU states, national governance codes set rules with which corporations must comply, or else explain why they have not complied. The RiskMetrics study found support for “comply-or-explain” regimes, but also found “some deficiencies,” including “unsatisfactory level and quantity of information on deviations by companies and a low level of shareholder monitoring.”
Reports on the retail sector, including apparel sellers, are a staple of January’s post-holiday business news. However the last quarter looks to retailers, it has told a grim story about the retail supply chain. In November 2009, the BBC reported that Uzbekistan’s fall cotton harvest was gathered, in large part, by children. Boys and girls as young as 11 were forced out of school and into the fields by the Uzbek government, which depends on cotton sales for most of its revenue.
Child labor is sadly common in much of the world, but Uzbekistan – the third largest producer of cotton in the world – presents an especially egregious case of a national industrial policy founded on the conscription of children.
The climate change scientists whose emails were recently hacked are living their worst nightmare. Like many of their colleagues, these scientists had long been frustrated by a handful of vocal global warming skeptics. The hacked emails gave skeptics a new opening to sow doubts about global warming, just as media attention turned to the Copenhagen climate summit.
These scientists spoke in some private emails of resisting Freedom of Information Act requests and boycotting journals that provide an ongoing platform for the skeptics’ views. Neither the hacking nor the censorship should be condoned. But when this dust-up settles, these things will be certain:
Investment & Pensions Europe’s Nina Röhrbein has presented some highlights from last week’s TBLI conference in Amsterdam. She quotes RiskMetrics Group’s Ran Fuchs, who asked why, historically, environmental, social and governance (ESG) research has primarily focused on equities, rather than fixed-income assets.
Mr. Fuchs’ question is about investment horizon, as ESG investment is long-term investment. In considering extra-financial metrics of corporate value, ESG investors act on their skepticism about short-term indicators, like share prices or quarterly returns. As ESG research can uncover longer-term risks and opportunities, Mr. Fuchs believes, its practitioners should apply its lessons to assets with longer time horizons.
Last month, “The Economics and Politics of Corporate Social Performance” won the 2009 Moskowitz Prize. The Haas School of Business at UC-Berkeley and the Social Investment Forum (SIF) award the annual Prize to research relevant to socially responsible investing (SRI).
Prize-winning Stanford Professor David P. Baron and his team found that the “social pressure market,” through its interplay with the markets for products and equities, can reward companies for their corporate social responsibility (CSR) practices. In doing so, Baron confronts a canard that the SRI sector has disputed since its inception: “The Social Responsibility of Business is to Increase its Profits.”
In preparation for the upcoming “SRI in the Rockies” convention, the Social Investment Forum (SIF) has posted highlights of its work over the past year. One of SIF’s most valuable 2009 efforts is a framework of its “Priorities for Financial Regulatory Reform.” Among these directives is a call to overhaul credit rating agencies. An October 19 report on the role of Moody’s in the subprime mortgage debacle explains why major changes are needed.
SIF’s Reform Agenda
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