The report – which provides information on AMP Capital’s corporate governance activity – argues that “responsibility falls both to companies to understand and also to shareholders to clarify their objectives before a mutually beneficial relationship can be established”.
“Companies and shareholders are not all the same, each have different objectives and different challenges,” said AMP Capital corporate governance manager Karin Halliday.
“We’d all benefit from understanding each other’s position but to do that shareholders need to be clear about what they want and have a way to communicate that effectively; shareholders must also give companies room to successfully balance short- and long-term drivers of value.”
Singling out the Bangladeshi garment industry as an example, Ms Halliday said sustainable practice must not be overlooked for short-term reward.
More broadly, the report identifies the challenge faced by companies in balancing conflicts of opinion and objective.
“Each type of investor is likely to approach their investment in a particular company differently; depending on their time horizon, yield objectives and approach to [environmental, social and corporate governance] issues,” the report stated.
“The more time we have spent speaking to companies about their priorities, the clearer it has become that companies are under enormous pressure to deliver a complicated, and often mutually exclusive, set of outcomes for their diverse shareholders.
“Companies must always have to consider how they balance the conflicting demands of traders focussed on this week’s share price against the demands of strategic owners who take a longer-term view.”
However, AMP Capital warned that “myopic investors can risk pushing companies into making decisions that are detrimental to their long-term performance”.
