intimidatory activists threaten CSR prospectsMarch 2000
It would be easy to dismiss the recent row over the sale, by fund manager Phillips and Drew, of shares in Huntingdon Life Sciences (HLS), as an isolated event of no relevance to the practice of corporate social responsibility by large companies
HLS, after all, is a fairly small company (its market capitalisation is only £16 million) working in the specialist area of product and ingredient testing for certain pharmaceutical and agro-chemical companies.
But the sale on 8 February by Phillips and Drew of its 11 per cent stake in the contract research laboratory, after a series of hoax bomb warnings to institutional investors in the company, could have wider ramifications than at first appears.
The fund manager later said pressure from animal rights activists had been one of a ‘cluster of reasons’ for its decision.
There has been surprisingly little comment in the national press on the wider implications for the fledgling corporate social responsibility agenda. Yet the action of the hoaxers could change the climate of opinion in which corporate social responsibility (CSR) issues are discussed within companies, among investors and in the public arena.
Although the protestors may think they have scored a famous victory, in reality they could have played into their opponent’s hands by confirming the worst fears of those senior company directors who still view CSR with mistrust.
All this talk of CSR, its opponents may argue, is nothing more than a smokescreen for radical anti-business groups with their own agendas.
Transparency, crucial to the continued successful development of CSR, will suffer.
Almost immediately after the HLS story broke, there were calls for the government to relax laws requiring directors and shareholders to reveal their home address as part of its general review of company law: in one day, the climate of debate on transparency had subtly altered.
Sceptical directors also fear contagion. ‘You can imagine’, claimed Dr Anne Robinson, director-general of the National Association of Pension Funds, ‘groups [violently] objecting to oil drilling, tobacco and arms.’
Furthermore, socially responsible investment may have been tainted by association with the intimidatory tactics of the protestors. Support for the regulation requiring pension funds to disclose their policies on ethical investment, has been challenged. The Ethical Investment Research Service (EIRIS) was forced to counter claims by Dr Robinson of the NAPF that the regulations ‘give encouragement to the activists. Once you change the law to dilute the trustees’ duties beyond maximising investment value, you open the door to these groups,’ Dr Robinson said. This at a time when the NAPF has just begun using EIRIS to offer a service for pension funds to engage with companies on socially responsible matters.
‘The ethical disclosure regulation is absolutely not about giving support to the illegal activities of extremists,’ argued EIRIS head of client services Karen Eldridge. ‘It is about responding to the legitimate concerns of scheme members to understand how their pension fund is invested.’
An important underlying issue surrounding this debate is accountability – not just of shareholders and companies, but also of pressure groups, which have power, but also responsibilities. Picking easy targets in the City may be tempting for certain pressure groups, but it could destabilise the entire corporate social responsibility agenda, which is presently at a delicate and early stage of development.
Penny Shepherd, executive director of the UK Social Investment Forum, comments, ‘There are legitimate and illegitimate ways for citizens to seek to exercise influence. The new pension disclosure regulation is clearly … a legitimate aid to influence. Bomb threats equally clearly are not.’
Ironically, the one thing that has been conclusively demonstrated is that perceptions of a company’s ethical performance can have a big impact on its share price.
The problem is that nobody wanted it demonstrated in quite the way it has been – except for a few hardline animal rights campaigners who fail to appreciate that any campaign for more socially responsible business practices must itself be socially responsible.
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