Listed status can be a liberation - but it can also act as a straitjacketJune 2011
The flotation of the global commodities trader Glencore hasn’t just raised tens of billions of pounds. It has also brought up uncomfortable questions about the company’s record on social and environmental matters.
Until recently, Glencore – dubbed by one British newspaper as ‘the biggest company you’ve never heard of’ – largely carried out its activities in the quiet backwaters afforded by its status as a private company.
But now that the Swiss-based business has become a public company with shares listed on the UK and Hong Kong stock exchanges, it can expect things to change. Already the media is taking an interest in various allegations connected to its mining investments in countries such as Namibia, Zambia and Bolivia – as well as its alleged role in pushing up the prices of commodities through speculation. NGOs, attracted by the higher visibility that attaches itself to a listed company, are doubtless planning new campaigns that have Glencore in their sights.
Despite the immense size of the business, Glencore’s website has only a cursory and unimpressive section on corporate responsibility, and it has not yet even produced a sustainability report. The guess is that all of this will have to change fairly rapidly, now that public status has been attained. Listed companies are almost inevitably subject to greater scrutiny and, in essence, are more accountable for their actions – at least to investors. It’s unlikely that Glencore will be allowed to get away with its low-key approach to sustainability for much longer.
If that turns out to be the case, it will be tempting to conclude that, in general, the conversion of private businesses into public limited companies is accompanied by the onset of more responsible behaviour. But it is not always a case of ‘public good, private bad’. While listing publicly can impel companies to accept the business benefits of becoming more sustainable, it can also introduce an element of short-termism, driven by the tyranny of the markets, an over-attachment to share price, and the general lack of interest among mainstream investors in anything that does not obviously contribute to the financial bottom line. By contrast, unlisted companies, free from such constraints, can – if they so wish – pursue their own agenda on the CSR front.
The former chief executive of Marks & Spencer, Sir Stuart Rose, revealed recently that he would have liked to have de-listed the business, partly because it would have made it easier to pursue sustainability targets. But he concluded that it ‘wasn’t financially doable’. Some – notably the Tellus Institute in the US with its ‘corporate redesign programme’ – are looking into the issue. But until they can come up with a solution, it seems many companies will be stuck in a straitjacket of their own design.
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