IR Society conference hears case for long-termism and ESG
A strong narrative of social responsibility and ESG ran through the IR Society’s annual conference, entitled ‘IR: future-proofing business’, held in London on Tuesday.
This began with the keynote speech from Douglas Flint, former group chairman at HSBC. He noted: ‘It is the dialogue with society that gives us the license to operate.’ Here he was highlighting the growing expectation of wider society in how listed companies are run.
This was placed in the context of companies articulating long-term thinking and building trust and establishing integrity by considering long-term objectives through broadening the definition of shareholders to – in essence – society itself.
Going further, Sir Michael Rake, former chairman of the BT Group, said: ‘Capitalism, if it is to survive, needs to be an inclusive capitalism. People feel left behind.’ And citing a Harvard Business Review (HBR) report from Joseph Bower and Lynn Paine, who co-wrote Capitalism at risk: Rethinking the role of business, Rake said there should be a ‘move from shareholder value to healthy companies’.
The conclusion of the HBR piece states this in clear and categorical terms: ‘The time has come to challenge the agency-based model of corporate governance. Its mantra of maximizing shareholder value is distracting companies and their leaders from the innovation, strategic renewal and investment in the future that require their attention.’
On another connected issue Rake warned: ‘The elephant in the room is remuneration.’ Excessive pay, he warned, can lead to negative and ‘unintended consequences’ for a company and among shareholders this is an issue that needs to be tackled.
In this way, the ESG narrative is a necessary counterpoint to influence many companies. But as Elly Irving, ESG Analyst at Schroders, warned: ‘A commitment to ESG needs to be fully integrated into all parts of the business.’ It cannot, in short, just be talked about – it needs to be backed up.
Central to all of this is effective messaging. In this way, the IRO has a major role to play. ‘The obligation of a company is to provide open, clear communications and to have a convincing long-term story,’ noted Rake.
This was why moderator Evan Davis cited Larry Fink’s letter to CEOs on the importance of long-term thinking and the need for companies to have a clearly defined purpose while delivering benefit for investors and, importantly, wider stakeholders.
That said, Craig Marks, senior director of IR at AstraZeneca, added another perspective: ‘The human brain cannot take more than three or four key messages, so it’s not just what you say – it’s how you say it.’
Summing up, it was strongly concluded that the IRO has a key role in helping to build a sustainable and ESG-focused business. In fact, the IRO can be the architect.