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Business & Finance Series: Expert Comment

Archbishop’s critics overlook the rise of shareholder engagement

Cass academic considers if the Church should invest in Amazon

by Amy Ripley (Senior Communications Officer)

The Archbishop of Canterbury has been accused of hypocrisy after criticising tax avoidance by Amazon in a speech at the TUC Congress in Manchester last week. Justin Welby accused Amazon of paying “almost nothing” in taxes but, as his critics point out, the Church of England owns shares in Amazon and it is one of the leading stocks in its portfolio.

Dr Daniel Beunza, Associate Professor in the Centre for Charity Effectiveness at Cass Business School, considers if the Church should invest in a company that it disapproves of and says the Archbishop’s critics have overlooked an important change in how people invest in stocks – the rise of shareholder engagement.

The rise of shareholder engagement

“The Archbishop’s critics overlook an important change in how people invest in stocks - the rise of so-called shareholder engagement.  While institutional investors traditionally gave blanket approval to the decisions made by corporate executives, nowadays they often state their opposition to environmentally or socially irresponsible policies.  One effective way of voicing such opposition is through face to face meetings with corporate management.  Indeed, religious investors in the UK and US are clear leaders in this approach.

Divesting from a company removes the ability to voice concerns

“Such practice, known as ‘shareholder engagement’, is made possible by existing corporate law, which ensures that small investors have a voice.  The catch, however, is that divesting from a company removes the possibility to voice concerns.  As the late Albert Hirschman wrote, investors can have ‘exit’ or ‘voice’, but not both. The paradoxical result is that investors often find themselves putting their money in companies they disagree with, because holding shares in them confers an effective voice. The downside of such practice is that investors can be accused of duplicity.

Religious investors excel at shareholder engagement

“Charges of hypocrisy are normally avoided by keeping criticisms private, that is, voicing them only in the meetings with company management.  This creates trust between investors and the company, facilitating a mutual understanding of the problem, and an eventual solution.  In that sense, the Archbishop’s critique is admittedly unusual for its public nature.  Investors typically go public when companies prove to be irresponsive, or when companies do not keep past promises and trust disappears.  From that standpoint, his critique is best described not as hypocritical, but as a normal escalation in a practice - shareholder engagement - in which religious investors typically excel at.”

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