At a time when the campaigns of activist funds are gaining in popularity and power, it is legitimate to wonder about the objectives of these shareholders of a new kind. Blamed for their quest for short-term financial performance, some now seem to have more altruistic motives. There is, however, one thing in common between these activists of yesterday and today: the conviction that quality governance has the power to change the destiny of a company!
We have always shared this conviction at La Financière de l’Echiquier. The dialogue we have with companies, including those with tens of billions of market capitalizations, proves that investors can make a contribution: by exercising our voting rights at general meetings, we are making our contribution to improving corporate governance.
An investment philosophy
Seek performance by investing in companies where good governance and managerial excellence drive social and environmental initiatives that create value for all stakeholders, that is our credo! To ensure that this balance is struck, the mission of responsible investors is to ensure that the governance, which underpins the responsible business project, is sufficiently healthy and robust. A quality management team, supported by an independent and qualified Board, is one of the elements necessary for this alchemy.
Governance at the heart of any responsible business project
In a context of climate emergency, where public opinion no longer tolerates the greenwashing, How to ensure the sincerity of a company’s CSR approach? The answer very often lies in a bundle of indices, from the presence of extra-financial indicators in the compensation plans for executives to the presence of experts on the Board and management bodies, including the integration of extra-financial risks into company risk management. A detailed analysis of governance makes it possible to interpret these signals, to ensure the sincerity and quality of the resulting environmental and social policies.
In recent weeks, the news has brought to the fore the compatibility between the economic success of a company and the good conduct of its social and / or environmental mission. For La Financière de l’Echiquier (LFDE), the quality of financial results is key to promoting the long-term deployment of a responsible business project. As ambitious as it is, such a project should not however obscure the economic imperative, essential to the proper functioning of the company. Finding that right balance is a strategic issue to mobilize the leaders and the Council. A central element of governance, the existence of effective checks and balances will undoubtedly make it possible to achieve this balance, thus creating value for all stakeholders.
For 30 years, governance analysis has been at the heart of LFDE’s responsible investment approach, which is why this research remains entirely internalized for LFDE.
The recent findings of theSRI & Performance study by LFDE confirm our conviction: in 2020, it is again the portfolio made up of companies with the worst governance that posted the worst stock market performance. Enough to encourage us to go deeper and deeper into this beautiful subject that is Governance!