Mind your own business: Balancing stakeholder demands in politically fraught times

The pressure to have a public view on everything from George Floyd’s murder and the Black Lives Matter movement to ‘don’t say gay’ legislation, voting rights and the overturning of Roe vs Wade has been increasing in recent years.

Dr Tara Van Ho, senior lecturer at the University of Essex School of Law in the UK, talks about ‘watershed moments’ that have occurred over the last decade or so, starting in 2011 when the UN adopted the guiding principles on business and human rights. Then this year, Russia invaded Ukraine – another turning point for Van Ho.

‘We have not seen companies come out so quickly and so significantly in any other circumstance,’ she says. ‘Or seen companies come out almost so completely in response to a global human rights or political development, as we saw in February. Companies have set themselves a new precedent for what will be expected of them in future.’

John Galloway, global head of Vanguard’s investment stewardship program, says the expectation that companies – particularly those in the US – will comment on political issues has come out of what he describes as the ‘dysfunction of the US political system’. This, he says, has ‘led to a rise in pressure on corporates and other entities to come to lead’.

But it seems that – even as companies offer public statements around Roe, albeit framed as a healthcare rather than a political issue – a new culture of caution is emerging. Even companies that have made bold statements on political issues in the past don’t want to comment: ‘We're super-focused on operational reliability for our customers and people [rather than] looking back at issues that have come and gone.’ ‘We have an internal framework that guides these decisions, but as of now we do not share that externally.’ ‘Unfortunately, I am not able to contribute to this article. [But] I look forward to reading it!’ So say just a few of the firms approached for comment for this feature.

A product of politics

Galloway agrees that firms are starting to question whether or not they should be coming out publicly on issues that aren’t material to their operations.

‘No rational company wants to opine on [political issues],’ he says. ‘I do think we’re seeing a reconsideration [around the need to comment].’ Talking about the reluctance of corporates to comment for this feature – even where they’ve come out strongly on issues in the past – Galloway is unsurprised: ‘You’re not going to get companies talking about [political issues] if they don’t need to. And as an investor, I think that’s right.’

Galloway stresses that Vanguard and its funds have no agenda or view on any political or social issue. To drive home that point, he notes that ‘when many of these issues are fraught politically, as they are particularly in the US, we are very cognizant that we serve 30 mn investors across our funds. And those 30 mn individuals have a wide range of personal beliefs, values and priorities. The one thing they have in common, that we’re aware of, is that they have entrusted Vanguard to grow their long-term savings.’

He adds that while Vanguard doesn’t have a view on politics, it also doesn’t have a view on whether or not companies should be sharing their own views – what Vanguard wants to know in those cases is what the board oversight of those decisions was.

This is an extract of an article that was published in the Fall 2022 issue of IR Magazine. Click here to read the full article.