It would be easy to dismiss the
recent row over the sale, by fund manager Phillips and Drew, of shares
in Huntingdon Life Sciences (HLS), as an isolated event of no relevance
to the practice of corporate social responsibility by large companies
HLS, after all, is a fairly small company (its market capitalisation is
only £16 million) working in the specialist area of product and
ingredient testing for certain pharmaceutical and agro-chemical
companies.
But the sale on 8 February by Phillips and Drew
of its 11 per cent stake in the contract research laboratory, after a
series of hoax bomb warnings to institutional investors in the company,
could have wider ramifications than at first appears.
The
fund manager later said pressure from animal rights activists had been
one of a ‘cluster of reasons’ for its decision.
There has
been surprisingly little comment in the national press on the wider
implications for the fledgling corporate social responsibility agenda.
Yet the action of the hoaxers could change the climate of opinion in
which corporate social responsibility (CSR) issues are discussed within
companies, among investors and in the public arena.
Although the protestors may think they have scored a famous victory, in
reality they could have played into their opponent’s hands by
confirming the worst fears of those senior company directors who still
view CSR with mistrust.
All this talk of CSR, its
opponents may argue, is nothing more than a smokescreen for radical
anti-business groups with their own agendas.
Transparency, crucial to the continued successful development of CSR, will suffer.
Almost immediately after the HLS story broke, there were calls for the
government to relax laws requiring directors and shareholders to reveal
their home address as part of its general review of company law: in one
day, the climate of debate on transparency had subtly altered.
Sceptical directors also fear contagion. ‘You can imagine’, claimed Dr
Anne Robinson, director-general of the National Association of Pension
Funds, ‘groups [violently] objecting to oil drilling, tobacco and arms.’
Furthermore, socially responsible investment may have been tainted by
association with the intimidatory tactics of the protestors. Support
for the regulation requiring pension funds to disclose their policies
on ethical investment, has been challenged. The Ethical Investment
Research Service (EIRIS) was forced to counter claims by Dr Robinson of
the NAPF that the regulations ‘give encouragement to the activists.
Once you change the law to dilute the trustees’ duties beyond
maximising investment value, you open the door to these groups,’ Dr
Robinson said. This at a time when the NAPF has just begun using EIRIS
to offer a service for pension funds to engage with companies on
socially responsible matters.
‘The ethical disclosure
regulation is absolutely not about giving support to the illegal
activities of extremists,’ argued EIRIS head of client services Karen
Eldridge. ‘It is about responding to the legitimate concerns of scheme
members to understand how their pension fund is invested.’
An important underlying issue surrounding this debate is accountability
– not just of shareholders and companies, but also of pressure groups,
which have power, but also responsibilities. Picking easy targets in
the City may be tempting for certain pressure groups, but it could
destabilise the entire corporate social responsibility agenda, which is
presently at a delicate and early stage of development.
Penny Shepherd, executive director of the UK Social Investment Forum,
comments, ‘There are legitimate and illegitimate ways for citizens to
seek to exercise influence. The new pension disclosure regulation is
clearly … a legitimate aid to influence. Bomb threats equally clearly
are not.’
Ironically, the one thing that has been
conclusively demonstrated is that perceptions of a company’s ethical
performance can have a big impact on its share price.
The problem is that nobody wanted it demonstrated in quite the way it
has been – except for a few hardline animal rights campaigners who fail
to appreciate that any campaign for more socially responsible business
practices must itself be socially responsible.
