In this week’s editor’s letter for MoneyWeek Merryn Somerset Webb issued a call to arms, asking fund managers to save the shareholder capitalism that served us all so well in the 1980s and early 1990s, by using their power as owners to force big companies to behave better.
According to Merryn, “it seems clear to most people that one of the things that help with long-term commercial success is having the support of your host country’s government and population. If the world’s big companies don’t start showing a little love to those people there will be blood on the streets (or the balance sheets at least).”
James Anderson of Scottish Mortgage agreed and went public with this comment sent to The Times: “My take is that it is in the long term interests of Google and others of that ilk to pay decent rates of tax and that they and others would be best served in taking the lead in volunteering this… they are beneficiaries of state spending on many levels and in return they would get a lot a respect.”
“The rise of the middleman shareholder – the fund manager – is one of the least studied economic factors in the economy”, says Anderson. This is a “different world” relative to all previous versions of capitalism. Business used to be about the “personal connection of individuals”. Now it is all about “certificates to be traded” – and the incentives within that are short-term not long-term. So big companies aren’t pressured to behave in the same way they might have been 30 years ago.
The shareholder’s influence has been weakened by the self-interested fund manager, and society as a whole pays the price.
Read the full article here.