Wednesday, April 27, 2011

Faith investors turn on pharmaceuticals companies

The drug firms are asking shareholders to vote against the resolutions. In its proxy statement, BMS said flexibility on pricing was necessary to enable it to "invest aggressively" in research.

Pfizer said: "It is essential that innovators are able to price drugs based on the value they bring to patients." And a spokesman for Abbott said the company takes a "responsible" approach to pricing.

Drug makers also highlighted assistance programmes to help improve access to medicines and J&J said in its proxy that it strives to keep average price increases across its health-care products within the consumer price index.

Pressure on drug makers is the latest example of religious investors taking a stand against perceived corporate shortcomings or excesses.

Four leading orders of Catholic nuns are urging Goldman Sachs to review its executive remuneration, unhappy about the $70m (�42m) the Wall Street bank is paying five of its leading directors ? clearly not believing Lloyd Blankfein, one of the five, who said in 2009 he was simply doing "God's work".

One of the Sisters of St Francis, in Pennsylvania, went so far as to say the order's founding saint would be "spinning in his grave" if he knew of the largesse at Goldman, which is facing considerable "noise" around its annual meeting in two weeks' time.

The Goldman movement follows a campaign against Morgan Stanley and Deutsche Bank, sued by Irish nuns in 2010 for allegedly failing to redeem their investment.

The banks and big pharma are not alone. BP has faced criticism of high executive payouts and of its safety record from Christian groups holding more than �200m of its shares. The action at BP's annual meeting in London 10 days ago heralded a fresh approach, as groups from both sides of the Atlantic ? US-based Christian Brothers Investment Services and Britain's Church Investors Group (CIG) ? co-ordinated votes on resolutions including BP's remuneration report.

Although CIG adopted a British stance of pressure through engagement, rather than the American route of filing a resolution, they kept open the possibility of tabling one next year if the oil giant does not make changes.

"It wasn't the right time to bring it, we needed to give the company a chance to put things in place," said Bill Seddon, vice-chairman of CIG, which represents almost 40 church investors with �12bn of assets between them.

But he added: "We will want to see some action and, in the autumn, we will look at what has actually happened, what's the evidence that BP has acted to make sure this sort of thing doesn't happen again, like the Gulf [of Mexico] disaster."

Mr Seddon pointed out there is now greater collaboration between different faith groups: "The difference is it's not just individual churches doing it now, it's much more collective, which is all to the good because it makes the voice louder."

Activism has also been rekindled by the the Stewardship Code. Born out of the banking crisis, it encourages better scrutiny of companies by those who own them.

"Good stewardship is a biblical phrase and has a biblical history," said Helen Wildsmith, head of ethical and responsible investment at the CCLA, which manages more than �4bn of funds for 15,000 Church of England parishes, cathedrals and schools, as well as 30,000 charities. "It's really ignited interest in the churches about being good stewards of their assets so the code has been part of this resurgence."

But faith investors' attempts to effect change through engagement draws criticism from observers who would like to see a tougher stance.

Lee Coates, of specialist financial advisers Ethical Investors, said: "What I'd like to see is better involvement and engagement with cut-offs, active positive engagement that requires companies to do something. That doesn't mean be slightly nicer.

"If you look through a lot of the resolutions, they're calling on companies to be better, to understand more, to incorporate more; there are very few resolutions which say 'you shouldn't do that'."

But Mr Seddon, who is also chief executive of the Central Finance Board of the Methodist Church, highlighted the importance of dialogue. "Avoidance is a pretty negative kind of approach to take; you don't have any influence if you are not involved. The ideal is to be working with companies to encourage them to change their practices."

That was echoed by Julie Tanner, assistant director at Christian Brothers, who said: "It's not just engagement for engagement's sake. There has to be improvement made."

"[Faith investors] are perceived to be preaching to companies on human rights or environmental stewardship, but in so many cases we're going in with real financial issues and risk arguments.

"We're going in as the moral or ethical voice, but also the financial voice."

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