Tomorrow's Company

What is happening to ownership? – Ground-breaking investigation by Tomorrow’s Company

- increasing emphasis on trading and share price at expense of ownership disciplines

- witch hunts of whole asset classes such as hedge fund, private equity and sovereign funds blurring debate

Tomorrow’s Company today announces a major new investigation into the ownership of companies and how this is changing.

The study is designed to address the huge change in the ownership pattern of companies over the last decade and examine:

· what impact these trends will have on companies’ ability to thrive and attract talent.

Over recent years, private equity, hedge funds and sovereign funds have come to dominate the debate on ownership and have often been criticised. Yet these different asset classes have characteristics that can be very positive for companies, for example private equity and sovereign funds can be long-term investors that are closely aligned with management; and hedge funds can engage with, and be critical of, companies in a very constructive way.

The study, which will be undertaken by Tomorrow’s Company with the support of Hermes Equity Ownership Services, will look at what these changes in ownership really mean and explore what might be the right mix of ownership for companies is to achieve optimum results. It will identify common global issues as well as local differences.

As a starting point the study will map the emerging patterns of ownership ( by type and by geography) and will begin to identify the key issues which arise from these shifts in ownership.

These could include the effect of privatisations and nationalisations; global consolidation, mergers and acquisitions, the growth of JVs; as well as the rise in private equity, hedge funds and sovereign investment funds. The study will also cover evaluate how the stewardship elements of ownership may have been diluted by the focus on current share price, the rise of CFDs and other derivatives; stock-lending and shorting.

The responsible investment community symbolised for instance by the UN Principles for Responsible Investment and exemplified by investors like Hermes, is another key influence. Large funds with stakes in every major company are now acknowledging the need to address their stewardship responsibilities. This in turn entails wider responsibilities for the well-being of the economy, society and environment which will also be examined.

The traditional large quoted company is far from the only template for the most admired companies. For example Tomorrow’s Company has in recent years studied employee-owned partnerships – like John Lewis (whose Chairman Charlie mayfiedl, was a speaker at the event) in the UK and Mondragon in Spain. There is also the continuing significance of family influence in Middle East, Asia and elsewhere and the state capitalism evident in China and elsewhere. . .

At a breakfast discussion at the Cass Business School launching the study today, Mark Goyder, Founder Director of Tomorrow’s Company, commented:

“The debate so far has often been superficial. It has stereotyped entire asset classes. It is almost as if there has been the annual witch hunt. First hedge funds, then private equity and now sovereign wealth funds.

But there are deeper issues that cut across asset classes. Do we see ownership as stewardship? If so that means some obligation to the company in which one is invested. Or do we see ownership simply as a claim on a commodity with no strings attached – in which case the “owner” may have no qualms about wrecking strategies which justify their shorting the stock.

Or are we seeing a divergence between two kinds of owners, one of whom feels an obligation to the asset she or he owners,a nd the other of whom sees none? “

“Our study will look at how different patterns of ownership impact on behaviour and explore how accountabilities make a difference. Changes in patterns of ownership are inevitable and we need a deeper understanding of how different kinds of ownership improve business performance; and their impact on the health of the society in which these companies operate.”

Tomorrow’s Company is a UK based ‘think’ and ‘do’ tank which focuses on the role of business, and the relationship between business and society. We describe ourselves as a ‘think’ and ‘do’ tank because we deal not only in ideas but in implementation, working with companies as they put new thinking into practice. A membership organisation, Tomorrow’s Company publishes research, brings practical business people together to generate and share ideas, puts those ideas into the public domain and influences decision makers in companies, the investment community, stakeholder groups, business schools, and government.

Hermes Equity Ownership Services (Hermes EOS.) Hermes EOS offers a comprehensive and unified responsible investment and corporate governance advisory service on a client's equity investments wherever they are managed. The services provided by Hermes EOS include voting, engagement and public policy for institutional shareholders.

As the executive arm of the BT Pension Scheme, the UK’s largest pension fund, Hermes has over the past decade developed an expertise in responsible investment and corporate governance. This stems from the belief that for a long-term equity investor, it is particularly important to be an active and engaged owner of companies. Hermes’ unique ownership means that it has a commonality of interests with other pension funds and thus a focus on achieving superior absolute returns.

The premise underlying Hermes EOS is that companies with informed and involved shareholders are more likely to achieve superior long-term performance than those without. Hermes EOS aims always to represent to directors a shareholder's perspective on the company's environmental, social and governance performance and to frame its discussions with companies in terms of long-term value creation. Hermes firmly believes that the stronger and more representative that shareholder voice, the more effective it is likely to be.

The site will bring to life, in a practical and innovative way, the themes from our latest inquiry Tomorrow’s Global Company: challenges and choices. Our ambition is that this site builds a global community of interest using the inquiry report as a framework and platform for demonstrating why and how business can be a force for good.

It will highlight great practice, provoke debate and provide the first truly global and interactive online space to drive the agenda forward on the role of business in society, both in theory and in practice. Through this we hope to engage the many leaders, change agents, teachers, students and activists who share our belief that business has the potential to create positive change and want also to learn from each others’ experiences.

If you would like to be involved or have content that could be included in the form of videos, audios, blogs, essays and toolkits we would like to hear from you. This could include examples of, among many other things:

Alastair Ross Goobey, whose obituary was in the FT on 5 February, started as a strong critic and ended as a good friend of Tomorrow's Company. He was the former CEO of Hermes, and Chairman of the International Corporate Governance Network, and a real pioneer in corporate governance.

After the publication of our original Tomorrow's Company report he was critical because he saw report as weakening the clear focus and shareholder accountability of companies.

We were involved in some quite heated debates, during which we came to understand that our positions were not merely compatible but complementary.

Tomorrow's Company was saying that relations, purpose and values were key to the success of a company. Unless it got these right, they would not generate shareholder value.

Alastair was arguing that companies needed to be fully accountable to their shareholders: otherwise their managers would lose focus on value creation and go off on ego trips of their own.

We found that we both cared about long-term value creation, and both wanted to improve governance so that boards focused better on the things that lay beneath it.

So it was that, in 2000 Hermes (formerly the BT pension fund) became the first investment company to be a member of Tomorrow's Company.

They went on to become increasingly involved in contributing to the thinking about our Twenty First Century Investment project, and most recently, to give invaluable support to our new project on ownership (Tomorrow's Owners).

I used to see Alastair at meetings of the DTI corporate governance forum where he would report on his formidable efforts to champion the highest standards of governance across the EU.

We had something else in common - like me Alastair was an Arsenal season ticket holder, and with my family I would bump into him and his son on the way to a match and exchange more gooner than governance gossip.

I only recently learned that he had first been diagnosed with bone cancer in 1998, before I first met him. I will miss him very much as a man of formidable intellect, noble values, human sympathy, great wit,and restless energy.

Tomorrow’s Company is delighted to announce its exciting new partnership with Horsesmouth, which will officially be launched in mid January 2008. Horsesmouth is the first dedicated site for e-mentoring and is at the cutting-edge of web 2.0; it is a safe, manageable and innovative online platform that connects those with valuable knowledge and life experience to people that can benefit from their advice.

Our partnership is founded on the belief that this presents an opportunity for companies to share their substantial expertise and stored wisdom with the wider community, directly in line with our most recent inquiry, Tomorrow’s Global Company, which concluded that businesses should play a larger and more positive role in society.

Click here if you are part of our network and would like to sign up as a Tomorrow’s Company mentor and here to see the Tomorrow’s Company partner page.

The site is now up and running so go to www.horsesmouth.co.uk and start sharing your wisdom.

If you are part of a company or organisation that is interested in taking part in Horsesmouth please contact Ivor on +44 (0)20 7222 7443 or by email (ivor@tomorrowscompany.com)

On Thursday 29th November, Tony Manwaring, Chief Executive of Tomorrow’s Company, participated in a breakfast panel discussion organised by Editorial Intelligence. Its motion for debate was whether 'business has fallen out of love with Labour' and was chaired by Andrew Neil, Chief Executive of Press holdings Media Group. Other members of the panel included David Frost, Director General of the British Chambers of Commerce, Margot James, Vice-Chair of the Conservative Party for Women, Baroness Denise Kingsmill CBE, Senior Advisor to RBS, and Stefan Stern, columnist for the Financial Times.

To listen to Tony's contribution, please click here

Editorial Intelligence makes it its business to read, analyse and summarise millions of words of comment in the UK’s national print and blogosphere in order to, among other things, create time-saving summaries, digests and profiles for chief executives and politicians through to broadcasters and researchers.

For more information you can find their website at: www.editorialintelligence.com