Lobby correspondence: the investment community's appetite for non-financial information has never been so voracious. In order to assure itself that companies' actions match their CSR rhetoric, it now wants them to report on what they are doing to persuade legislators to act in their interests. Scott Payton explains the implications of this trend.
| Author | Payton, Scott |
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Investor relations used to be simple: a couple of times a year, companies would update fund managers and analysts on how much money they had made and how much they expected to make in the near future. Then, at the start of this decade, investors began demanding more information, more frequently and in more detail. Corporate governance and corporate social responsibility (CSR) became normal agenda items in shareholder meetings. And now another subject is becoming a regular topic for discussion: corporate lobbying.
According to a new research report, "Coming in from the cold: public affairs and corporate responsibility", investors are becoming particularly interested in how closely companies' lobbying actions are aligned with what they are claiming in their CSR reports. This interest has arisen for two reasons. First, it's a symptom of the investment community's increased vigilance after Enron and the scandals that followed. These made fund managers, analysts and the financial regulators realise that they could not take it for granted that a particular company would be run in either a well-structured or ethical way. And, as one analyst says: "Soft non-financial issues have a nasty habit of becoming hard financial issues."
As CSR climbed the sociopolitical agenda, particularly in the US and northern Europe, companies came under growing pressure to report more non-financial information than just their corporate governance policies--for example, how they were treating their suppliers or what their recycling practices were. The increased demand for details about a company's lobbying activities is a natural extension of this hunger for non-financial information.
"Also, you've got an increase in the number of vocal stakeholder networks pushing for greater transparency in reporting--shareholder activist groups, consumer groups and others," says Julia Harrison, co-author of "Coming in from the cold" and managing partner of Blueprint Partners, a Brussels-based public affairs consultancy.
The second reason why corporate lobbying has become a hot topic is the increase in the scale and sophistication of the practice itself. In Europe, the rise of lobbying is a response to an increase in EU legislation affecting business, according to Harrison.
"Public affairs activity has grown over the past 20 years or so in the UK, but it has now also taken off much more widely across Europe," she says.
Commercial areas affected by new and proposed EU regulations...
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