Jury out on Impact of Shareholder Activism

Shareholder activism and Hong Kong are rarely used in the same sentence and experts differ on the question of whether investors can play a role in improving CSR.

Melissa Brown, executive director of the Association for Sustainable and Responsible Investment in Asia, (Asria), said shareholder activism was usually thought of as a scenario in which shareholders were engaging with management and sometimes other shareholders about issues or proposals that might add value to a company's shares.

"Activists may be interested in raising issues which are fundamental to the interests of minority shareholders , as opposed to insiders. It is this element which is crucial to good governance ," Ms Brown said. "Checks and balances between management, controlling shareholders and minorities are at the heart of productive governance strategies."

While the actions of minority shareholders elsewhere in the world are having an increasing impact on corporate decisions for the greater social good, in Hong Kong shareholder activism and its impact on corporate governance remain obscure.

Corporate activist David Webb researches and displays regular incidents of questionable financial disclosures and abuses by local companies, many of whom he said enjoyed a well-entrenched, dynastic opaqueness in this regard.

"The CSR movement has good ideas in areas such as global warming and the environment - well-founded principles - but it should not expect companies [or shareholders ] to do any more than they would do to maximise shareholder returns," he said.

"In other words: if it makes good financial sense, by all means vote yes. If there is no net reward, the shareholder will vote no."

Shalini Mahtani, founder and chief executive of non-profit group Community Business, agreed up to a point.

" Shareholders of all sizes, from retail to institutional, are demanding greater transparency and accountability. Is this activism , or simply the shareholders exercising their rights? If shareholders being more vocal is being seen as activism , I think they will be found wanting.

"I'm a shareholder and when I invest in a company it is not because I expect them to give my money to a charity - I want a return. All shareholders want is a return, but the question is at what price? What are the issues that affect that return?"

The bottom line seems to be the net return, regardless of an investor's social conscience. But are there conditions peculiar to Hong Kong that prevent shareholder activism from being more imbued with a social responsibility?

"In Hong Kong, commercial pressures do exist," Mr Webb said.

"If companies own factories elsewhere