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ESG stands for Environmental, Social, Governance. It’s a catchy way in three letters to sum up some of the issues that concern responsible owners and overseers (i.e. board members).
Today, the number of long term investors that care about all three letters (ESG) is growing. The U.N. Principles for Responsible Investment outline some of the ways long term investors use ESG. http://www.unpri.org/principles/ Today, the signatories to the principles represent nearly 1000 asset owners and investment managers across the globe. See the list here. http://www.unpri.org/signatories/
(1) From time to time, I like to take the temperature of board members on these topics. My latest article suggests that while many board members today are savvy on environmental concerns – and more aware on governance, directors’ awareness around social concerns is highly variable. The lack of awareness on S (as it does on E and G) pushes the locus of ethical leadership outside the organization.
The article posted on Friday is here. http://management.fortune.cnn.com/2012/11/16/hershey-child-labor-suit/
(2) On the governance front, special deals between management and companies should be avoided (think Enron and Chesapeake) and if undertaken, deserve full transparency. This article discusses the lack of disclosure of such a deal at Citi. http://management.fortune.cnn.com/2012/10/29/citigroup-pandit/
(3) Bloomberg news last week had a story on Morgan Stanley hiring a Goldman trader accused in a US suit. http://www.bloomberg.com/news/2012-11-09/morgan-stanley-hired-goldman-trader-accused-of-hiding-position.html
Vetting executives and key personnel is imperative.
This article discusses Goldman’s decision to promote to CFO a sales person who was involved in Timberwolf, passing up two women who by all accounts were well qualified for the job. http://management.fortune.cnn.com/2012/09/25/goldman-sachs-cfo-board/
(4) Board effectiveness can, in part, be evaluated based on compensation practices. Here’s a link to a panel discussion at the Brookings last month discussing compensation governance. http://www.brookings.edu/events/2012/09/27-executive-compensation
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