Shell won, the Financial Times told its investor readers last week
after chairman John Jennings used four blocks of institutional votes to
defeat a motion for an independent policy audit promoted by ethical
pension investment campaigner Pirc.
No it didn’t, said the Guardian, which highlighted the defeated vote as
the largest ever against Shell’s board, while claiming the company had
effectively lost the argument.
Neither interpretation is surprising given the leanings of both titles
but the fact that Pirc amassed 11 per cent of investors’ votes suggests
many FT readers had already adopted the Guardian’s stance.
The result says less about Shell’s PR or IR but says a great deal more
about the amount of quiet lobbying ethical investment campaigners and
environmentalists are now doing in the City. This lobbying blurs the
distinction between IR and PR and aims to force companies to re-think
Pirc attributes its success to two years of talks with the fund managers
in charge of the pounds 150 billion assets owned by its pension fund
Pension funds whose stakeholding makes them Shell’s ultimate owners.
’The key issue for fund managers is whether shareholder value would be
affected by Shell’s intransigence,’ says Pirc joint managing director
Alan McDougall. ’But they want to keep quiet. It’s a natural instinct to
deal with problems behind closed doors.’
Pirc saw its role as unblocking the line of communication from investors
through the fund managers that represent them to Shell’s board. That the
City listened to Pirc comes amid signs that it is quietly paying more
attention to environmental campaigners - groups who do not represent
company owners but whose opinions could affect future sales.
’We’ve certainly talked to different groups of investors of a range of
types,’ says Friends of the Earth spokesman Blake Lee-Harwood. ’But we
wouldn’t choose to go public about those discussions because they’re
more fruitful conducted behind closed doors.’
The City has recognised, says Hogarth chief executive Chris Matthews,
that public concern isn’t going to go away. He cites the burning of
Shell petrol stations in Germany during the Brent Spar controversy.
’There’s a whole generation of German youth growing up thinking Shell is
a monster,’ he says. ’They’ll drive on to the next service station.
Investors don’t like that.’
Institutional investors are concerned about being seen investing in
environmentally-destructive companies. But even harder to fend off are
the allegations of social exploitation - issues that even non-greens
For example, several UK companies have taken a pounding in the media in
the last two years after allegations of child labour in the overseas
factories of suppliers.
But for Shell, the fault line ran between its claims of social
enlightenment and its refusal to intervene on behalf of the condemned -
and subsequently executed - Nigerian writer and activist Ken Saro-Wiwa,
despite the company’s huge economic influence in that country.
By elevating green and social issues to its AGM Shell conferred
respectability on any shareholders who wanted to use its AGM as a
platform for criticism over its record.
That’s a lesson that corporate PR people seem slow to learn. Asked about
the implications of the Shell AGM for corporate communications, one
leading PR practitioner said: ’None. It’s an IR issue. The papers said
And one year after then-chairman and chief executive Dr Chris Fay’s
admission to PR Week that Shell’s mistake was not to be open enough,
Shell refused to discuss the AGM this week. A spokesman said only that
Shell was known to be talking to investors, NGOs and staff around the
It’s not the approach Matthews would advocate.
’Open a dialogue with the NGOs,’ he says. ’But look at the internal
issues first.’ Once you’ve identified problem operations, start
improving them incrementally and tell staff what you’re doing. Then, and
only then, contact the NGOs and ask their advice.
’Then they’re demonstrating with their behaviour,’ he says, warning
against what he calls ’the reflex PR approach of issuing public
But Laura Sandys, managing director of LSA, believes that life gets
tougher in trying to negotiate with NGOs or trying to out-shout them.
She thinks it is better for companies to re-examine the contract between
directors and shareholders, to take on the role that Pirc is now
She recommends: ’Increased market research plus on-going shareholder
communications on key issues, and a close examination of corporate
reputations and values.’ Unless your corporate communications team has
found a way to out-shout the minority.
Joint managing directors Alan McDougall and Anne Simpson set up Pirc in
1985 to bring ethical investment advice to public body pension funds
whose concerns were poorly represented in the City, mostly union
It has for most of the intervening 12 years, been seen as something of a
joke, a woolly single issue campaigning group with none of Greenpeace’s
ability to attract media attention. In reality it has built up a
50-client membership with assets of pounds 150 billion in the UK and
abroad. Around half its clients are now private pension funds.
Its most visible tactic is to maintain an open dialogue with target
companies and publish all correspondence in critical reports and,
morerecently, a web-site (http://www.pirc.co. uk). It rarely criticises
the fund managers whose proxy votes it needs to swing, instead it tries
to persuade them to exert pressure too. The Shell AGM will undoubtedly
have made that job easier.