Canada’s institutional investors want to end shareholder primacy

Overwhelming majority of poll respondents agree on need for new multi-stakeholder perspective

Canada’s institutional investors want to end shareholder primacy

The call to end the shareholder-first model of corporate purpose has been met with varying levels of approval and contention. But in Canada, at least one major group of investors appear to agree strongly that there has to be a change.

In the Edelman Trust Barometer Special Report: Institutional Investors, 91% of Canadian institutional investors agreed that maximizing shareholder returns can no longer be the primary goal of corporations. That’s compared to 84% of all 607 institutional investors surveyed around the world who felt the same.

Among the Canadian respondents, a large majority maintained shareholders’ needs must be balanced with those of employees, customers, suppliers, and local communities to drive long-term business success and lower the risk of multi-stakeholder activism.

“The Edelman investor trust data is clear, companies can no longer focus on shareholders above all other stakeholders,” said David Ryan, Executive Vice President, Corporate and Financial Communications at Edelman. “Canadian institutional investors are looking at how companies treat every one of their key stakeholder groups to measure the attractiveness of their investment value proposals.”

Workers’ welfare is a growing point of concern among the Canadian respondents, with 81% of the opinion that companies with activist employees are less attractive as prospective investments. They didn’t just see activism as an event to react to, as 86% said they were ready to support a reputable activist investor if they believe a company they invest or recommend investing in has to change its ways; the same percentage believed their firm’s actions can have a meaningful role in influencing a company’s operating performance

While the significance of activism is clear and on the rise, four fifths of the Canadian participants felt that companies were not prepared to address such campaigns from employees (79%) or shareholders (80%).

ESG also has a meaningful place among Canada’s institutions, with two thirds reporting that they have increased their investment allocation to companies that excel against ESG KPIs.  Sixty per cent said they vote their shares more often in favour of board candidates they believe will increase the company’s attention to ESG issues, and just over half vote their shares more often to support ESG-related policy initiatives.

The survey also revealed a major focus on people. Ninety per cent of Canadian participants said they require companies to show that they attract and retain the very best and brightest talent; almost half look for companies that both enforce a corporate code of conduct throughout all organizational levels and maintain a healthy company culture.

Leadership is also under the microscope, as respondents saw CEOs (50%), heads of Strategy (50%), and CFOs (44%) as the most important stewards of corporate trust. While only 38% felt that way about companies’ boards of directors, 81% admitted they must trust a company’s board before making or recommending an investment.

When asked what factors affect their trust in leadership, those polled said that they’re more trustful of companies where board and executive leadership has stock ownership positions (48%), financial performance-linked compensation (48%), and diverse board and executive management teams (47%). Among investors watching for high leadership diversity, the range of business area expertise (61%) and strategic philosophies (55%) were of critical importance.

“A healthy corporate culture, strong talent retention, customer service and community impact are looked at just as closely as financial KPIs,” Ryan said. “It is apparent that companies need to nurture all of their stakeholder groups equally to drive long-term success.”


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