We invite boards to report on both short-term and long-term developments. If a company can draw an accurate picture of what long-term investors need for their investment analysis, it will reduce uncertainties and risks and hence will lower the cost of capital.
INTERVIEW - Meet the editorial board: Rients Abma
Lars Dijkstra invites Rients Abma as the next participant in this 'relay-interview'. His reason: "As Director of Eumedion, Rients Abma has done a lot of good work over the years to improve corporate governance in the Netherlands.”
What is your personal motivation to SHIFT TO?
'It is my belief that businesses are the engine of economic productivity and prosperity. It’s very important as a country to have large businesses, and especially large listed companies are important – they are not only huge employers and investors in research and development and innovation, they also have spinoff effects for smaller companies.
For these large listed companies to function properly it is very important to have adequate check and balances. This is where shareholders should be the watchdog – they should keep an eye on the strategies and policies of listed companies, for example their sustainability policies.
So personally I would like to contribute to a good system of checks and balances. I’ve been involved in the field of corporate governance since 2000; I first contributed to the development of better legislation to protect shareholders at the Ministry of Finance as a policy advisor. Secondly I was secretary of the committee that developed the first edition of the corporate governance code for the Netherlands, containing best practices and principles for the behaviour of executives, supervisory directors and shareholders. Since 2006, I have been Executive Director of Eumedion.'
How does this fit into your professional ambitions?
'I think it was a well-considered step for me to move from the Ministry of Finance to Eumedion.
Eumedion is a collaboration of institutional investors like pension funds, insurance companies and asset managers, all of which have a long-term horizon. Together, these institutional investors own approximately25% of all listed shares in the Netherlands and these so they have an important role to play in keeping an eye on checks and balances in Dutch listed companies.
As an executive director of Eumedion, it’s very nice to be a central figure in contributing to that well-functioning system of checks and balances.'
In your opinion, where should the financial industry be in seven years’ time?
'Hopefully we will have a critical mass of institutional investors in 2024, that really behave as good and engaged long-term guardians of long term-focused listed companies. These institutional investors will also take a holistic look at companies, thereby taking the long- term value creation generators as a starting point for the analysis of the investment process.'
Who should we definitely hear from in this newsroom?
'I hope that not only institutional investors, pension funds, insurance companies and asset managers are thinking about long-termism and good corporate governance and sustainability policies – but also members of supervisory boards. They have a very important role to play.
Executive and supervisory directors are a decisive factor in determining the strategy of the company, and the policies of companies. I hope that leading supervisory directors such as Jan Hommen, Jeroen van der Veer and Hans Wijers can also be involved in this discussion.'
Which issue is most urgent in your view/field of work?
'The most urgent issue at the moment is the current political discussion about possible government intervention in takeovers of Dutch listed companies. There is the perception that the Dutch concept of long-term focus on all stakeholders, the planet and society in general is under pressure by shareholders and bidders whot are more focused on short-term profit and pure shareholder value maximisation.
This leads to important questions such as: should there be a mandatory time-out period for boards of target companies in a situation of a hostile take-over bid and or undesired shareholder activism? And if so, how should this be regulated? What should be the role of institutional investors in hostile bid situations? And should companies formulate a broader statutory purpose than only long-term profit and value maximisation?
We are still in the middle of that discussion; Eumedion will certainly contribute to the discussion.'
Extra question from Lars Dijkstra: “How can Eumedion contribute even more to lower the barriers for long-termism? I.e. to minimise the agency issues between asset owners and asset managers and to maximise the impact of long-termism through engaged ownership between asset managers and public companies?”
'With our Eumedion participants – pension funds, asset managers and insurance companies that all have a long-term horizon – we contribute by stimulating engagement between our participants and Dutch listed companies. For example, by supporting our participants in having a good analysis in preparation for that dialogue - one that takes not only financial information but also non-financial information into account; and by having a look at the sustainability policies and the long term value creation model of the company.
So hopefully we can contribute by having good input into the agenda for dialogues between Eumedion participants and listed companies.
On the policy side we are hopefully also making a contribution to minimising agency issues because we are pushing for integrated reporting by listed companies via the integrated reporting framework. We are pushing companies to take a holistic look at their strategy and policies; we push them to explain their long-term value creation model and the strategy for creating that value, as well as reporting on which contributions were made to long-term value creation in the past year. We invite boards to report on both short-term and long-term developments. If a company can draw an accurate picture of what long-term investors need for their investment analysis, it will reduce uncertainties and risks and hence will lower the cost of capital. Moreover, if a company is able to communicate its strategic framework for long-term value creation in a concise and trustworthy way, the company may attract more investors with a long-term horizon. Research already shows that such integrated reporting is associated with a more long-term, stable investor base.'
Rients Abma invites: Lars Kurznack as the next participant to this ‘relay interview’.
Reason: 'Lars is responsible for KPMG’s Sustainable Finance & Investment Advisory services in the Netherlands. He helps financial institutions manage business impacts of key ESG/Sustainability and other non-financial issues to optimise long term value creation.'
And adds one question: 'In your view, can integrated reporting be considered as an ‘economic’ anti-takeover measure for ‘sustainable companies’ and if so, how?'
The members of the editorial board of SHIFT TO all have professional but also very personal reasons to join this initiative. In a ‘relay interview’ we learn more about their motivations as they ask each other: ‘Why do you want to SHIFT TO?’