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July 25, 2001
Book Review: The New Global Investors
by Doug Wheat
Robert Monks calls on institutional investors to exercise their rights as shareowners and hold
senior managers accountable for company performance and practices.
SocialFunds.com --
In The New Global Investors: How Shareowners Can Unlock Sustainable Prosperity Worldwide,
author Robert A. G. Monks views the capacity of CEO's to pay themselves as much as they wish as a
call to institutional investors to become more responsible shareowners. Monks uses personal
experience, history, and modern examples to explain why corporations are important wealth creators
in our economy and why the corporate managers need to be scrutinized by shareowners. In the book,
Monks repeatedly illustrates his broad understanding of, and high standards for, corporate
responsibility. This understanding has made him one of the world's most respected advocates for
shareowner rights.
 Looking back through history, Monks claims
that the English were the first to discover that "wealth generation requires a sharing of power and
role between government and commerce." Some governments tried to dominate commerce with pitiful
results. King James, Queen Elizabeth's successor, began a new chapter in economic history by
creating and licensing independent corporations with limited liability. These corporations had
rights conferred to them by the state and simultaneously were obligated to carry out commercial
activities with a "public purpose" - a dual expectation.
Fast forwarding to modern
corporate governance, we learn from the author that there is a convergence of what is known as
portfolio investing and what is known direct investment. Portfolio investing traditionally has
been a term for diversified holdings, reflecting ownership without power. Direct investing implies
a long-term relationship between the investor and the enterprise, with a corresponding influence
over the management of the company.
Enter the Global Investors, a term coined by Monks,
that have the ability and responsibility to influence the management of companies. These new
investors are private and public pension funds, foundations, universities, and other institutional
investors. As reported in the book, pension funds in the US had more than $3.8 trillion in assets
in 1998 and worldwide pension funds owned more than 15 percent of largest international companies.
While these investors are often considered portfolio investors, their size and concentration of
power have created a new class of investors with the muscle to engage management similar to direct
investors of the past. They have the means to challenge senior managers at corporations, unlike
other organizations such as boards of directors and the government.
The Global Investors
have themselves a vested interest in the long-term health of society including economic growth,
livable wages, and a clean environment. First, they have a long-term focus of 20 or 30 years or
more. Second, they are often index investors, with a stake in the general economy rather than a
small handful of individual companies or industries. Finally, they have the ability to do what is
right.
Indeed, the call of the Global Investors will not be new for people who have read
Monk's other books, including The Emperor's Nightingale, his most famous work. He is supremely
focused on the concentration of corporate power and the accountability of these entities to
shareowners and society. Monks sees the phenomenon of runaway CEO pay as the ultimate symbol that
executives act at their own will and use their power to confer wealth on themselves. "This
corruption at the core is a cancer to the legitimacy of the corporation," says Monks.
Monks pulls bits and pieces of his argument from so many sources and from every conceivable
angle that at times it can be challenging to keep them straight. But the message of The New Global Investors is clear. Shareowners, and in particular institutional
shareowners, are in a position to demand accountability of corporate leaders. Our world will be
wealthier and more sustainable when they do so.
Buy this book at Amazon.com
©
SRI World Group, Inc. All Rights Reserved.
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