Bottom 20 Companies
Companies that score badly because of poor disclosure, but are not high risk:
Daejan Holdings
Daejan Holdings has totally unacceptable corporate governance. Two executives hold over 30% of the voting rights between them while there are no independent directors on the board. Disclosure related to the remuneration policy is scant. The Co-operative Asset Management voted against on the Report and Accounts and Remuneration Reports for the last 2 years. A bottom 20 company last year, it continues to have no reporting on environmental and social issues with the exception of making £120k in charitable donations and no political contributions, the same as 2007.
[back to top]Moneysupermarket.com
Moneysupermarket.com, as a purely Internet business, has very low direct social and environmental impacts, and for this reason it says it has chosen not to set Key Performance Indicators. Similarly, the company's first Annual Report and Accounts has extremely basic reference to CSR matters. To the extent that Moneysupermarket.com may feel little need to make strong efforts in Corporate Responsibility it will always fare badly in such a scoring exercise. Nevertheless, other businesses also with low impacts take corporate citizenship to heart and have worked to 'green' their business and create goodwill through community investment.
[back to top]Tullet Prebon
Tullet Prebon featured last year in the bottom 10 companies. Its Chief Executive, Terry Smith is on record as saying that businesses should not be expected to devote resource to reporting on environmental, social and governance issues (Financial Times, June 15, 2007). However, the Companies Act now requires companies to at least say whether there are any material non-financial issues or not and how they provide for them. Duly, the most recent Annual Report and Accounts makes a short statement referring to ESG matters and consequently the company has improved its score marginally, however there is no material change in its position.
[back to top]IG Group
IG Group is one of the few FTSE250 companies that says next to nothing at all about social, environmental and ethical issues either in its Annual Report and Accounts or its website. In the 2008 report there is a remarkably brief section of monitoring greenhouse gas emissions and that is all. Based on this, it was never going to do well. True, the highly specialised nature of its business dealing in financial information means it has little of the conventional social and environmental impacts associated with other businesses. This has not prevented other low-impact companies from demonstrating their interest in being a good corporate citizen.
[back to top]Rightmove
Rightmove remains in the bottom 20 this year. It remains difficult to assess positively since it discloses so little on corporate responsibility. To be fair, as a property website, its direct environmental impacts may well be limited. In spite of being in the bottom 20 again the company's general CSR disclosure (and Good Companies Guide score) has improved somewhat. On corporate governance, executive directors will get automatic payouts from their share options if the company is taken over. This could clash with the interests of other shareholders.
[back to top]PV Crystalox Solar
PV Crystalox Solar manufactures key components in solar power systems and hence directly contributes to a more sustainable future. However, it makes no mention of sound sourcing of silicon, environmentally responsible manufacturing processes or Health & Safety risks in its CSR reporting. Although these shortcomings may be partly explained by the company only having listed in London last year, it nevertheless appears to rely too much on the nature of its business. It may seem counter-intuitive for a solar panel company to feature in the bottom 20 and we struggled with this, but the overall rank reflects many different factors and the need to compete with other companies on common issues, such health and safety, environmental housekeeping and employee welfare.
[back to top]PayPoint
PayPoint claims to manage its social and environmental impacts but provides very little by way of evidence for this, let alone measurable data or examples of how CSR is integrated into its business operations. Most worryingly for a company processing hundreds of thousands of payments every day, it barely recognises the importance of data security despite the devastating effects that unsecured credit card and payment details may have on individuals.
[back to top]Melrose
Melrose states that it is committed to monitoring and minimising its environmental impact but publishes no performance data and few details of measures taken to this end. There is no evidence of lifecycle analysis in product design or growing demand for sustainability playing any part in research and development and, despite its ongoing expansion to emerging markets, neither does Melrose disclose any efforts to mitigate potential risks brought on by operations in locations with less stringent environmental and employment regulation.
[back to top]Companies that score badly because of poor disclosure AND they are high risk:
Heritage Oil, Salamander Energy and Imperial Energy
Heritage Oil, Salamander Energy and Imperial Energy are all recent listings to the FTSE All-Share. They also have in common operations in environmentally sensitive and or politically risky countries including Congo, the Mekong Delta and Russia, yet their disclosure on the considerable ESG risks attached to these operations and countries, from health and safety standards to avoiding environmental damage and ensuring local communities benefit is at best highly general. Heritage provides a more detailed outline of community investment, but Health, Safety & Environment (HSE) information is vague. Salamander's reporting is also extremely generalised. Imperial has introduced a 4-level HSE programme for its employees, and highlight Russian orphanages, university scholarships and the Russian Children�s Fund as areas for charitable donations. Combating climate change amounts to planting trees every year to remove some carbon dioxide emissions.
[back to top]Hunting and Melrose Resources
Hunting and Melrose Resources operate in less risky territories but disclosure is bland and lacking specifics. Hunting's Health & Safety policies include training, review, reporting and accreditation with Quality Assurance standards but specific details are omitted. Environment, ethics and charity are extremely briefly reported, in a very general manner. Melrose Resources' environmental policy is to ensure 'adverse effects on the environment are reduced to a practicable minimum' and 'promotes awareness of recycled materials' - hardly cutting edge for and Oil and Gas Company. Melrose says it has implemented its own Health, Safety & Environment and CSR policies with goals and objectives but it is impossible to assess progress on this based on the company's disclosure.
[back to top]Ashmore
Ashmore offers specialist investment services based in emerging markets. It makes no reference to ESG issues in investment, leaving the company seriously exposed to unexpected risks associated with such locations. ESG risk/opportunity is admittedly limited or not relevant in certain asset classes e.g. currency, nevertheless, Ashmore is getting big pension fund mandates e.g. £665m from HSBC to spend in emerging markets.
[back to top]N Brown Group
N Brown's principle activity is retailing through direct home shopping and as such it is less exposed to environmental issues than most others in its sector. Still, it is highly exposed to supply chain labour risks due to it sourcing products from emerging markets, including China. Despite this, the company provides no information on responsible sourcing or supplier auditing, nor does it participate in any relevant supply chain initiatives. While the company has a written supply chain policy, a genuine commitment to fair labour will need a more determined shift from policy to practice. Brown does not address the environmental impacts of its logistic activities.
[back to top]Companies that score badly because of additional concerns to poor disclosure e.g. corporate governance, poor environmental/social performance etc.:
Talvivaara
Talvivaara is a Finnish start-up company with prospects in Eastern Finland for nickel, zinc and cobalt. Disclosure on ESG risks and management is very poor and there is a complacent tone to its reporting. The company's corporate governance is also far from best practice: the 2007 Annual Report and Accounts were posted late to shareholders and the AGM had bundled resolutions. Apart from the CEO who with his associates owns 27% of the company, there are only three other shareholders who as at 31/12/2007 held more than 5% of the shares and votes. While this is not in itself representative of poor governance, the fact that a few parties own almost half the company may act as a disincentive to improve governance in the interests of all shareholders.
[back to top]Vedanta
Vedanta has gained notoriety for attracting excoriating criticism and legal censure over grave allegations of environmental, legal and human rights abuses, leading to the Norwegian Sovereign Pension Fund to withdraw investments after a 2 year investigation and 'fruitless' attempts at engagement, finding systematic, persistent and cultural abuses. Regrettably, the company's CSR disclosure fails to address possible shortcomings and omits critical information. For instance, EIRIS reports that Vedanta experienced 17 fatalities in '06/'07. Such a rate is well above industry averages and disproportionate to its size, yet the company's '07 Sustainability Report makes no mention of this. The company says it is soon to produce a full, stand-alone report. Until we see a more 'warts-and-all' approach by the company, we cannot grant existing reporting much credibility.
[back to top]COLT Telecom
Despite having recognised the value and opportunities created by CSR, COLT's disclosure is lacking on measurable data and detail although positive steps to improve environmental performance have been taken. It is the company's corporate governance, however, that is of a persistent concern: in addition to the lack of independent representation on the board, there is also a complete lack of disclosure of remuneration schemes and special bonuses have been paid without performance conditions.
[back to top]Sports Direct
Analysts are predicting tough times ahead for retail and reputation is more important than ever for this consumer facing sector; yet Mike Ashley seems to be damaging the reputation of the store he founded at every turn. Moreover, as there is no independent monitoring of suppliers' compliance with the company's Code of Ethics, good supply chain labour standards cannot be guaranteed, and there is also little evidence of human capital management systems. Sports Direct also faced criticism in an ITV programme this year for allegedly excluding local residents of Shirebrook, Sheffield, from employment in a sports warehouse in favour of supposedly harder working polish immigrants, a claim the company denies.
[back to top]Findel
Findel's corporate governance requires serious attention. Concerns over directors' contracts, independence and remuneration place the company well below most of its retail peers. There are also several other areas where Findel's ESG reporting could improve. For example, it does not provide adequate data to enable an assessment of environmental performance and its ethical trading policy document lacks detail. In addition, compulsory credit agreements required for customer purchases via the Home Shopping division raises questions about personal debt and responsible lending.
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