Invest in Alphabet by all means, but attach some conditions to doing so

Posted on

I was interviewed by The Times yesterday for its story about the Church Commissioners holding a significant investment in Alphabet, the parent company of Google, despite its tax position. I have to admit I do not know if the quotes made it to the story - I have not got a Times sub right now. This comes from the publicly visible part of the story:

The Church of England is investing millions of pounds in Google despite its promise to confront companies that are accused of tax avoidance.

The church also paid one of its executive commissioners £463,000 last year, almost six times the Archbishop of Canterbury’s stipend and about 20 times the minimum pay for a parish priest.

Both aspects are interesting, and as I em engaging with a number of investors these days I share my opinion here.

My view is that it is very difficult for charitable trustees to completely ignore the market presence of some companies unless they find them especially egregious. More than that though I am not sure they should. Those with substantial funds to invest (and the Church Commissioners meet that criteria) can have as much impact by being active thorns in the side of the companies in which they have stakes as they can by divesting. Divestment may be a wholly appropriate act for the individual or small fund but for the larger investor this is just issuing an invitation  to be ignored when by holding a stake they can instead demand that reform take place.

I do not criticise the Church Commissioners for having a stake in that case but do believe that they have a duty to make clear that they expect the company to respond to shareholder demands, and that there are at least three of those. The first is that tax is paid in the right place, at the right rate and at the right time. That meets the company's ethical and legal obligations. It also reduces shareholder risk, considerably.

The second is that that Alphabet (and other companies) make clear their commitment to this policy and not by some token gesture, boiler plate statement of the type the UK government is currently proposing but instead by the creation of policy on which they intend to proactively report in future.

Which means that the third demand should be that the company evidence its right behaviour by publishing full country-by-country reporting. Nothing less will do.

The current Church Commissioners statement on tax, ethics and investing falls way short of this standard, It is not good enough as a result. They need to get their act together, and soon.

Executive pay may be another case where they might need to review policy. Christian vocations come in many forms. Few have £400,000+ salaries attached to them. I do not propose that Church Commissioner employees act charitably, but I simply do not believe that salaries of that level are required.

There appears to be a compelling case for some different thinking in the CoE.