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2005-01-09 Statement by Nick Renton AM CORPORATE TSUNAMI DONATIONS NEED SOBER RETHINK"It would be better to hold the debate on the ethics of charitable donations from listed companies at a less emotional time than so soon after the recent devastating tsunami." Mr Nick Renton, the founder of the Australian Shareholders' Association and the author of numerous books on investments, was commenting on the recent remarks by the association's deputy chairman, Stephen Matthews, to the effect that companies had no right to give away shareholders' money without their consent. Although since retracted, these views were soundly based. Mr Renton said: "It is immoral for funds entrusted to companies for one purpose to be devoted to another. Would the Australian community approve of a board making a donation to the Nazi party rather than to a relief fund? If not, then where should the line be drawn? "Would the depositors in a bank really approve of some of their savings being diverted to a particular cause, no matter how worthy, without their authority? The principle of not giving away other peoples' money is the same for depositors and shareholders." Mr Renton added that, while it was understandable that company directors wanted to be seen in a good light, they should note the recent precedent created by James Hardie. That company had promised not to divert funds to asbestos victims without the prior approval of a shareholders' meeting. Background: This debate is not new. Extract from Company Directors: Masters or Servants? by N E Renton (Wrightbooks, 1994): Many listed companies use corporate funds to make donations to charity. In the absence of specific provisions in any company's rules to the contrary the necessary authority for this comes from Sections 161 and 162 of the Corporations Law. Typically, a company's motives may include one or more of the following: Anecdotal evidence suggests that many companies want to be good corporate citizens for business-related as well as for genuine reasons; they want to be good, but they also want to be perceived by their current and potential customers as being good. However, notwithstanding these aspects, the use of company funds to make charitable donations is not really desirable. Shareholders should decide for themselves whether they want to make such donations and if so to which organisations and to what financial extent. They should not have such decisions made for them by a paternalistic board. |
This page http://nickrenton.com/928.htm was last updated on 2005-01-09