March 22, 2012, by Maggie
Margin Call was the final film in this year’s series Doing the Business, a series designed to use the medium of film to encourage discussion and debate on social and ethical issues in business.
It was the most mainstream of the films we have screened this year, with an academy award nomination for the screenplay and an all start cast including Kevin Spacey, Demi Moore, Stanley Tucci and Jeremy Irons.
The film makes compelling viewing portraying a callous corporate world governed by short-termism and greed. As the penny drops ‘the formula is wrong’ and the implications of these valueless assets for the company and the market as a whole become apparent, key players are revealed to have some decency and humanity, even conscience. Yet they remain complicit, continuing the fraud for one more day – holding a fire sale, trapped by their pay packets, medical cover, mortgages, pensions and lifestyles.
So while compelling, the film is also depressing in equal measure – a sickeningly realistic view of a world governed in the end by self interest. In one of my favourite later scenes the Jeremy Irons character reveals his fatalistic view of a fundamentally flawed system reciting ‘1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987, 92, 97, 2000 and whatever we call this one.…’
Fortunately to give us all hope the screening was followed by a response from Will Oulton, European Head of Responsible Investment at Mercer. Will is widely recognised as a leading thinker in Responsible Investment having been Director of Responsible Investment at FTSE establishing the FTSE4Good, FTSE KLD and FTSE Environmental indices.
Will spoke about the recommendations of Sir David Walker’s review and highlighted in particular the development of the (voluntary) UK Stewardship Code to encourage engagement between institutional investors and companies and outlining best practice when it comes to conflict of interest.
He outlined the challenge of overturning short term-ism and the type of casino capitalism prevalent in Europe and under review by Professor John Kay. The Kay review is considering the impact of incentives (e.g. fee structures), motivations and timescales (e.g. quarterly reporting) on the activities of all participants – and how these factors may be driving short term behaviour.
He concluded by making four recommendations for a move towards responsible (or even sensible) capitalism.
- Remove quarterly earnings reporting.
- Reward long term investment (introduce tax incentives) or provide higher dividends for shares held over a longer period of time.
- Higher scrutiny of fund managers – only reward long term performance.
- Don’t pay such high fees for activity (few can beat the market anyway).
Is there a chance anyone will listen this time?
For more information on the initiatives and research referred to by Will see:
By Maggie Royston, Business Development & Centre Manager of the ICCSR, Nottingham University Business School.