Dec 15, 2001 - would be over-optimistic to look to the 'triple bottom line' for a resolution ... the 'triple bottom line' of financial, environmental and social returns.
TASA 2001 Conference, The University of Sydney, 13-15 December 2001
Share-ownership and the triple bottom line: A preliminary study
Bruce Tranter University of Tasmania
Robert White University of Tasmania
Abstract In this paper we present a preliminary analysis of one striking feature of the Australian political economy: the rise in private share-ownership. We note, first, that both political campaigners and corporate analysts have responded to this change in terms of the ‘triple bottom line’ of financial, environmental and social returns, then that this implies a unified rationality, and finally that this can be tested through environmentalism and the postmaterialism in Inglehart’s theory of value change. On that basis we analyse questions on share-ownership in the 1994 National Social Science Survey. Finding a significant divergence between the results for environmentalism and postmaterialism, we conclude that it would be over-optimistic to look to the ‘triple bottom line’ for a resolution of intensifying disputes over corporate activity.
We start with a puzzle. On one hand, events at Genoa and at earlier meetings on world trade confirm that disquiet over global corporate activity is becoming both more intense and more widespread. On the other, more and more individuals are participating in that activity by acquiring shares in the corporations involved. Further, while private shareownership has risen throughout the postindustrial world since the 1980s, the trend is particularly marked in Australia. After the wave of full and partial privatisations, especially of the Commonwealth Bank and of Telstra, and of demutualisations such as those of the AMP and the NRMA, a slight majority of Australian adults are now share-owners, and Australia has the world’s highest levels of private investment in the stockmarket. In this paper we report a preliminary study of this rapid and extensive change in the political economy. After showing the rise in share-ownership and after comparing Australia with other countries through figures reported by the Australian Stock Exchange (ASX), we briefly introduce one political-academic response to this shift in corporate ownership: accounts of the ‘triple bottom line’ of financial, environmental and social returns. To test it, we develop a four-phase predictive model from responses to questions on share-ownership in the 1994 National Social Science Survey (Kelley et al. 1996). We first model demographic variables and then compare the results with the actual demographic patterns that the ASX has reported. It seems that ownership is becoming more diffuse than our model predicts. Secondly, we model the two attitudinal variables of environmentalism and of the postmaterialism in Inglehart’s theory of value change. Our assumption here is that all share-owners look for a financial return, whether in capital gains or in dividends, and that if
2
Bruce Tranter & Robert White
the theory of the triple bottom line holds, they should also be expected to be favourable t o the environment and to the ‘social’ issues indexed by ‘postmaterial values.’ The results are surprising, since attitudes that are normally highly correlated trend significantly in opposite directions. That difference remains when we combine demographic and attitudinal variables in a third model. It then seems that accounts of the triple bottom line are prematurely optimistic. Finally, when we include prior ownership of shares in our fourth model we find that this is by far the most significant effect. We conclude that if that trend holds, and if share-owners continue to become even more demographically diverse, then corporations are likely to face rising protests from within as well as protests from without such as those at Genoa.
Share-ownership in Australia Between 1991 and 2000 the ASX conducted six surveys on share-ownership in Australia. I t found that in the single decade of the 1990s the number of direct and indirect share-owners more than tripled, to a current combined level of around 52% (ASX 2000, 2001). On its definitions, ‘direct ownership’ refers to shares or units in a trust that are bought through a broker, received as an inheritance or gift, or allocated in a demutualisation or employee share scheme, and ‘indirect ownership’ to investment in either a managed fund or a personal superannuation fund invested wholly or partly in the stockmarket. Using its data, we show in Figure 1 the trends in the percentages of Australians who own shares, both directly and in total (directly and indirectly combined).
Figure 1: Direct and total share-ownership in Australia, 1991-2000
P e r c e n t a g e s
60
Direct
50
Total
40 30 20 10 0
Dec91
Oct94
May97
Oct98 Nov99 Date of survey
Nov00
By the time of the ASX’s fifth survey, measuring ownership in 1999, a majority of adult Australians were participating in the market, and that majority remained even after the slight dip in 2000. That gave Australia the world’s highest levels of private shareownership. We show the ASX’s international comparison in Figure 2.
Share-ownership and the triple bottom line
3
Figure 2: International comparison of share-ownership, Nov99
P e r c e n t a g e s
60
Direct
50
Total
40 30 20 10 0
Aust
Can
USA
UK
NZ
Germany
Countries
Since the ASX’s definitions of ownership do not encompass the general superannuation funds now mandatory for all Australian wage and salary earners, Australians’ exposure t o the market is even more pronounced than these already striking figures suggest. Yet despite its obvious importance, this effect has been little studied. We next suggest one approach t o it.
Share-ownership and the triple bottom line Given the changes in Australian share-ownership, it might seem that Australia is becoming a ‘shareholder democracy,’ with citizens cast as corporate ‘stakeholders’ and the companies in which they invest cast as ‘corporate citizens’ (e.g. Wheeler 1998). On similar grounds, the trend in share-ownership has been both welcomed as a mark of ‘progressive liberalism’ (Argy 1998) and attacked as a ‘people’s capitalism’ that widens rather than narrows inequality (e.g. Howard 1998). In the shift from government proper to corporate governance (e.g. Bosch 2000), and in the reconfiguration of individuals as responsible for their own economic welfare, it fits the patterns to be expected under ‘neoliberalism’ (Beeson and Firth 1998; Dean and Hindess 1998). Since many of these themes recur in accounts of the ‘triple bottom line’ (e.g. Elkington 1998), and since this is explicitly on the Australian political agenda (e.g. Latham 2001), we focus on it in this preliminary study. The ‘triple bottom line’ is an expression of the variously political and academic calls for the ‘third way,’ for ‘sustainable development,’ and for a greater stress on ‘social capital.’ It has been extended from an early and narrow focus on ‘ethical investment’ (e.g. Harte et al. 1991; Quazi 1997) to a claim that some companies already deliver environmental and social returns commensurate with their strictly financial profits, and that all corporations could and should follow that pattern. Mark Latham is drawing on that sense in his campaign for Australia to adopt the ‘third way.’ In his vision of the “stakeholder policy” needed if Australia is to fulfil its “potential as a sharemarket democracy,” all “citizens should have a stake in the market economy” (2001: 26). Since a ‘stake’ in this sense stands for a rationalised resolution of apparently disparate imperatives, it is an imaginary of a political economy without conflict. To some extent, these claims for the ‘triple bottom line’ appear to be supported. Speaking for the ACTU, for example, Sharan Burrows (2000) has held that under conditions of rising share-ownership, and on economic, environmental and social grounds, unionists could no longer see their interests as opposed to those of shareholders. A certain amount of
4
Bruce Tranter & Robert White
evidence suggests that Australian companies are also responding to the three types of rationality demanded by both shareholder activists and the general public. Analysts of corporate annual reports, for example have found that environmental disclosures increased with increased public attention to the environment (e.g. Deegan and Gordon 1996), and that the reports are a useful means of testing corporate claims to social legitimacy (e.g. Guthrie and Parker 1989; Wilmshurst and Frost 2000). But while the rhetorical functioning of the reports implies that boards and managers use them to tell their shareholders what they decide those shareholders want to hear (e.g. White and Hanson 2000), information on the shareholders themselves is less clear. For example, although Anderson and Epstein (1996) found that Australian shareholders looked for more environmental and social information in annual reports, they could not tell how those shareholders resolved tensions in what they already received. Attitudinal surveys of shareholders should help clarify that. In so far as the ‘triple bottom line’ is descriptive as well as prescriptive, or in so far as boards and managers are reading their shareholders correctly, then shareholders in general should show the environmental awareness marked by the institutionalisation and routinisation of environmentalism (e.g. Papadakis 1996; Pakulski et al. 1998). They should also reveal the social awareness marked by calls for ‘corporate social responsibility’ (e.g. Trotman and Bradley 1981; Tilt 1994; Milne and Adler 1999). One means of access to this second effect is through Inglehart’s (1977, 1990, 1997, 1999) ‘postmaterialism.’ Inglehart holds that new valueorientations, concerned with ‘quality of life’ rather than with a narrowly economistic rationality, emerged among those born after World War II as a result of conditions that liberated most people in developed countries from spending their lives on basic material demands. He has found that their effects are unevenly distributed, with the richer, the urban, the better educated and the younger all more likely be postmaterialists. This is well suited to a test of the ‘triple bottom line’ among Australian share-owners. Inglehart (1997, 1999) himself has listed Australia among the countries where his theory is confirmed. Since he measures postmaterialism by the extent to which survey respondents agree with ‘giving people more say in important government decisions’ and ‘protecting freedom of speech,’ it bears directly on the democratising moment in the ‘triple bottom line.’ It is just as relevant to the environmental moment, since postmaterialism in Australia is highly correlated with environmentalism (e.g. Tranter 1996, 1997; Bean 1998).
Data and Method Our data are from the 1994 National Social Science Survey (Kelley et al. 1996), obtained from the Social Sciences Data Archive, Australian National University. The 1994 NSSS has 1503 cases and includes four questions relating to share ownership: ‘Do you own any shares in the company you work for?’ (in 1985). And now? (i.e. 1994). Any shares in other companies, or share market funds? (1985). Shares in other companies now ? (i.e. 1994)’. The breakdown of share-owners in the survey is shown in Table 1. Table 1: Percentages of Share-owners General Shares
Shares in Company of Employ
1985
1994
1985
1994
Own Shares
14.2
22.9
6.9
11.2
Don’t Own Shares
85.8
77.1
93.1
88.8
The figure of 22.9% of general share-owners is comparable with the ASX’s 1994 finding that 19.9% of Australians were shareholders.
Share-ownership and the triple bottom line
5
We analyse the NSSS data with SPSS Version 9.0. We use logistic regression to predict share ownership on the basis of the values of our independent variables. Logistic regression is an appropriate technique for analysing dependent variables that are binary, such as owning/not owning shares (Agresti 1996). To allow interpretation of the logistic regression estimates, we report odds ratios calculated from the logits (i.e. the exponential of the logit is interpretable as an odds ratio). For example, in Table 2, Model 1, those with a tertiary degree are 1.5 times more likely than the non-tertiary educated to own shares as opposed t o not owning shares, after we control for the influence of the other independent variables. We categorised the independent variables as demographic and attitudinal. In the former, we constructed dummy variables for sex (men), tertiary education as opposed to non-tertiary, location in a large city, and income groups ($75K). The exception is age which we measured as a continuous variable in its natural metric. The attitudinal variables include a feelings thermometer for environmentalists. We also operationalised a scale variable to measure postmaterialist value orientations. We rescored all scale variables with the exception of age to range between 0 and 1. Again with the exception of age, the odds ratios for the scale variables therefore represent the difference between the extreme values on each scale. The inferential tests we used (Wald statistics based on the chi-squared distribution) test that the logistic regression coefficients are zero. For ease of interpretation we indicate statistical significance at less than 0.05 and 0.01 with asterisks. We replaced missing data for the independent variables with their respective mean scores, except for the postmaterialist scale where we coded missing values to the mode.
Analyses We estimate four regression models to examine the impact of socio-demographic influences and the two attitudinal variables. The first model includes sex, age, education, location and income variables. In the second model we consider the effects of the attitudinal variables. Next we combine these demographic and attitudinal variables (model 3), before finally adding a dummy variable that measures prior share ownership. This is a retrospective question that asks if respondents owned shares in companies other than those in which they were employed, or owned ‘other market funds’ in 1985. The full analysis is shown in Table 2. Table 2: Predictors of Owning Shares (other than in Respondent’s Company of Employ) 1
2
3
4
Men
1.2
-
1.2
1.1
Age
1.027**
-
1.026**
1.001
Degree
1.5*
-
1.5*
1.8**
City (500,000+)
1.3
-
1.3
1.2
Income (reference: < $20,000)
1
-
1
1
$20-$30,000
1.7**
-
1.7**
1.6*
$30-$40,000
1.9**
-
1.9**
1.7*
$40-$50,000
2.9**
-
2.9**
1.7
$50-$75,000
2.9**
-
2.8**
2.1*
6
Bruce Tranter & Robert White
over $75,000
10.6**
-
10.5**
5.0*
Environmentalists Thermometer (+ = like)
-
0.5**
0.5*
0.6
Postmaterialism Scale (+ = postmat)
-
1.7*
1.4
1.8*
Owned Shares in 1985
-
-
-
27.7**
Pseudo R-Squared
.11
.01
.12
.40
* p
