Closing the information gaps around talent and culture
By Natalie Kenway
It is not often the City Hive team attend an external conference and hear a panel focused on equity outlooks to zone in on the importance of corporate culture and talent retention, and the impact of these on investment outcomes.
So, Bev and I were practically cheering from our seats the Edelman Smithfield Investor Summit in December when senior management from Jupiter, BlackRock and Janus Henderson moved on to this topic unprompted within a panel answering the question: Are we at a turning point for investor preferences or will US big tech continue to dominate portfolios?
Panellists were shown a slide on where there are data gaps in the ‘valuable information provided by companies’ management team’. Edelman Smithfield had surveyed 300 global investors, and found 42% said there are big gaps data around ‘ability to attract and retain talent’. This was the highest, followed by gaps in ‘plans to mitigate impact of inflation of the business’ (38%) and ‘distributions to shareholders via dividends etc’ (37%).
Source: Edelman Smithfield Investor Pulse, November 2024
“[Culture] is massively important,” said Matthew Beesley, CEO at Jupiter Asset Management, when the panel was asked whether their own clients wanted to find out more about internal culture.
“The UK regulator talks about a purposeful culture as a key thing they look at to determine the health of an organisation for a regulatory perspective,” he added.
See also: How to ACT on Consumer Duty and SDR
But as the poll suggested, investors want more information around culture, and this can be hard to quantify.
“Quantitative data is easier to process than qualitative data, and I think that's comes out here [in the poll results]. When we think about where investors want more information, it's trying to work out how to systematically process that softer stuff. How do you understand the culture of a business? How do you know that the company is doing the right thing socially? And when it comes to ESG-based requirements, are they paying appropriate attention to governance-related issues… these are much harder to judge from the outside looking in.”
The ‘feel’ of a company is an intangible asset that is hard to measure, the panellists discussed, with Helen Jewell, CIO, EMEA, at BlackRock Fundamental Equities, pointing out: “You're never going to speak to a CEO who says, ‘oh yeah our culture is awful’.”
She added investors can look at turnover of staff and Glassdoor data to unpick some factors of culture at an organisation.
“There's no doubt, if you have two companies, both equal [in valuations] but there is one that you think has a better culture, that is the one that you will invest in.”
The third panellist, Lucas Klein, head of EMEA and Asia Pacific equities at Janus Henderson, agreed the ability to attract and retain talent as being the largest gap where the firms’ investment teams would like more information.
“It's tricky because for those of us who spent many years investing you can't see it on the balance sheet. But we do think ultimately, it is an important driver, and we're very hungry for more information in that respect.”
When answering the question around investors’ appetite for more information around Janus Henderson’s culture he said: “We're a publicly traded company, so you can see the background. We have a refreshed board; a new CEO joined a couple of years ago. We've been undergoing, I think, a very positive cultural evolution over the past couple of years, and that's a really important topic of conversation with our clients.
“They care a lot about the involvement of the board, what the sentiment is like and they ask about employee surveys. We do find that it's quite important, and I'm thankful and grateful that we have a good story to tell on that front.”
See also: The industry and societal shift on consideration of culture
City Hive understands talent retention and company culture are indeed very challenging to measure and quantify from an investor's perspective, which is why the ACT Framework was created alongside fund gatekeepers’ who felt it was paramount to their investment due diligence. It closes that gap around information on culture, talent retention and attraction, values, behaviour and more and users appreciate they can find an overview of this information, and the underlying quantitative and qualitative data, all in one place.
ACT looks for the alignment of behaviour and values within investment management firms and can help improve transparency and accountability, as well as combat greenwashing, in a standardised, strategic and stakeholder driven way.
View our website dedicated to ACT by clicking here or email HQ@cityhive.co.uk for more information about using the Framework in your investment analysis or becoming a Signatory.