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BP, oil sands and democracy

Robert Peston | 12:19 UK time, Sunday, 11 April 2010

Since we seem to be talking about democracy and voting, it's as well to remind ourselves of one of the great democratic deficits - which is the yawning gap between the owners of public companies and their managers.

As I've bored on about for some years, each of the millions of us saving for a pension own tiny slivers of almost every big stock-market company on the planet.

Yet we're the worst kind of absentee landlord: for most of us, it barely enters our consciousness that we have a financial interest in the performance of these businesses, and that we have a right - albeit of a slightly indirect kind - to boss them, especially when they're letting us down or taking dangerous risks.

The rarity of our interventions is understandable: if our pension funds own shares in BP or Marks & Spencer, for example, the shares are registered in the name of the funds; they're held in trust for our benefit.

So there's no right for each pension-fund member to vote those BP or M&S shares. But fund members do have the ability to put pressure on pension-fund trustees to instruct pension-fund managers to vote those shares according to their wishes.

If you belong to a pension fund, have you ever thought about the lever you possess to influence how big companies behave? Have you ever used that lever?

Probably not.

Because as I've described it, the process of transmitting your voice into the boardroom of a BP or an M&S seems rather long and convoluted.

But here's the thing. The internet is transforming these theoretical democratic rights to put pressure on boardrooms into something more real and practical: online social networking allows support for a campaign to build rapidly; web petitions are a powerful tool for communicating views to decision-makers.

Now it's no accident that I've been talking about BP, because that oil giant has been on the receiving end of a pensioner campaign that comes to a head on Thursday at its annual meeting.

Organised by Fair Pensions, the lobbying group for "responsible investment", the campaign raises concerns about the environmental risks of extracting oil from tar sands, which are a massive potential source of crude oil, much of it located in Canada and Venezuela.

Fair Pensions' attention has been directed in particular at the activities of BP and Shell in Alberta, Canada, where tar sands cover an area greater than the size of England and Wales.

For BP and Shell, the important point is that the proven reserves in Canada's tar sands are the world's second largest source of future oil after Saudi Arabia's more conventional reserves - which they feel that they can't ignore at a time when demand for energy shows no sign of easing.

For Fair Pensions, the more significant issues are that the greenhouse gas emissions that result from tar-sands extraction are higher than for normal oil production, that there is the potential for significant damage to forests and wildlife, and that there is a threat to the livelihoods of Alberta's indigenous First Nations communities.

What Fair Pensions wants is a report by BP's audit committee or a risk committee into the first tar sands project being developed by BP, a joint venture called Sunrise.

This report would set out the "the assumptions made by the company in deciding to proceed with the Sunrise Project regarding future carbon prices, oil price volatility, demand for oil, anticipated regulation of greenhouse gas emissions and legal and reputational risks arising from local environmental damage and impairment of traditional livelihoods".

Under Section 338 of the Companies Act, Fair Pensions succeeded in forcing BP to include a special resolution to that effect for this week's annual general meeting.

And it then used the internet to rally support to its cause from individual members of pension funds: on a special tar sands web page, it's easy for individuals to send a message to their respective pension funds, urging those funds to back the special resolution.

According to Fair Pensions, in the last six weeks over 5000 people have emailed pension providers, mostly UK providers. Legal and General, which is the largest investor of pension assets in the UK and the largest single shareholder in both BP and Shell, is said to have received 3000 of the emails.

Other pension funds and investors that have been sent the protesting emails are the University Superannuation Scheme, Friends Provident, the West Yorkshire Pension Fund, Prudential, Standard Life and Aviva.

It would be wrong to overstate the significance of this popular pressure: those 5,000 emailers are a tiny minority of the millions of pension-fund members.

And the chances are that the resolution will be lost, by a very wide margin.

BP is urging its investors to reject it, on the basis that it would be inappropriate for it to commission a special board report on a single project; British pension funds have a habit (which some would describe as lazy and unfortunate) of voting the way that the boards of their companies would wish.

That said, some of the biggest US pension funds, led by the enormous and influential CALPERS of California, are backing the resolution.

Also, BP has - in apparent response to the protesters' demands - provided quite a lot more relevant information about the Sunrise scheme, including the greenhouse gas emissions it expects, the steps being taken to engage with local communities, the cost of carbon it incorporates into its assessment of the viability of such projects, and its expectations for future oil prices.

In that sense, BP hasn't simply ignored "the little people" - although, arguably, BP's non-executive directors are taking something of a personal risk in not acceding to the protestors' demand for a more rigorous evaluation of what by any standards is a significant change in the company's energy strategy that is fraught with potential financial and reputational dangers.

Anyway, for those who want to learn more, you can click here for Fair Pensions campaign page, and here for BP's response to the oil sands resolution.


  • Comment number 1.

    I put money into UK pension fund. I want pension fund to grow big and fat so I can retire without having to forage for food. For pension fund to grow big and fat its providers (BP, Shell and so forth) must make big profits and they won't if ecologically-driven pressures are brought to bear.

    I also want my offspring to live in a future decent world.

    These two goals are incompatible, if equally desirable.

    Surely this is the hub of the problem: fair pensions are mutually exclusive with the corporate profits required to generate them.

  • Comment number 2.

    Surely, if you don't like a way a company is being run then you don't invest in it. Likewise how many "normal" people know the science behind the decisions that are made by experts? Can we trust anyone these days as they all have their own agenda. At the end of the day everyone wants the best bang for their buck as it's their retirement they need to think of.

  • Comment number 3.

    I have no idea how the Teachers' Pensions company actually invests our money... all they send is an annual statement of what I have paid in, and what I can expect as an annual payout when I hang up my board marker.

    But as far as I am concerned, they are being paid to look after the investments on our behalf. If we were good at playing the stock market, we might not be teachers but day traders, after all!

    If I wanted to exert an influence over a given company, I'd trundle off and purchase shares in it directly; then participate in shareholders' meetings.

    And I do not agree with the statement that 'fair pensions are mutually exclusive with the corporate profits required to generate them' - you can get a good return from ethical investments. But your idea of what is ethical might differ from mine.

  • Comment number 4.

    The absurdity of all this is that the oil extracted from these sands are needed to sustain a technology which has allowed the human population to grow to the current level.

    The only way to resolve the dilemma is to restrict population growth.

  • Comment number 5.

    The advantage for the corporate boards is that they are so remote from individual shareholders that they can do what they like so long as they produce profits, and even if they don't there's little that joe public can do about it. Pension funds became big and fat on the back of general stockmarket performance and tax reliefs, now somewhat reduced, and have a fairly cosy relationship with the boards of large companies. Not only that, but unit and investment trusts and their offshoots have also divorced individual shareholders from company boards, and this has been exacerbated by these trusts attraction on the back of the somewhat illusory tax reliefs of ISA's.

    Company boards used to value their shareholders (eg Shell used to have good shareholders days explaining what they did in their business.) but the boards now seem to treat shareholders merely as cash cows; it is a lot easier for them to have the institutions as a buffer against their shareholders.

    The internet gives the companies the ability to disseminate information direct to the underlying individuals in pension funds/trusts etc and is a way that they could combat the menace of pressure from single interest groups whose objects may not be in the best interests of the companies they are attempting to pressurise. We may see go ahead comapnies using the internet precisiely for this. When cash is short it pays to cultivate those from whom it can be extracted.

    Of course, it is always possible for a large number of people to buy shares in a company and seek to change policy that way, but at least they have a financial stake in the success of the company.

  • Comment number 6.

    And, when (1.) Pension funds like CALPERS cave in under the weight of their own political correctness, FairPensions must assume 'the taxpayer' will rescue the teachers' union that has done so much to bleed California white? Which taxpayers, from where? Idaho? Missouri? Certainly not California--they're BROKE, in case the news hasn't reached Sacramento.

    (2.) The US economy is increasingly crippled by a government that will not allow for the extraction of oil reserves KNOWN TO EXIST WITHIN OUR BORDERS, and the earnings of all companies that pension funds like CALPERS suffer (and they will), and unemployment spikes again (which it will), then where do CALPERS and FairPensions assume the wealth will be generated to sustain their particular corner of prosperity? Taxation? Seizure?

    Drill. Dig. Refine. Exploit every avenue that makes economic sense, and that keeps our wealth out of the hands of madman regimes like Iran, or chaotic parts of the world like Nigeria, or out the hands of banana dictators like Chavez.

    Stand your ground, directors of BP!

  • Comment number 7.

    #4 stanilic

    You are begining to sound like you're coming round to jaded jean's pov! ;o)

    ...and as most of us know, uncontrolled population growth is the real elephant in the room.

  • Comment number 8.

    #4 Stanilic has hit the nail on the head. The fundamental problem is the amount of people on the planet. We look for perpetual growth so that we become richer whilst living with finite resources.

    We have to manage population growth and change our system of economics from one of growth to one of sustainability.

  • Comment number 9.

    Boss pension fund managers we might like; letting us down or taking dangerous risks they are likely doing...
    But these managers can and will do as they please because greed is the name of the game. Unless somehow we "absentee landlords" can muster far more than 5,000 emails/twitters, we will do little more than vaguely annoy the pension fund group. Try emails/twitters by the million - and even then, what are we going to do when the pension fund manager says, “Thanks, nice to hear from you, but we've already studied these issues. We are sending you a copy…”
    If you belong to a pension fund, have you ever thought about the lever you possess to influence how big companies behave?
    Yes, I have, and it’s right up there, next to non-existent. To tell you the truth I’ve thought NOT to waste my time in pursuit of these pension miscreants because they will do what they will do, justify what they do and hold the public in contempt.
    The priority is not damage to wildlife, or threats to the livelihoods of Alberta's indigenous First Nations communities. Do you really believe that they care?
    5,000 emails are not going to effect pension-fund managers. 5,000 is a drip in a very large bucket. Try, as I mentioned before, one million.
    And then there's the outright division:
    UK’s Local Authority Pension Fund Forum (LAPFF) called on members to vote with management at BP’s annual general meeting. LAPFF, which represents 52 pension schemes with a combined £90bn (€100bn) in assets, said it had issued the alert to members to oppose the shareholder resolution after its own negotiations with BP had provided “sufficient evidence” that the company’s approach to tar sands development was “well-grounded”.
    Forget a million! Try for one million with a united voice. In other words, the tar sands resolution at BP’s April 15th AGM now looks like it could pit active institutional investors against each other.
    The LAPFF has been convinced that while the proponents had raised some important issues, no evidence has been found to indicate BP had adopted a position that was not supported by technical and economic research. The Forum also does not believe BP or their partner have failed to meet the wide range of local requirements set by Government to protect the environment and local communities.”
    I had to smile when Cllr Ian Greenwood, LAPFF Chairman remarked that it was important that shareholders participate, provide input when they have concerns on environmental, social and governance issues, and the Forum encourages the use of shareholder resolutions to facilitate this. In other words, keep those emails coming…We’ve got the delete button.
    So what can poor, little old me do about infringments that I see?
    Give me an answer, save contacting my member of Parliament who has told me that he has no jurisdiction over the Tar Sands, but he will forward my concern along. Yeh, success. I feel so powerful!!

  • Comment number 10.

    It seems the insurance companies have been investing in the most unhealthy, fat-laden foods and the restaurants that sell them too.

    The fund managers know we don't have the time to get the info let alone sit down and read it for us to take action where needed. It's time to pull the plug on the greedy, illogical markets, our value systems of money and just don't buy the products. Just go Co-op

  • Comment number 11.

    I used to live in England but moved to Calgary, Canada in 2007.
    A lot of jobs are dependant here on the oil sands prjects and the bitumen extraction. The other thing to think about is the counter balance effect to the Saudia Arabia position. This alternative source of oil puts pressure on the Arab states forcing them to think again about price rises.
    We all live in a modern world that uses plastics, paint, fuel oil etc all derived from oil. We cannot turn the clock back and live a near Quaker simple life style.Imagine living without cars, washing machines, and all the other modern appliances. What we can do is make appliances and cars that use alternative fuels or use existing fuels more efficiently.
    The UK has scaled vehicle tax on engine size, so the bigger the engine the more pollution the more tax you pay. Personally I agree with that concept if you want to drive a big engined vehicle you have no feelings for the damage you are doing to the planet or our childrens lungs.
    Then you are basically selfish, there are people who need big trucks for there business and thats acceptable provided they are run on LPG or diesel engines not gasoline(less pollutants).
    Pensions hmm the concept of taking money off millions of workers then pooling it together and creating an investment fund is a bit well old fashioned. With todays technology you should be able to invest your cash in companies directly without the middle man. Then you can make ethical choices eg if you want to invest in an environmental freindly company you can. Its about individual choice and yes morality, if you do not like a company because its behaving in an unethical way do not invest in it.

  • Comment number 12.

    I am proud of my country. I gave up the pretensions of care long long ago. Devon, Wales, Scotland and many parts of my country are still unspoilt and I hope they remain so.

    I am also very proud that BP is willing to ravage and damage another country for our sakes, for our wealth as a nation. Let us worry about our own country, not be a bleeding heart for the rest of the world please.

    Over a century ago it was our naval ships and cutting-edge military that ensured we enjoyed world domination and reaped the very great benefits. Alas, now only the likes of BP can continue in that vein.

    I have travelled the world. I do not believe for a moment that the native americans affected by BP's actions would shed one single tear if GB sank into the north Sea without a trace. Nor would anybody else. Why do so many folk here pretend to care? Because they have nothing else much to worry about. They have shelter (mostly)food and security. I suggest that if they had the hardships that many people throughout the world have to face on a daily basis they might consider getting our own country right and putting it first again? Worry about duties of care and responsibility later when we can afford to again?

    Tongue in cheek? Perhaps a little. But the foundations of my statement remain, Charity begins at Home.

  • Comment number 13.

    Always remember you have the power to refuce to contribute to any investment its your cash to do as you choose. But the banks and the city have been very good at clawing back your pay by any means they can.
    They do not want you making money with it, they want control of your income to invest it and make millions from it!
    Then give you a token gesture of say 3% in your savings account, you would be better off investing it yourself in property or buying shares and keeping all the gain for yourself! Direct trading in stocks and shares is possible now with the internet you do not have to buy an insurance policy!

  • Comment number 14.

    Sometimes I wonder if we wouldn't all be better off stuffing our savings in our mattresses,I mean our banks are offering next to nothing in interest rates and many of our UK banks were on the threshold of collapse without mega bucks handouts of our monies via .gov.

    I myself got an ISA with my last seven grand 15 years ago and what with management charges etc my Scottish Widows European ISA has only just got back to par and Im making zero and dreading the fall of the stock market when the Blues get back in(?)as I got stung with black (Lawson)Wednesday.

  • Comment number 15.

    10 Copper Dolomite
    Those same insurance companies have been investing in fast food joints years. Yes they have been making millions out ofselling unhealthy food to the masses. Think it through a bit further though, in the short term they made a lot of cash.Now they are being hit with insurance claims because of heart attacks, hospital bills for corrective surgery, and other claims related to feeding people unhealthy food!
    Real smart decision that investing in these companies, obessity is the biggest killer of people and the vested interests are supporting it!
    Ethics and morality have no place in business or so they would have us believe.
    But you can make money out of running a health business!, its a mind set change.This slump has forced people to look at there spending habits. Instead of buying expensive boxed prepackaged food,buy fresh vegetables, and cook fresh food and meat!
    Jamie Oliver has been pushing this big time, he knows there is another way to getting kids healthy.But you have vested interests eg fast food companies pushing back, they don`t want people buying fresh food its not good for business!Things can change if people have the will to change.

  • Comment number 16.

    #8. zardoz3006 wrote:
    >> "#4 Stanilic has hit the nail on the head. The fundamental problem is the amount of people on the planet. We look for perpetual growth so that we become richer whilst living with finite resources."

    >> "We have to manage population growth and change our system of economics from one of growth to one of sustainability."

    Very good point, I too believe that those are probaby the most important two issues we shoud care about.

    I will only comment on the latter as it is more to the subject. Planning for sustainability as opposed to continuous growth means excessive profits should be investigated as something abnormal and redistributed (the most part) to those customers or providers that have been ripped off. Likewise a small lost from time to time should not mean bancrupcy (as usualy means today - either grow or die), as long as measures are put in place to perform better next year.

  • Comment number 17.

    I currently receive a penson through the British TPA. Like others in my age grop I had no option other than to contribute via what was noted as "superannuaton". In general my understanding was tha the British Government used these contributions as it felt inclined and paid out the pensions liable. Civil servants (tax officers, government officials etc.) paid no personal contributions but received pensions similar to those who did pay. There was, and still is, no way those like myself can control what our pension "fund" is invested in, if in fact any such investment exists. Meanwhile the British council tax payer (including mself!) is constantly being told our council tax bill increases are due to pension increases. Explain this please? Ontario TP at least seems to know where it's going, wish his county did.

  • Comment number 18.

    Sustainability means making products that have a life cycle of 20yrs instead of in some cases just months!. The energy used to reprocess scrap products into useful items is a complete waste of the earths resources.
    Imagine cars being designed to last 20yrs, or washing machines that were energy efficent and would last your lifetime?
    No manufactuer will want this because they all want to sell you items three and four times over during your life time. But thats just to maximise sales but in the long term its not sustainable.
    The amount of material that goes to landfill is horrendous, some of it could be used or recyled the rest burned to provide useful heat.The ideas are out there its just vested interest that does not want to make it happen so we all carry on buying more and more crap or reinventions of the same thing. Why becuase products are not made to last.

  • Comment number 19.

    This is all about "big oil".
    Pension funds and economics are nothing compared to it.
    As things stand at the moment, we cannot survive without the oil....politically, economically or militarily.
    "Environmental concerns" or "political conscience" will be thrown out with the rubbish if oil becomes that situation, the military will decide.
    The Canadian resource is vital and necessary, whatever the "greens" or the pension funds may say.
    But as I understand it, the worlds' largest oil shale reserves are in the United States, around the Green River area of Utah.
    These reserves are truly vast, but need fresh, boiling water to extract.....and that may need pipelines and nuclear plants to operate.
    The greens and the pension funds will have a right old go about the "environmental impact" of all that, but if US oil supplies becomes pinched, the greens will be swept aside.

  • Comment number 20.

    I am not in the oil industry although I live in Alberta where the tar sands are, I am not an environmentalist either. However I do know that the tar sands ( that's the old name by the way) is not the environmental disaster the environmentalists say or claim it is. I strongly suggest you read a very carefully researched and objective book called "The Oil Sands- Canada's path to clean energy?" by Gordon Kelly. This was written in 2009. Do yourselves a big favor and read it. Then make up your own mind pro or con.

  • Comment number 21.

    As an ex B.P, Worker I know what makes that company tick, Profit and more profit. Morals and Ethics dont' make me laugh !!!



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