Author: Jeroen Wilbrink, Senior Client Advisor at NN Investment Partners
We do many things differently in the Netherlands. I notice these differences, because I have lived most of my adult-life abroad. One example, is that the Dutch share a lot of the news with their children. Not only are concepts like ‘Jeugdjournaal’ (youth news) unique to the Netherlands, but Dutch schools also typically spend relatively much time on current affairs.
One of the consequences is that I sometimes have to explain the news to my kids, and their childlike naivety often offers a different perspective on the world. With the recently announced IPO’s of several Dutch companies, it was time to explain the term ‘shareholders’.
“So the shareholders are the managers of the factory?” “No, they are the owners, not the managers.” “But if the owners are not the boss in the factory, why do they own it? Do they work there?” “No, they do not, and they own just a small part of the factory.” “So they may own a machine? Why would you want to have a machine if you don’t work there?” “Because the shareholders get the money the factory generates.” “But how is that fair if they do not work there?”
It is now obvious to me that children are born as Marxists. They look around at school and see children with new bicycles and expensive clothes, while others have to wear the hand-me-downs of their older brothers or sisters. But then children are social-minded, have empathy and many don’t mind sharing with their classmates.
In capital markets, we can learn from our children. According to economist Friedman, the only purpose of companies is to make a profit (create shareholder value). But socially and environmentally responsible business practices, empathy with the employee and income inequalities are now becoming increasingly important.
After the scandals involving banks, Enron and Volkswagen, shareholders have to get back to work, vote on executive remuneration and take action if management slips up. Also, the owners of capital are no longer the big industrialists. Despite all the focus of economists like Piketty and Varoufakis on the super-rich, we have a society where a considerable amount of capital is held collectively in sovereign wealth funds or pension funds, where investment returns will benefit the ordinary worker.
In my opinion, these pools of capital play a very important role; not only in generating savings but also in creating jobs and investing in clean energy and new technologies, in infrastructure, medical improvements and the development of third world countries.
Pension funds have a responsibility to their participants, but also to the children of their participants and the broader community. It is no longer acceptable to hoard up dividends and coupons; vote, decide, support and invest, because with ownership comes responsibility. Karl Marx and my children would be proud.