It is completely impossible to prove that a commitment to corporate social responsibility has any effect whatsoever to a company's share price. I wish we would agree that, and move on to more interesting territory, argues Mallen Baker

The problem is that the mechanisms that shift the share price are not tied to a far-sighted and multi-level analysis of the company's quality of management, its ability to navigate its non-financial and financial risks, and the likelihood that its products will be fit for a low-carbon future.

So I am not overly surprised that a recent report by the Danish Institute for Human Rights found that most investors do not believe that social issues are material to the financial valuation of companies.

I'm not even surprised at the fact that nearly half of such investors in a US survey by Ceres said that they didn't consider climate risks because they didn't feel the issue was material to their investments decision making.

If it's any consolation, financial analysts don't fare much better. An academic study has shown that, from nearly 200,000 revisions of earning forecasts made by analysts over a ten year period, there was pretty much no movement in share prices as a result.

That means that even the very smart people who only have eyes for the key financial factors that investors are meant to care about - they are routinely ignored by the ones making the decisions.

I fancy that if we were able to read minds and we came to understand the real reasons why investment decisions are often made - we would be astonished by how irrational they sometimes are.

I was thinking about this today when I was reading the latest defence statement by Cadbury as it tries to fend off a hostile takeover by Kraft.

Cadbury CEO Todd Stitzer made waves not too long ago when he talked about the relevance of ethical business practices in relation to the takeover battle. Cadbury has a long tradition of good business practices going back to its original founding.

But the document aimed at shareholders seeks to persuade investors to stick with the company in the face of an external threat. It therefore focuses tightly on the arguments most likely to hold sway.

That is to do with Cadbury's current performance, contrasted against Kraft's. It is about the value of the offer, and how it shows a dismal comparison with similar food group buyouts in recent history.

It is the right document to put out, much though I'm sure many CSR activists would bemoan that absence of any mention of social responsibility.

It is the right document because the audience does not care. And, what's more, to bring such issues into such a high-profile sensitive communication might be taken as evidence by some that the Cadbury management wasn't quite all it should be.

The problem is the fact that such companies are 'owned' by people that enjoy the benefits of ownership (a share of the profits) without being burdened by the responsibilities of ownership (caring about how those profits are generated).

It makes it increasingly difficult for a company with a great tradition to survive as an independent entity.

It means that every initiative taken in the social or environmental space has to try to justify itself to people who see only numbers.

It hampers leadership, because that leadership is not valued, unless it is about driving up numbers.

Five years ago, the people that I worked with on CSR were firmly of the view that the executives of listed companies were more committed to CSR because they were forced to disclose information and be accountable. Privately owned companies, however, could keep quiet, and so were inherently less responsible.

Sometimes that is absolutely true. There are a lot of quiet companies out there.

But increasingly I'm coming to the view that it is easier to have a company founded on values and integrity when it is privately owned than when it is listed. Why?

Because the owner can make mistakes and learn from them without being fired the first time something goes wrong. Because the owner can show real leadership - in the way that Branson did, for instance, with pledging the profits from his transport companies into climate change programmes.

Because values are not something that you try to smuggle into the working culture of the company when the shareholders aren't looking.

In the mean time, I hope that the Cadbury defence will be successful. They have put up a very effective case.

But one wonders how all that proud tradition and commitment to social responsibility ended up in the hands of investors for whom the question is only whether the bid is 900p per share rather than 850p.

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