Crisis shows companies need social licence to operate, Federated Hermes says

[April 15, 2020]    LONDON (Reuters) - Federated Hermes <FHI.N> has written an open letter to company executives and chairpersons setting out how COVID 19 has changed its engagement priorities and how the pandemic should change global businesses for the better.

A view of a nearly deserted Broad street and the New York Stock Exchange building in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, New York, U.S., April 3, 2020. REUTERS/Mike Segar

Hans-Christoph Hirt, head of Equity Ownership Services at Federated Hermes, which advises on more than $875 billion in assets, said the crisis had reinforced his firm's belief that companies needed "a social licence" to operate.

Hirt called on executives to ensure the safety and wellbeing of their workforces, to treat suppliers fairly and support the efforts of governments in dealing with COVID-19.

He also said companies needed to be better prepared for rapid crisis responses in the future.

"Business and governments will need to learn from and comprehensively act on the lessons from this crisis, not only for future pandemics, but for other known risks, such as the climate crisis – an emergency that requires far greater planning, resolve and commitment than we have seen so far in addressing the Coronavirus pandemic in most countries."

The investor has also modified voting policies for the 2020 shareholder meeting season, allowing greater flexibility on the re-election of some board members to avoid any unnecessary disruption to company management at this time.

It also said it would support companies that are "prudent" as they navigate the impact of the pandemic, particularly when it comes to strengthening balance sheets and mothballing dividends.

(Reporting By Sinead Cruise, editing by Carolyn Cohn and Simon Jessop)

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