The role of investors as owners of failing financial institutions moved centre stage at the 2009 NAPF Investment Conference last week.
In his speech, FSA Chief Executive Hector Sants issued a very welcome call on investors to shift the balance of their interests towards their ownership responsibilities. He said “It is critical to recognise that the principal responsibility for managing firms responsibly remains with the management of the firms and that shareholders are the principal mechanism for holding these managers accountable. Shareholders going forward, have a duty, an obligation to make that oversight role more effective.” And he questioned “if there had been more effective and collective shareholder intervention whether the financial crisis we are witnessing would have been as severe”.
Sants said “As owners we would encourage you to focus on four issues: governance, risk management, business strategy and the issue of compensation.”
A key issue is how investors interpret issues of risk and strategy.
Yesterday, the UK Government Chief Scientist Professor John Beddington gave an insight on this. He said the looming crisis of food, energy and water shortages by 2030 would match the current one in the banking sector and result in a “perfect storm”, according to the BBC.
2030 is only 21 years away – as far forward as 1988 is back. Today’s 45 year olds may not even be drawing the pension that they are investing for today while Sir Fred Goodwin will be a mere 71 year old, presumably with many years of pension still before him.
For genuinely sustainable and long-term investment, investors oversight of risk management and business strategy needs to think this far ahead and beyond – and to protect the wealth generating capacity of the global economy as a whole not just of the individual firm.
The Walker Review of the role of institutional shareholders in corporate governance needs to step up to the challenge of encouraging this level of farsightedness.
In his speech, FSA Chief Executive Hector Sants issued a very welcome call on investors to shift the balance of their interests towards their ownership responsibilities. He said “It is critical to recognise that the principal responsibility for managing firms responsibly remains with the management of the firms and that shareholders are the principal mechanism for holding these managers accountable. Shareholders going forward, have a duty, an obligation to make that oversight role more effective.” And he questioned “if there had been more effective and collective shareholder intervention whether the financial crisis we are witnessing would have been as severe”.
Sants said “As owners we would encourage you to focus on four issues: governance, risk management, business strategy and the issue of compensation.”
A key issue is how investors interpret issues of risk and strategy.
Yesterday, the UK Government Chief Scientist Professor John Beddington gave an insight on this. He said the looming crisis of food, energy and water shortages by 2030 would match the current one in the banking sector and result in a “perfect storm”, according to the BBC.
2030 is only 21 years away – as far forward as 1988 is back. Today’s 45 year olds may not even be drawing the pension that they are investing for today while Sir Fred Goodwin will be a mere 71 year old, presumably with many years of pension still before him.
For genuinely sustainable and long-term investment, investors oversight of risk management and business strategy needs to think this far ahead and beyond – and to protect the wealth generating capacity of the global economy as a whole not just of the individual firm.
The Walker Review of the role of institutional shareholders in corporate governance needs to step up to the challenge of encouraging this level of farsightedness.
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