HM Treasury has published a speech that Lord Myners (Financial Services Secretary) gave at the LSE Corporate Governance Seminar.
Key points in Lord Myners’ speech include:
- Corporate governance shortcomings throughout the financial services sector had a part to play in causing the financial crisis. These problems were not restricted to the investment management sector. Responsibility must also lie with the lack of effective oversight within the banking industry, and inadequate supervision.
- Professional investors have a duty to pay close attention to the strategies and activities of the companies they own, the motives of their senior management, and the competence of their boards and chairmen.
- There are numerous reasons as to why engagement is not already a matter of priority with institutional investors. Such reasons include the fact that good governance and the benefits that accrue to it are not easily quantified and factored into the fundamental analysis that determines investment decisions, and, as such, are hard to embed in the operational model of the investor.
- Moving forward the Government has a key role to play and it strongly supports the recommendations contained in Sir David Walker’s final report. In particular Lord Myners regards the recommendations on the role of institutional investors to be Sir David Walker’s most significant contribution to the governance debate.
- As the Chancellor mentioned in the Second Reading of the Financial Services Bill the Government will, in some areas, go further than the recommendations in Sir David Walker's final report. The Government will consult on regulations for narrower disclosure bands than was proposed by Sir David Walker, starting with remuneration packages below the £1 million floor that was suggested.
- Those who speak for the end investor - pension fund trustees and others - need to ask whether they are fully fulfilling their fiduciary responsibilities to hold assets in good care if they do not pay and evidence proper regard for stewardship and governance.
- A good starting point would be for trustees to let their fund managers know that they will be asking searching questions about what their fund managers have done to challenge inappropriate remuneration practices and unwarranted payments across a swathe of the world’s major banks.
- Clients have every right to expect their fund managers to be taking a leading role in challenging all aspects of board and high-level remuneration, making it clear that they will not hesitate to act if they feel they are being let down by directors or fund managers.
View LSE Corporate Governance seminar, 1 December 2009