Friday, 25 July 2008

Why aren't UK bank directors accountable?

I'm avoiding the rather large Glaswegian elephant in the room because a) it's already been covered much better than I could do elsewhere and b) I want to focus on upbeat, happy things like sticking the boot into the directors of banks.

Mark Burgess of Legal & General (the big index-tracker that hold a big chunk of UK equities) has asked the question that has been in my head for months now - why so little accounability in the UK banking sector? In the US several high-profile banking execs have walked (unfortunately often with monster payouts) but in the UK there is nothing comparable.

"We have seen the top 11 executives leave UBS, the heads of Citigroup and Wachovia step down and the chief executive at Merrill Lynch go. But only one UK director has had to leave a UK bank and that was because he had angina. You have to say that is curious," Mr Burgess said.

Steven Crawshaw, chief executive at Bradford & Bingley, which only succeeded in raising rescue funding after three attempts, resigned due to ill health.

But the boards of both Royal Bank of Scotland, which launched the UK's biggest ever rights issue in April, and HBOS, whose £4bn rights issue was only taken up by 8 per cent of shareholders, so far remain in situ.

Mr Burgess said Sir Fred Goodwin, RBS chief executive, and Sir Tom McKillop, chairman, who continue to resist calls for their resignation, were equally to blame for the bank's deteriorating performance following its £12bn rights issue and its €71bn (£56bn) acquisition of ABN Amro, the Dutch bank.

"I think they both have a lot to answer for," he said.

In contrast, in Europe the heads of UBS and Société Générale have stepped down.

The chief executive of Fortis, which was in the consortium led by RBS in the bid for ABN Amro, was forced to resign this month.

I agree with all of that. My question in return though is why have institutional shareholders like L&G not been seeking accountability. In the US this has been happening, often led by unions, but in the UK even institutional investors prefer to snipe from the shadows.

The FT leader today is on this subject, but its suggestion of introducing another advisory vote seems a bit misplaced. Surely it is shareholders who should use their existing rights more effectively?

5 comments:

Nick Drew said...

broadly agreed

though on a point of info, the highly ironic 'academic free marketeer' Matt Ridley did in fact resign from Northern Crock

Charlie Marks said...

shame you ducked Glasgow East - would be interested to get yr take on how Labour should respond to the nationalists. They've directed their energies on getting the traditional Labour vote - one much neglected - but keeping it might be a problem, especially come a General Election when it's a straight fight between Tories vs Labour at westminster. Given the closeness of the result, Glasgow East may soon be a safe labour seat again...

(Okay, I'm doing my best to cheer you up - how's it working?)

Tom P said...

Nick

Yeah that's true. Adam Applegarth didn't go until NR was nationalised tho did he?


Charlie

As for Glasgow East I really don't know what to think, or what we can do to turn things around. I agree it will probably return to Labour, but then look at what happened in Brent East.

Do you think people aer voting SNP primarly for nationalist reasons or because it's seen as a bit left of Labour?

Charlie Marks said...

It no doubt helps that the SNP is a progressively patriotic outfit, but I think the main factor was that the Westminster government isn't seen as being on our side when it comes to rising costs. The SNP meanwhile have the policy of a fuel price regulator...

The one-sided policy of wage restraint has been overlooked as a factor in Labour's woes.

Action said...

You are right to contrast US regulations with ours and find we are lacking.
The US Democrats seem to be to the left of New Labour on everything now.
They even take more notice of the unions.
Or have I just been watching too much West Wing?