Friday, 10 October 2008

It's all about ownership

The current crisis that is - so says Tomorrow's Company in its report out this week. I've got a lot of sympathy for what they say:

“The current crisis reflects a failure of ownership. We have reached a turning point. Ordinary people now recognise that it isn’t enough to put their investments in the hands of clever technicians. They will, rightly, want more vigilance over how the money is being made on their behalf. This is what we mean by stewardship – looking after assets for the long term, and being more aware of what is being done in your name – whether the money is going into debt or equity – and having the assurance that those who handle that money are doing so in a principled way. ”

And here's what they say the future issues will be. Again there's a lot of common ground.
- What can be done to address the lack of alignment between the interests of some investors and some companies?

- What regulations or frameworks are needed to underpin stewardship – protecting the long-term health of a company and supporting global growth?

- Can regulators and the law continue to treat all shareholders in the same way?

- Why should a CEO extend the same time and co-operation to a short-term investor seeking to profit by movements in the company’s share price as to a long-term intrinsic investor?

- What does stock-lending do for the concept of stewardship?

- Why do pension funds allow stock-lending across the board when it can harm their longer term approach in particular situations

- Doesn’t the practice of borrowing shares to vote negate the stewardship role?

- Why don’t pension funds do more to influence the activities of the hedge funds and private equity vehicles through which they invest, especially where the actions of those funds can compromise their longer term interests?

- Government ownership has been extended to a number of strategic financial institutions recently. Is it necessary to review the case for state ownership of strategically important industries –energy, defence, food - or could foreign ownership help to guarantee economic interdependence and its wider benefits?

- Shouldn’t responsible investment criteria apply to debt holders as well as equity?

Good stuff, in theory. But are the big investors going to up their game and play the ownership role properly in future? It will require a big cultural change in my opinion...

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