Some commentators have criticised shareholders for failing to hold boards to account. It is true that shareholders sometimes encouraged companies, including investment banks, to ramp up short-term returns through leverage. They were not always as close as they could have been to companies they owned.
Yet, a larger problem has been failure of regulators. They did not respond decisively when they realised that markets were mispricing risk. They allowed banks to operate with too little capital, with excessive leverage and too little attention to liquidity risk. They failed to pick up on poor risk management by boards and on poor lending practices in the mortgage market.
Personally I agree that both 'owners' and regulators have not done a great job, but look at all the criticisms the ICGN makes of regulators - these could apply to shareholders too, surely? And since shareholders are supposed to be driven by self-interest to monitor companies, I don't think we can really say the bigger problem is regulatory oversight. In addition the ICGN goes on to say that shareholders need greater rights. Again I'm basically on the same page, but it won't make any difference if shareholders don't use them.
By way of example, being a geek about voting, I've been looking through the voting records of some of the big asset managers to see what they were up to at the banks in recent years. Very few had any governance problems. I have found one asset manager that voted for every single resolution at all the banks' AGMs for the past 6 years. A lack of rights isn't the issue.
To be fair the ICGN does go on to address this point, saying that shareholders do need to use their rights, and to devote proper resource to governance issues. But the tilt against regulators really bothers me. We have witnessed a failure of ownership. We need to face up to this and try and put it right, trying to pass the blame onto regulators and a lack of rights doesn't seem to be a positive way of starting this process.
PS. Peter Montagnon of the ABI had a sensible bit in the FT yesterday on exec pay that's worth a read.