Tuesday, 10 March 2009

Two snippets

1. Via Corporate Governance I came across this fascinating paper. Not sure I agree with the conclusions, but it's a strong argument. Here's the abstract:
In recent years there has been significant ongoing academic debate over the expansion of public shareholders' participation rights in corporate governance. The debate has accompanied a dramatic increase in institutional shareholder and hedge fund activism attempting to influence the conduct of corporate affairs.

The legitimacy of shareholder participation rights depends upon the actual role public shareholders play in contributing to the corporation's function of providing goods and services and, ultimately, to economic growth and social welfare. Nobody in the debate has stopped to examine this question. This paper presents original empirical evidence that demonstrates that public shareholders do not, on net, contribute capital to finance industrial production, and in fact are net consumers of corporate equity. Moreover, their investment incentives significantly distort the behavior of corporate managers who place strong emphasis on stock price at the expense of long-term business health, a fact that has played some role in the current global financial debacle. The logical conclusion is that public shareholders' rights should, ideally, be eliminated, and certainly not expanded or enhanced.

2. Look what the ABI's guidelines on remuneration say about exec pensions:
Pensions paid on early retirement should be subject to abatement.

And here's what RBS made public in its remuneration report last year:
"All UK based directors, with the exception of Guy Whittaker, are members of The Royal Bank of Scotland Group Pension Fund (‘the RBS Fund’) and are contractually entitled to receive all pension benefits in accordance with its terms. The RBS Fund rules allow all members who retire early at the request of their employer to receive a pension based on accrued service with no discount applied for early retirement."

So presumably investors following ABI guidelines challenged it???

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