Saturday, 2 May 2009

Where were the shareholders?

IMA chair Robert Jenkins gave an interesting speech this week about the role of shareholders in the financial crisis. The whole things is worth a read, but there's a section in it I don't agree with. He says that active managers will sell companies that they don't like, so (in effect) it's primarily up to passive managers to use voting rights to hold management accountable.

For various reasons that are well-known (benchmark hugging etc) many active managers don't sell companies they don't like, they underweight them. I've been for an extended ride on my huffy bike lately about voting disclosure. Well, one of the things I did find in the limited data available was quite a few active managers holding bank stocks (from memory only Standard Life didn't hold them all). Surely that either means that active managers liked the banks (right into 2008) or that actually they underweight rather than sell?

Also out this week of course was the Treasury select committee report on the banking crisis. Although there's a lot in there about UKFI, I couldn't see anything about the role of shareholders. Anyone know if this is supposed to get picked up at a later date or something?

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