“A lack of long-term stewardship by company heads and shareholders is at the heart of the current financial crisis, an influential think-tank says in a report published on Wednesday. Tomorrow’s Company, whose previous research has helped shape UK company law, urges the government to understand better the effects of the growing “casino economy”, where activities such as derivatives trading are often far removed from the real economy activity to which they theoretically relate. The report warns against the search for scapegoats for the current crisis and says that it is wrong to attack private equity, hedge funds and sovereign wealth funds for irresponsibility, noting that different shareholders perform different functions. However, it condemns the practice of borrowing shares for voting purposes and asks if investors need to toughen up their engagement to change company behaviour or divest holdings in companies with particular shortcomings. Mark Goyder, Tomorrow’s Company...

Paper by Mark Goyder: Capitalism is in trouble because stewardship is failing. The world needs shareholders whose priorities and behaviors are aligned with the long-term interests of the company, and with the health of the soil in which it is being nourished.  

In the UK, the US and many other countries, existing board election processes mean shareholders rely almost entirely on existing board members to identify board candidates. In the vast majority of cases, shareholders have no real say over who is chosen to represent their interests and those of the company they own. Board nomination committees are sub-committees of the board itself. Over the last 10 years, Sweden has moved away from such a system. This report examines the Swedish experience of shareholders taking this key governance function into their own hands. The report also considers lessons that can be drawn for governance in the UK and other countries with dispersed shareholdings.  It  concludes with an agenda for action by listed companies, institutional investors, the Institutional Shareholders Committee  and the Financial Reporting Council. 

In the UK, the US and many other countries, existing board election processes mean shareholders rely almost entirely on existing board members to identify board candidates. In the vast majority of cases, shareholders have no real say over who is chosen to represent their interests and those of the company they own. Board nomination committees are sub-committees of the board itself. Over the last 10 years, Sweden has moved away from such a system.This report examines the Swedish experience of shareholders taking this key governance function into their own hands. The report also considers lessons that can be drawn for governance in the UK and other countries with dispersed shareholdings.  It  concludes with an agenda for action by listed companies, institutional investors, the Institutional Shareholders Committee  and the Financial Reporting Council. 

It will not have escaped many of your attention that I have been vocal of late about the importance of good governance. Indeed this is my second speech on the topic for our hosts today in the space of a week!So whilst I make a small apology to those who may be experiencing a slight feeling of déjà vu at this point, I make no apology for reiterating the point. Well-run companies are founded on sound governance. If the global banking crisis has taught us anything, it is that poor decisions were made. Decisions went unchallenged.Decisions were allowed to stand.Good decision-making requires three things.It requires excellent judgement to identify opportunities and spot emerging risks.It requires robust governance to ensure that those judgements are in the long-term interest of the company, and to ensure that when judgement fails, there is a back-stop.And it requires owners to care. It requires shareholders and those who act on behalf of shareholders to take an active role in holding...