UK - Stock markets will remain fragile and volatile without good corporate governance, leading shareholder activists warn.
A paper by prominent US shareholder activist Robert Monks and British businessman Allen Sykes for the Centre for the Study of Financial Innovation sets out several proposals for improving corporate governance – both in the UK and US markets.
The paper – Capitalism Without Owners Will Fail: A Policymaker’s Guide to Reform – proposes:
- Letting shareholders nominate at least three non-executive directors for each major quoted company.- Giving non-executive directors real control over the audit and remuneration committees.- Giving non-executives access to independent advice on all significant mergers and acquisitions activities so they can genuinely represent the interests of shareholders.- Making institutional shareholders responsible for exercising their votes in an informed and sensible manner.
The paper said that while British institutional shareholders had been active over the last decade or two, they fell far short of being regularly active and cited findings in Paul Myners’s review and the Company Law Review as evidence.
Monks and Sykes conclude that while individual institutional investors lack the power to make change, the latent collective power of investment institutions can bring a real influence.
CSFI director Andrew Hilton said: “What we are looking at and what they [Monks and Sykes] are calling for is a revolution in 21st century capitalism.
“The implications for these proposals for regulators, governments, non-executives and the way companies are actually run are profound.”
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