UK - Low governance levels among companies could lead to the next financial crisis, Treasury financial services secretary Paul Myners says.
He said the government has had to intervene and take a lead in remuneration and risk management, as asset owners have left governance in the hands of inexperienced employees.
He added: "There was effectively market failure, so the government has a responsibility to act."
He said it is "ridiculous" that pensions funds required to meet liabilities over three to four decades focus on shorter term investments over 90-day periods.
He explained all the problems are underpinned by a failure of judgement by boards of companies, their banks and their shareholders.
He said shareholders need to be the drivers of improved governance, as they are the owners of companies, not government and regulators.
Nonetheless, the pressure for change will come from government, regulators and creditors, while the cost will be incurred through reduced income for shareholders, he warned.
Myners also gave a call to arms for the asset management industry.
"More fund managers should go out and sell their ability to add value through governance. But good governance does not come cheaply.
"Only as a result of an industry-wide effort can we drive effective board performance.
Without significant steps forward, the ownerless corporation will sleepwalk into another financial crisis," he added.
Hermes Fund Managers chairman Glyn Jones said the key issue underpinning the challenges is that fund management and its larger institutional clients have a bigger role to play than they currently perform.
He added: "A few take responsible investment seriously, but even these exceptions focus fairly narrowly on the quoted universe of companies."
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