UK - Shareholder activism has been trivialised and dismissed by policymakers, delegates at a responsible investment conference heard yesterday.
US shareholder activist and founding trustee of the Federal Employees' Retirement System Robert Monks told the Sarasin & Partners Responsible Investment Seminar 2011 in London that shareholders are marginalised and have no authority in selecting CEOs.
Monks said the problem stemmed from the growing autocratic power of company CEOs against a background of failing corporate governance.
"CEOs are not effectively accountable within the corporate constellation. The traditional, ritually recited, authority of shareholders to elect directors who select and monitor CEOs is a nullity," he said.
"In the absence of enforcement of the clear legal requirements that trustees must act as stewards of portfolio companies, the world of ‘shareholder activism' has, unfortunately, been defined by self-selection and many fiduciary organisations.
"Institutions do not participate as activist shareholders for several reasons: they sense no legal imperative and they calculate no economic benefit from doing so.
"We have stood by mutely while a century's old societal commitment to employer funded pensions has virtually been abrogated. From the corporate point of view there is some correlation between ‘pension savings' and increased compensation to the principal executive cadre."
Chairman of the Financial Reporting Council, Baroness Hogg told delegates there was a need to protect the chain of accountability as shareholders were the supplier of capital.
This was echoed by head of governance and environmental and social research at Sarasin & Partners, Adam Frost. He said: "We need to insure companies are truly managed in the interest of shareholders."
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