Less Talk, more Action!
That is my message to all those who are following the
debate about corporate governance. While articles in learned journals and any
number of conferences and think tanks dabbling in the subject are welcome and
may bring some (slow) progress it is time that a more focused approach is
The real investors are twice removed from any influence in the corporate world -
the original agency problem dates back more than two generations when management
and ownership of major (listed) corporations became increasingly separated.
During the past few decades a second layer was introduced in the form of the
institutionalisation of investment management which means that the actual
investor has delegated all supervisory tasks to professional money managers who
are supposed to protect his interest.
The only way that the interests of the real shareholders will be protected is if
their fiduciaries in the money management world are motivated enough to put
their interest above their own (commercial) interest
The top 100, maybe even only the top 50, investment institutions can - if they
act together - influence the behaviour of all public corporations in a decisive
manner. Given that the same institutions often are the main investors in the
'Private' Equity Industry this part of the economy can also be brought under the
umbrella of the same governance rules.
The lack of appropriate forums to allow input from the real end investors is
also a major gap in the governance debate and I will try to foster ideas and
initiatives to alleviate and overcome this deficiency.
There is a lot of work to be done and I hope that all those with good will
concentrate their minds on bringing forward actual measures rather then more
I am looking forward to your comments - or better still join my effort by
signing up to my mailing list. Please send me emails only if they relate to
aspects of how to cooperate to promote the cause of corporate governance.
General comments and suggestions should be posted on the Pro Governance Blog in
the interest of transparency and in order to develop a community spirit.
About Pro Governance
Our Mission is to
campaign for the protection of investors and savers by promoting
good corporate governance.
We also believe that the wider spread of share ownership is in
itself a public good and may sometimes even be preferable to higher
Shareholders in publicly listed companies are widely dispersed and cannot
micro-manage the affairs of the companies they are invested in. The
international nature of today's shareholder registers make this also
impossible for large institutional investors.
On the other hand, abuses that have developed over the past few years make
it imperative that company managements are supervised in a more efficient
Tax incentives and institutional constraints have favoured the growth of
large institutional investors at the expense of small individual
shareholders. This makes it more important than ever that these investors
behave like fiduciaries and have the interests of their clients at heart.
This means that the business of
money management cannot be treated like any other profit-maximising business.
Like the medical, legal or academic professions the interest of the clients
has to have priority when critical decisions have to be made with regard to
companies the money managers are invested in.
We at Pro-Gov think that the establishment of an effective international forum
combining representatives from the national organisations of individual
shareholders and investors will be an effective step in the direction of
improving corporate governance.
At the moment the corporate
Governance discussion is limited to academics, journalists in the quality
business press, institutional shareholders and companies and their business
associations as well as politicians. The one party missing on the table are
the real investors who - with some exceptions - voiceless in the debate.
isn't what's illegal; it's what's legal"