Myners said "You (pension funds and trustees) have a legal duty to your beneficiaries to protect the value of assets held in trust on their behalf and a duty to the businesses in which you invest. Shareholders need to meet their responsibilities as owners."
Pension funds and pension fund members (that’s us!) must play a greater role in demanding a crackdown on excessive City bonuses to protect pensioner cash, The City minister told the National Association of Pension Funds (NAPF) that fund trustees and institutional investors had a "legal duty" to pensioners to ask for better standards from the financial services industry and insist on more modest pay deals. Lord Myners said there had been "significant shortcomings" and failures to take boards to task that had cost savers dearly.
The biggest failure of all was in letting bonuses reach sky-high levels, but soaring levels of financial services fees also needed to be addressed. The latest Income Data Services statistics show that CEOs of the companies in the FTSE 100 earn 81 times the average pay of full-time workers. A decade ago, the multiple was less than 50.
Key points from his speech
· Pension funds are significant owners of many our country's most important companies
· We have undisputedly seen poor governance and ineffective stewardship play a major part in causing significant loss of value. Over the past decade people who owned shares in UK banks have enjoyed a return of little more than zero. Over the same period bank executives and traders have taken home many billions of pounds in remuneration.
· As a shareholder you are an owner, irrespective of the size of your holding. Ownership brings both rights and duties. Rights to share in the returns generated by the business and duties to ensure the business acts in the interests of all stakeholders. However, if you own or manage shares on behalf of others, as Trustees do, you cannot justify a failure to ensure effective stewardship.
· The picture I paint is one that has led us to what I have characterised as the ownerless corporation, reflected in fragmented share registers and non-existent or inconsistent investor engagement. The true owners, pension fund trustees and others, have been intermediated out of the story by agents who do not think and act as economic theory would tell us to expect of owners.
· So, to remedy the deficiencies of scrutiny and drive progress, we must not just show willingness for change, but push forward with vigour to improve the functioning of the investment chain. I commend those in the industry who have seized the opportunity to embed a new culture that values governance and stewardship. And I want us to continue to herald in the change where good governance is not on the periphery, but at the heart of what we do.
The full text of this important speech can he read here http://www.mondovisione.com/index.cfm?section=news&action=detail&id=88547