|
For immediate release: Friday 1 May 2009 IMA CHAIRMAN CALL TO ARMS: ASSET MANAGEMENT INDUSTRY SHOULD HOLD BOARDS ACCOUNTABLE In a speech to the CFA Society of the UK yesterday, Robert Jenkins, Chairman of the Investment Management Association encouraged the asset management industry to use its power to call companies to account. He commented, "Boards don't own the companies in which we invest. Our clients own the companies in which we invest. It is not the boards' money. It is our clients' money. I would encourage active managers who hold the shares to engage. And I would encourage all shareholders who engage to vote down directors of Companies they judge to be poorly run. Hold them accountable. Who else will? Let me be clear. It is not our responsibility to manage the companies in which we invest. It is our responsibility to maximise client returns within guidelines. But surely it must be a good thing for our industry and industry more generally that company boards listen to the agents of their owners. Alas, many will not do so unless they believe there will be consequences if they do not. And they will not believe there will be consequences until they have seen that there could be. Let us put a body on the street when engagement fails so that future engagement might better succeed. Voting directors down is likely to do more for governance than all the Code revisions in the Realm." Observing that Gresham's Law (bad money drives out the good) explained several key market developments in 2008 Mr Jenkins turned to 2009 noting, "A somewhat different but ultimately more depressing example of Gresham's Law involves the banking system at large. Many banks remain overly dependent on wholesale funding and excessively exposed to toxic assets. Scarce funding is supporting problem paper instead of funding new and prudently originated credits. And how is it that governments can encourage an AIG, Citigroup or RBS to dispose of their "non-core" businesses at current distressed market prices but do not insist that these same institutions dispose of their toxic waste at current distressed market prices? How is it that bank managements maintain that the latter will have more value later but not the former? Consciously or unconsciously governments are forcing the disposal of earnings-generating franchises in order to avoid disposing of confidence-sapping problem loans. Thus does bad money continue to drive out the good." Mr Jenkins ended by congratulating the CFA Society for its stance on fair value accounting, "... I applaud the public, aggressive and thoughtful position that the CFA Society took recently on the issue of fair value accounting. What do the authorities think is the alternative - unfair value accounting?" A copy of the speech is attached. - ENDS - About Investment Management Association (IMA) IMA is the trade body for the UK's £3.4 trillion asset management industry. The money its members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs. Its role is to represent the industry and promote high standards For further information, please contact: |
