Shareholders in the crosshairs of governance
So the Financial Reporting Council has this week come out with a revised and rebranded corporate governance code.
There’s a fresh emphasis on chairmen being accountable to shareholders every year, but what I like is the attention shareholders and their responsibilities are getting.
Even if it doesn’t work the FRC will bring some fresh focus on shareholders, and their obligations to a company, through a new code.
Such a measure recognises that shareholders had some responsibility in the credit crunch and by and large failed to keep an eye on things. Where were they when all those institutions were investing in sub prime? What was their analysis telling them about those business models? Why weren’t they complaining about the risk?
It probably all had something to do with the tasty returns they were receiving at the time.
Not sure how binding a set of guidelines for shareholders will be – after all, if a shareholder wants to pile in and then ignore the company it partly owns well, in a free market, he or she, is perfectly entitled to.
But it’s not impressive stewardship. The bigger question is who holds the shareholders to account? After all the shareholders are supposed to be holding the executives to account. That’s going to be a tough one to answer in the new code.
But shareholders deserve the attention.