Bos attacks shareholder role in financial crisis
NETHERLANDS - "Shareholders did virtually nothing to prevent and manage the financial crisis", Dutch finance minister Wouter Bos said this morning at a conference in Amsterdam.
Bos told delegates of a conference hosted by corporate governance platform ICGN he holds shareholders accountable for their role in the years before the credit crisis erupted as he said: "The Boards of many financial institutions felt pressured by their shareholders: yields and leverages were forced up, resulting in bubbles that could only seem healthy by neglecting financial risks."
The minister also appeared rather cynical about the way shareholders have managed the crisis until now as he continued: "The financial crisis is more than one-and-a-half years old. Have the boards been steered in the right direction by their shareholders in that period; away from taking irresponsible risks? Or is that task being left to the government?"
Roderick Munsters, chief investment officer at APG Asset Management, hit back at Bos' harsh statements, in a panel discussion that followed, by arguing: "The minister put it rather eloquently. But I do agree that improvements can be made and I want to share thoughts with him on how we can prevent such a crisis in the future."
Munsters added he felt the option, for a pension fund, would be "to bring down the number of companies [they] invest in," as he said he believed "this will enable [them] to get to know the companies better".
He also suggested there was "too much emphasis by institutional investors to outperform a certain benchmark" and argued: "We should focus more on absolute returns. As long-term investors, we have a different perspective than investment managers that can run away every day."
As chief investment officer of APG, asset management arm of ABP, the pension fund for Dutch civil servants, Munsters said he supported the idea of requiring bank Boards to assign at least one member with risk management expertise.
"We can ask ourselves whether there was sufficient know-how of the financial risks in the board of Fortis," he continued.
Furthermore, Munsters called for "more simplicity in the design of remuneration policies" and added on disclosure: "We do not need more information, we need better information on the risks taken."
Munster said he thought it would make sense to split the banking sector into savings banks and investment banks so when asked whether APG would invest in savings banks with low probably returns, he answered, "yes, why not. There is nothing wrong with low returns, as long there is low risk".
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