GLOBAL - Incoming US President Barack Obama should be good for pension funds because he will seek more "accountable capitalism", the head of Hermes' corporate governance arm reckons.
Colin Melvin, chief executive of Hermes Equity Ownership Services, argues the new administration will aim to protect pension funds and improve corporate governance.
Melvin's comments come as the International Corporate Governance Network said pension funds should take more responsibility for corporate governance by hiring fund managers that put "sufficient resources" into such issues. The ICGN claimed stronger rights for shareholders and a "strengthened" package of corporate governance measures are needed to rebuild confidence in the financial markets.
The organisation said in the past shareholders have "sometimes encouraged companies, including investment banks, to ramp up short-term returns through leverage", and it admitted shareholders "were not always as close as hey could have been to the companies they owned". However the ICGN warned the failure of the regulators in the build-up to the current crisis has been a "larger problem", and as there is a need for a regulatory response with international co-ordination it warned a "leading priority should be to maximise the supporting contribution of governance".
In a newspaper article, Hermes' Melvin said: "In Obama's first 100 days of office we can expect to see the rights of shareholders strengthened. He understands the need for change to the economic landscape to prevent a recurrence of the greed and overtrading which have driven the current crisis.
He added the incoming president "needs owners to shoulder their responsibilities so that the regulators can focus where they can best add value". This would include a "say on pay" as well as the ability to propose board directors.
"There may also be legislation that will breathe new life into defined benefit retirement plans - where the employer has responsibility for managing the pension fund - rather than contributory schemes - where the onus has been on the employee," Melvin writes in the Evening Standard.
"This will spur institutional investors such as pension fund trustees (the guardians of our retirement income) to take up their responsibilities as owners and will give important new tools to do the job."
He concludes: "I hope that pension funds and other institutions will rise to the new opportunities that they are given by his leadership to create a stable platform for future growth.
"In any case, we are at the beginning of an exciting moment in the quest for an accountable capitalism."