The world would be a much safer place, he said, if each of us had the courage to say at the right moment in the right company: “I don’t understand, and I don’t think anybody here does either”. While warning that the problems exposed by the financial crisis were far from over, former chairman of the United States SEC, Richard Breeden, urged investors to be more aggressive in voting out directors and boards to ensure that their interests were better protected. Meanwhile our own Minister of Finance, Lindsay Tanner, spoke of the need for a new regulatory framework that sustained trust and facilitated long-term growth.
Tanner said new regulations would need to be more adaptive and flexible than in the past, with a greater emphasis on education and information technology. Notably for Australian super funds, the conference reinforced the proactive role that long-term asset owners can play in improving corporate governance. Indeed, many commentators warned that governance reform simply would not happen without active shareholder commitment. That is why it is important that Australian super funds join ICGN delegates in supporting one of the key shareholder reform proposals currently under consideration by the SEC.
This proposal to enable shareholders to appoint directors to the boards of US public companies is seen as an important step forward in US governance practices, which lag behind those in AustraliaUS sharemarket – will help persuade the SEC to adopt this initiative in the face of what is expected to be strong opposition from many US where shareholder rights are generally considered to be adequate (even if they are all too rarely enacted).
The ICGN believes that pressure from offshore institutional investors – who account for about 20 per cent of the business groups. AIST has already written to the SEC and I urge other super funds to follow suit and put pen to paper ahead of the SEC’s cut-off date for feedback on this initiative later this month. The executives on Wall Street may not be listening to the global governance debate but the SEC and others are. Like those who attended the ICGN conference, they understand that reform of governance and regulation are the essential ingredients for a sustainable recovery the world so desperately needs.