Afterword: Final Thoughts and Future Directions
What is wrong with the British and American system is that far too many shareholders, both institutional and individual, do not behave like owners.
Rupert Pennant-Rea, 1990
What progress, if any, has there been since this diagnosis described in The Economist twenty years ago?
The Treasury committee investigating the financial meltdown for the UK seemed to think Pennant-Rea was still right.
“ Institutional Investors have failed in one of their core tasks, namely the effective scrutiny and monitoring the decisions of boards and executive management in the banking sector, and hold them accountable for their performance.1 ”
So does the UN.
“ We also believe that one of the most important lessons from the crisis is that institutional investors responsible ownership needs to be strengthened in order to be fit for purpose.2 ”
And so does Nobel Prize-winning economist Joseph Stiglitz:
“ So basically we have a system in which the corporate executives, the CEOs, are trying to make sure the legal system works not for the companies, not for the shareholders, not for the bondholders – but for themselves. So it's like theft. These corporations are basically now working for the CEOs and the executives and not for any of the other stakeholders in the corporation, let alone for our broader society.3 ”
What is our best hope for addressing ...