The ICGN Conference and the UK Vickers report

On September 12 the International Corporate Governance Network ICGN opened in PARIS its annual gathering of responsible investors. At the same time, while European markets lost 4% on average and that French banks shares collapsed by 10%, in London the Independent Commission on Banking ("ICB") published a report recommending to the British Government to reform the banking system (the "ICB Report") by substantially isolating the activities of deposit and credit legitimately protected by the taxpayer in the event of systemic crisis, from the rest of the activities of these universal banking group.

ECGS attended the ICGN conference and welcome this orientation of the Vickers report.
ECGS has not only announced since 2001 to the ICGN members the unavoidable financial banking crisis unless such reform would be undertaken, but it had renewed concerns in the spring of 2010. The response of participants to a poll following the first panel of the ICGN conference on this banking system issue was on the same tone.
The debate, unfortunately not open to any true representatives of the shareholders gave the floor to MM. Eddy Wymeersch, Chairman of the European Corporate Governance Institute in Brussels, Christian Schricke, Advisor to the Chairman of Société Générale and new member of the AMF Board, and Robert Ophele, Director General of Operations of the Bank of France. On the question of the most appopriate needed reform to end the crisis, these three institutions unsurprisingly had opposed to any idea of ??separation of activities. But the same question posed by the electronic boxes to the attendants, presented an opposite response with a 56% positive to the split. Better yet, a majority of those present accepted the idea of ??dropping the ROE of the banks, 33% up to a 7% drop, to ensure greater financial stability.
While the ICB is of the view that its requirements will "create a strong fence" which, unlike full separation, will allow the parent undertaking to move capital between its subsidiaries and allow customers to use the same bank for retail and investment banking business. Proxinvest regrets that the others businesses than credit and deposit of universal banks should be prohibited on the ground of unfair competition to the rest of the economy.
The star speaker of the ICGN Conferecne in PARIS was needless to say Robert Monks the author of the ERISA refgulation and the founder of ISS : the audience offerde him a standing ovation to his memorable speech quoted hereunder:
" Quite simply, you (responsible institutional investors) are under attack. Universal acceptance of a role for shareholders in corporate governance cannot be taken for granted. The Western financial crisis and global recession have left champions of free-market capitalism facing an increasingly skeptical international audience./.. . Many will claim that both the increased involvement of government and the explicit autocratic prerogatives of management provide greater long term value than the traditional system with its insistence on the accountability of CEO and board to the effective owners.
So you are attacked on both sides – for doing too little and for doing too much./..
Shareholder responsibility and rights has been neglected by politicians for many years, conspicuously in America. … Nor were shareholders able to mobilize political support: in recent US congressional proceedings, (now former) Senator Chris Dodd sneeringly repudiated the effort to achieve a modest right for owners to have access to nominating directors. As Senator Schumer looked around the Committee room to determine whether his proposal had any support at all, he reluctantly concluded that he was alone and could only say: “I can count, just register me opposed”. One US senator for shareholder rights in 2010.
The inability and unwillingness of institutional investors effectively to monitor and require accountability of management is one of the principal causes of the continuing financial crisis. There is an almost total failure to appreciate the “business” actually embraces in one way or another most citizens. But the hundreds of millions of shareholders – most of whom are of modest means – are the real owners, the real entrepreneurs, the real capitalists under our system. They provide the capital which fuels the economic system which has produced the highest standard of living in all history. Yet shareholders have been ineffectual in achieving a genuine understanding of our system or in exercising political influence.
Why do the “great and the good” prefer to complain rather than to participate in a system of accountability to ownership in which they would have a strong role ? Rather than act as responsible owners they prefer to dilute the credibility and effectiveness of the shareholder based governance system ? There can be no effective corporate governance, until, unless and to the extent that the major institutions become involved. This will not happen until and unless there is a formal legal policy that shareholder activism is in the public interest and is the national policy. Governmental response to the existing crisis does not give confidence that there will not continue to be major crises and direct government involvement has had many unfortunate consequences not the least of which is the destruction of the legitimacy of corporate governance. What is at stake now is the sustainability of the traditional real return on equity investments - 6% plus or minus per annum. Whether we live in a poor or an adequately financed society depends on the effectiveness of our system of corporate governance.
The absence of corporate governance threatens the scenario of adequate resources to meet societies’ needs. Institutions must take the initiative to protect their relevance as a wealth preserving energy in a free society. They cannot wait for others, nor can they decline to act. Institutions must take the lead, because all other courses have failed."